There’s a broad spectrum of forms of rewards and recognition that can be used to reinforce desired behavior, performance, and results with employees, the best of which have little, if any financial cost. This is a delightful irony of employee motivation that is often lost on leaders who have an implicit bias that rewards and recognition for employees need to primarily emphasize rewards that are tangible, such as money, merchandise, gift cards, or “points,” in order to be valued by employees.

A Few Definitions

Recognition is acknowledgment and approval, or the expression of gratitude. It is appreciating someone for something he or she has done for you, your group, or your organization. Recognition can be given either as one strives for a certain goal or behavior or upon completion of that goal or behavior.

Reward. Rosabeth Moss Kanter, a professor of business at Harvard Business School, defines a reward as “something special—a special gain for special achievements, a treat for doing something above-and-beyond.” Rewards are typically provided when desired behavior or performance is obtained.

Incentive. A reward that is planned and agreed upon in advance or the anticipation of a future reward or rewarding consequence is often called an incentive. Rewards tend to be most motivating if they have a strong incentive value.

Recognition Categories

There are three broad categories of recognition that are typically used with employees: Formal, informal, and interpersonal.

Formal recognition is planned recognition such as a celebration for achieving a company’s sales goals or a years-of-service anniversary award for individual employees. Other examples of formal recognition include president’s awards, employee-of-the month programs, and attendance awards. Such recognition is infrequent, typically occurring on a periodic timeframe such as annually, quarterly or monthly, and often involves more traditional recognition items such as trophies, plaques, or mementos in conjunction with an awards program or banquet.

Formal recognition has historically been the most common forms of recognition used by organizations to thank and honor its employees. On the downside, formal recognition often has a lag between the time of achievement and the presentation of an award, which can diminish the value of the recognition to the recipient. Another downside of formal recognition is that it is reserved for a limited number of recipients, often just 1-2 percent of the employee population, so misses the opportunity to impact the majority of employees within the organization.

Informal recognition are spontaneous forms of recognition that can involve a nominal gift (flowers, memento, dinner, etc.) or personal gesture (time off, personal favor, etc.). At an organizational level, informal recognition can come in the form of visibility to upper management or other parts of the organization or special opportunities for career development. Informal recognition has the advantage of being more current, “here-and-now” to the behavior or results that are being reinforced, but the burden of such recognition typically falls to one’s immediate manager, making informal recognition more difficult to implement consistently throughout an organization.

Interpersonal recognition is a form of informal recognition that includes one-on-one verbal praise, written notes of thanks or public praise. This category of recognition, although having the least financial cost and taking the least time to implement, has often been cited as some of the most desirable forms of recognition by employees. Ideally, informal and interpersonal forms of recognition should be done on a daily basis by those who work most closely with employees, starting with their immediate manager, but also including co-workers who provide peer-to-peer recognition to one another.

Research on Top Employee Preferences

In research conducted by Dr. Gerald Graham, professor emeritus of Wichita State University, he identified 65 potential workplace motivators and found that all five of the top employee-ranked items were non-monetary forms of recognition, three of which required little or no financial resources and very little time to successful implement.

The top-ranked item, “Manager personally congratulates employees who do a good job” had the highest-ranked impact (2.73/3.00), although 58 percent of respondents said their manager seldom if ever provided such a personal form of thanks.

The second-highest ranked employee motivator (2.59/3.00), “Manager writes personal notes for good performance,” was reported as being seldom if ever provided by their managers by 76 percent of respondents.

Other motivators included in the top five identified by Graham include “Manager publicly recognizes an employee for good performance” (2.41/3.00; 81 percent of respondents reporting this seldom if ever was provided by their managers) and “Manager holds morale-building meetings to celebrate successes” (2.20/3.00; 92 percent of respondents reported this seldom if ever was provided by their managers).

In his conclusion, Graham writes: “It appears that the techniques that have the greatest motivational impact are practiced the least even though they are easier and less expensive to use.” As such, I’ve argued for the increasing need for organizations to consider informal rewards and interpersonal recognition, rather than just formal recognition programs to meet and augment the changing needs and expectations of today’s employees.

Other studies reinforce Graham’s findings. In a survey of executives by Robert Half International, more than 34 percent of executives reported that a lack of praise and recognition is the number one reason why people leave their jobs. And the National Study of the Changing Workplace by the Families and Work Institute in New York further supports the importance of non-monetary factors for employees deciding to take a job with a current employer today. Of reasons considered to have been “very important” by respondents, the top 15 cited reasons required no direct financial cost, with “open communication” being ranked as the most important reason by 65 percent of respondents.

The Evolution of Rewards and Recognition for Employees

These three dimensions of formal, informal, and interpersonal recognition parallel the organizational evolution of most incentive programs. In general, organizations typically first use recognition on a formal yet infrequent basis around specific events such as to celebrate a record sales quarter or an end-of-the-year awards banquet. If a company chooses to increase the frequency of recognition it often establishes one or more programs, such as an employee-of-the-month program or years-of-service awards. If an organization seeks to further increase the frequency of rewards and recognition for employees, it often focuses on manager behaviors as part of daily management practices, as is the case with daily feedback on performance, person alone-on-one praising, and the systematic use of thank you notes.

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Bob Nelson, Ph.D., is the world’s leading authority on employee recognition and engagement. He’s worked with thousands of companies on these topics, including 80percent of the Fortune 500, spoken on six continents, and authored related books on the topic that have sold over 5 million copies. For more information, visit www.drbobnelson.com.