Employee Recognition

Authors: Michael Rose and Chris Wilson

US Consultant: Marta Moakley, XpertHR Legal Editor


  • Recognition is about praising people for the great things that they are doing, rather than being an incentive for reaching targets. See Recognition and Recognition Programs.
  • Recognition programs range from the very informal, in which supervisors concentrate on saying "thank you" to employees, to more formal corporate programs. See The Recognition Continuum.
  • A recognition program should be consistent with the culture of the business and the business's stated policies and values. See Aims and Objectives.
  • Engagement surveys and other business measures can be used to identify the starting position and then measure the impact of the recognition program over time. See Developing the Business Case.
  • In designing its recognition program, an organization will need to decide, for example, how formal it wishes the program to be, the appropriate recognition criteria, and how nominations will be made and assessed. See Designing the Recognition Program.
  • The type of recognition award on offer will depend on the nature of the program being run, but the impact should be through the recognition itself and not the award. See Recognition Awards.
  • Any recognition program will need to be branded, promoted and marketed to optimize success. See Communicating the Program to Employees.


This section of the XpertHR Best Practice Manual discusses employee recognition. It explains the importance of building a recognition culture, as well as providing guidance on introducing both informal and formal employee recognition programs.

Recognition and Recognition Programs

Recognition is "acknowledging or giving special attention to a high level of accomplishment or performance, such as customer care or support to colleagues, which is not dependent on achievement against a given target or objective" (Rose, 2011). Recognition is not about setting targets and rewarding people for achieving them; it is simply about recognizing the great things that people are doing.

A recognition program formalizes the act of recognition through a (typically) centrally managed and controlled process, often with nominations and tiers of awards.

If an organization is serious about recognition, having a specific recognition program will be only one part of building a recognition culture within the organization. It will also be important for the organization to cultivate a management style that sees basic recognition as being part of effective management, with, as a matter of course, supervisors thanking employees for good work and contributions, and saying "well done" when it is merited, rather than commenting only on the negatives. This approach can be built into relevant training programs, reinforcing for supervisors the power of positive encouragement.

Recognition and Incentive

Recognition is the act of praise or thanks that leads someone to feel recognized for what he or she has done. This is quite different from an incentive that seeks to motivate an individual to do something. An incentive must be of value to the potential recipient, otherwise it will not incentivize. Recognition, on the other hand, does not require a high-value award, or indeed any award, although awards are common in recognition programs.

The Recognition Continuum

Recognition can occur in many different forms and may be looked at as a continuum, as shown below (Rose, 2011).

Recognition continuum

While organizations often think it is necessary to take a more formal approach to recognition, it is often at the day-to-day end of the continuum that there can be the greatest impact for the lowest cost. This can be achieved by ensuring that supervisors are aware of the importance of a simple "thanks" and recognition of employees, and that this forms part of the organization's management training and development. As one moves to more formal recognition, there is a greater cost and more infrastructure is required.

The Importance of Recognition

The importance of recognition on employee motivation and engagement is well documented. It can be significant in how engaged employees feel at work, and a lack of recognition can have a detrimental impact on employee turnover. An employee who feels that his or her efforts go unrecognized is more likely to move on, potentially resulting in the loss of a valuable member of staff. Conversely, employees who have been recognized for their positive behavior are more likely to exhibit those behaviors again, leading to further performance and/or productivity improvements for the organization. Other employees may also exhibit similar behavior, knowing that the recognition is likely to follow. Ensuring that employees are recognized will help to create a positive working environment, meaning employees want to come to work and make an impact.

Aims and Objectives

The approach that an organization takes to recognition should be driven by its values and strategic aims. As with any other initiative, simply introducing a recognition program is unlikely to have much impact unless it fits with the culture of the organization.

It is fundamental that the organization has a clear understanding of what it wishes to achieve by introducing the program. Understanding what success will look like from the start will help the organization to focus on the design and the measurement of the impact and success of the program. This will enable the organization to create a baseline against which it can judge and assess change. For example, success could be as simple as increased productivity, a reduction in absenteeism, or an increase in employees' perceived engagement or employee opinion survey scores.

The clearer and more precise that the program's objectives are, the more likely it is that the program will be well understood by both employees and supervisors, and viewed as having merit. Backing and support from the top of the organization will assist with the program's success.

While recognition is important to most people, the format will need to differ according to the culture of the business. The following four themes reflect the most common ways in which recognition can have an impact, and are often the basis of the aims that are set.

Recognition and Engagement

Many organizations have found that there is a strong link between employee engagement and a number of corporate financial metrics; there is also considerable research that supports this. Therefore increasing the level of engagement among the workforce is an important part of improving organizational performance. Recognition is a component of engagement and many organizations seek to raise levels of recognition as part of their desire to improve employee engagement.

An organization may choose to include one or more questions on employee recognition in its employee engagement survey. This can provide both the rationale for introducing a recognition program and the means by which its impact can be reasonably measured.

Recognition and Values

Many companies have developed a set of corporate values to help reflect the culture and behaviors that they see as important. However, it can be difficult for organizations to turn the "values on a page" into real change in the way in which people behave. A recognition program can help by linking recognition and the values so that the program encourages behaviors exemplifying the values.

One of the benefits of this approach is that it should allow the organization to capture stories of things that people have actually done for which they have been recognized. These stories can be important in helping everyone to see what the values actually mean. A recognition program may, therefore, have as an objective helping to clarify what particular behaviors look like and so encouraging a behavior or a change of behavior among employees that is linked to a business value or desired culture.

If a program is built around an organization's business values, it is important that the senior managers of the organization actually demonstrate and live the values themselves, or the program is likely to fall into disrepute.

Recognition and Collaboration

As the complexity and range of products and services has grown, organizations have become more complex and flexible. There is a greater than ever need for interdependence and collaboration between different teams and departments. The effectiveness of interteam or interdepartmental collaboration is commonly covered in engagement surveys. Encouraging recognition between teams can help build cooperation across teams, resulting in better organizational performance. Where this is one of the objectives of a recognition program, changes can be monitored through the employee engagement survey.

As an example, in a sales-driven organization, the individuals from outside the sales team who have contributed most to the success of the salesforce could be invited to join the sales team at that year's sales celebration.

Recognition and Customers

It is common across the service sector (e.g., restaurants and hotels) for customers to be given the opportunity to give feedback on the service received from members of staff. However, other organizations could also consider what customers would want to recognize. An aim of a recognition program might therefore be "to improve customer service," which can also cover internal customers.

Developing the Business Case

As with any initiative, it is likely that a business case for an employee recognition program will be required. Before starting to build its business case, an organization should carry out both internal and external research.

An organization should assess what recognition is already taking place. Even without a formal recognition program, there are likely to be supervisors undertaking best practices in recognizing employees; they may be able to provide guidance on what is already effective, which could be leveraged going forward.

An organization should also look at what other organizations are doing around recognition, as well as what recognition program providers offer. See External Providers.

A business case for a recognition program should cover the following:

  • Introduction/purpose. Include a short summary of the purpose of the program and any driving issues that need to be addressed, such as those identified by employee engagement survey results.
  • What recognition is. Clarify that recognition is not the same as incentives. It is about changing behavior rather than another form of reward.
  • Aims. State the aims of introducing the recognition program. What is the purpose and what should change if it is successful? State the measures to be used.
  • Proposed approach. State what the program will look like, which could be informal or more formal. The intention might perhaps be to start with an informal approach and build up to a more formal program over a longer period. If so, state the time frame.
  • Costs and benefits. Set out the costs. If the organization is establishing a more formal program there may be supplier costs as well as the costs of awards. Even if the program is informal, there will be a time cost associated with developing communication materials and conducting employee briefings. Set out the benefits. These will be based on the aims, and could include higher engagement levels, better customer satisfaction or lower employee turnover.
  • Project plan/timetable. State when the program will be launched and the steps needed to get to that stage.

Designing the Recognition Program

The characteristics of different types of recognition programs are set out in the table below.

Types of Recognition Programs


Day-to-Day Informal Formal

Simple thanks, and possibly small gifts, to individuals and teams, primarily from the manager recognizing behaviors, actions and outcomes. These should reflect business culture and values.

Local or divisional, with awards. May involve nominations.

Likely to be a high-profile corporate, division or site-based program.


Zero to low.


Medium to high.


Likely to be a small local budget for supervisors to spend.

Limited budget based on frequency.

Set budget, normally at corporate level.

Time frame

Frequent and any time.

Periodic, typically monthly or quarterly.

Often annual award, sometimes half-yearly or quarterly.


Possibly just the thanks: oral, letter, certificate, email or intranet. Symbolic item such as cup, or low-value gift such as flowers or bottle of wine (value < $25).

Possibly certificate/letter but also higher-value gift. May be able to choose from list or acquire through points system (value < $100).

Higher-value awards (value > $100).


May be in private, but ideally public, for example at a team meeting.

Presentation at team, department or company-wide meetings. Likely to be featured in local newsletters, intranet and bulletin boards, etc.

Awards often presented at major business event to maximize impact and publicity.


Locally managed but within simple guidelines and policy. Possibly some central system to enable gifts to be procured simply and quickly.

May be nominations from peers or other stakeholders. Likely to be assessed locally by small group.

Commonly formal nominations from peers, supervisors, customers, etc. Often escalated from local awards. May be multiple awards covering different behaviors, and individuals and teams.


Normally none.

May be promoted locally to prompt nominations, and set out deadlines and behaviors to be recognized.

Considerable promotions to stimulate nominations and raise profile of program, desired behaviors, etc.


Very little, if any, administration. Records may be required for gifts to ensure compliance with tax requirements.

Coordination of nominations and scheduling of awards and local events. Records must be kept for tax purposes.

Considerable coordination and administration required. Records must be kept for tax purposes.

Organizations need to ensure that they build a program that is appropriate for their needs. They should therefore consider the following in relation to their program design:

  • Why does the organization want to introduce a recognition program?
  • Is the organization ready for a recognition program? If there is a lot of negativity or cynicism or a lack of trust among its employees, other actions may need to be taken first to address these issues; they are unlikely to be solved by a recognition program alone and the program may fail.
  • How will the organization benefit?
  • What has worked in the past, or in other organizations in similar markets with similar employee profiles?
  • How are employees likely to react to the program, and what is likely to work in making them feel recognized and valued for their behaviors and contribution?
  • How can the program be kept as simple as possible? Over-engineering the processes is likely to put people off.
  • How ambitious should the program be? A program can develop and grow over time if it is successful, but withdrawing or reducing the program could have a negative impact.
  • How can the organization ensure that the program is affordable, and that there will be a return on the investment? Any administration cost should not outweigh the anticipated benefits to the organization.

In addition to the main objectives of the recognition program, which might include, for example, increased engagement and better cross-working, the program may be designed to offer other opportunities. See Aims and Objectives. For example, does the organization want to be seen as being in touch from top to bottom? If this is the case, involvement of senior management in the recognition process may help. For example, this could entail:

  • A personal email, letter or certificate indicating that the employee's behavior has been recognized at a senior level; or
  • The chance to attend a lunch with members of the senior management team.

In designing its program, it is important for an organization to consider what other initiatives it has in place for incentivizing and encouraging behavior. It should ensure that there is no conflict or contradiction between recognition or reward programs in terms of what is being encouraged or recognized, as this may result in both programs being undermined.

Project Team

It can be effective for an organization to approach the design of its recognition program as a project, particularly if the program will be operating company-wide, nationally or globally. The team responsible for this should consist of a mixture of individuals from various levels within the organization, who are tasked with developing a proposal, possibly under the guidance of HR. The terms of reference should be set by HR or senior management to ensure focus, clear objectives and time frames.

Understanding the expectations of the target community will be very important. Often individuals think they know what will engage a particular population without actually asking the target group. Therefore, small focus groups or a questionnaire may be helpful.

The final proposal can be put to a senior management "supervisory board" for review. Senior management endorsement is likely to be a key factor in the success of the program. However, the organization must be committed to implementing the program before the project team is formed. Forming the team will raise expectations among the workforce, and if the program is not subsequently implemented this may work directly against the increased engagement sought.

If the program designed by the project team is adopted, the team can become program advocates and champions and help with promoting and explaining the program and its goals.

Consideration should be given to launching the program as a pilot, perhaps in one location or division. This will enable an evaluation of the program's effectiveness and allow any procedural issues to be smoothed out. This will be important if expensive promotions and materials to support a major business-wide launch are planned.

External Providers

There are many third-party providers that can operate and manage recognition programs for organizations.

If a recognition program involves making awards or gifts of some value, deciding what to award employees can be a challenge. It can also be difficult to choose items that will be perceived as having value for the individuals concerned. Many organizations therefore turn to outside providers to manage the supply of recognition awards, as they will have access to a wide range of gifts. In some programs, the employee is awarded credits or points or an amount that he or she can spend or to which he or she can add to obtain a gift of choice from a wide range of options provided by the supplier.

One benefit of using an external provider is that there should be good reporting available within the provider's system, which will assist with tax compliance. See Taxation. Using an external provider can also help to reduce the amount of time spent internally on sourcing suitable awards. However, using an outside provider does require management and often has a cost associated with it. It is important for organizations to choose a provider carefully and test thoroughly any portal or system for reliability, user-friendliness and accessibility. Any provider should have alternative arrangements for members of the workforce who are not online.

If an external benefits portal is adopted it is important that "spending" of the award is monitored, particularly if the website operates an expiration date for awards. Some recipients take considerable time to make selections and may need reminding.

Setting the Recognition Criteria

The criteria for the recognition program should be as straightforward and as easily described as possible. Even in informal programs, it is important that there is a degree of consistency in the behaviors that merit recognition, so setting standards is important.

Setting the criteria and the "qualifying level" for recognition programs can, however, be a challenge. Successful formal programs tend to be ones where the award commands respect and the nominee feels chosen from the crowd. However, if the criteria are too hard to satisfy this may result in few or no nominations, and the program may be discredited and forgotten.

In informal programs it is often supervisors who identify the behavior and decide on the recognition. However, in more formal programs there is often a nomination process, and the understanding of the criteria needs to be broader, covering both those making nominations and those selecting award recipients.

It should be clear to all involved what sort of behavior or results meet the criteria for an award. Clear written guidelines detailing the criteria for awards should therefore be drawn up and made available.

Frequency of Awards

A number of different approaches can be taken to the timing and the frequency of awards. While day-to-day and informal recognition should be encouraged all the time, recognition itself must not be limited to a quota; the culture of recognition needs to be emphasized rather than the focus being on awards.

With respect to formal programs, ideally everyone who demonstrates the criteria set should qualify for the designated award. However, this could be very difficult to manage and budget for. With such programs it is therefore often necessary to have a process in place to select who will receive an award. This approach requires evaluation and ensuring perceived fairness and equity, so that it can be slower and more bureaucratic. If possible, all those meeting the criteria should receive some recognition even if this is only a personal "thank you," or a mention on the intranet or in a meeting. Low-value awards can be used to increase the number of awards that can be made.

One approach that satisfies both the need to recognize all those who meet the criteria and the desire to have high-profile successes and awards for some is a tiered approach. All nominations meeting the criteria receive a low-value or non-cash award, and there is then an evaluation process at the next stage. There may be, for example, bronze, silver and gold, or quarterly and annual higher awards. In this way the best submissions potentially receive greater recognition and possibly multiple awards. This approach can recognize all those satisfying the criteria, generate interest across a wide cross-section of the business and create exemplars of the desired or targeted behaviors.

Making Recognition Nominations

Many programs will want to recognize positive behavior everywhere, meaning that nominations could come from the individual's:

  • Supervisor;
  • Peers;
  • Other managers;
  • Customers;
  • Other third parties like suppliers; or
  • Any combination of these.

If an organization wishes to seek nominations for customer service from customers, clearly the customers need to be made aware of this and encouraged to make a nomination, including details of the behavior that merited recognition. In the restaurant or food service industry, this is often done with a form when the bill is presented or via a weblink to a form. Other organizations encourage customers (or service users or clients, etc.) by using posters and an email address. It is common for call centers to refer callers to an automated survey at the end of the call, or to send follow-up emails. In some organizations communicating with customers and motivating them to act may be more difficult. This can be overcome by offering an incentive to customers to provide feedback (e.g., entering the customers into a prize drawing).

The nomination process should be as easy as possible, and require the least information necessary to make a fair assessment. Long forms requiring the behavior to be described in great detail will deter all but the most committed, and could lead to the wrong individuals being rewarded if some of those making nominations give up. Guidance should be prepared so that it is clear how the nomination process works. It may also be necessary for the organization to make clear that self-nominations are not permitted.

In some programs, nominations are made behind closed doors, for assessment by senior managers. Often there is no prior publicity for these awards and they can have a very profound impact. For the individual it comes as a complete surprise but means that what he or she has done or achieved has been recognized at a senior level within the business, which can have a real impact on his or her engagement.

In relation to a formal recognition program, nomination submission deadlines may be required if awards are to be made at key events or on a time-driven basis, such as quarterly or annually, and these deadlines will need to be clearly communicated.

The type of workforce at an organization is likely to influence how nominations and any related processes are managed. If there is a diverse workforce working remotely or from home, a different approach may be required than in an organization where all the employees are office-based, online and in one location.

Assessing Nominations

It is important for organizations to consider who will make the assessment of recognition nominations. Programs can work very effectively with spontaneity and decisions made quickly at the supervisory level; the recognition comes close to the action of the individual and is current in the minds of peers.

If its program has a high profile and involves valuable awards, an organization may set up a panel to undertake the evaluation of the nominations. This often consists of senior managers. However, to give greater credibility to the process, the panel should involve individuals from various levels in the organization, including previous award recipients. These individuals can also act as champions to promote and communicate the program.

Those selecting award recipients will need to receive guidance and training on what to look for and a standard to follow to ensure reasonably fair treatment of all nominations.

The Recognition Program Process

If a formal program is adopted, the recognition program is likely to follow the process shown below.

Possible Formal Award Process


Recognition Awards

It is important for organizations to remember that the impact of recognition is through the recognition itself and not the award. For the day-to-day and more informal arrangements there may be no tangible award, just a "thank you" delivered in the most appropriate way, ideally in public. Such spontaneous demonstrations of recognition can be built on by having a special "trophy" that is passed on to the next successful individual.

Even if recognition takes a tangible form, this need not necessarily be a gift. A letter or email from a board member, a desk trophy, a framed certificate, or displaying the winner's photograph on the bulletin board for a defined period of time can all be effective. Giving the successful employees or teams something that can be displayed in the workplace can give additional public recognition. Research suggests that these symbolic awards of no financial value can have much greater long-term impact than a gift that is soon forgotten.

If a gift is given it should not be cash. This is to differentiate recognition awards from salary and bonuses, for both managers and recipients. One company reported that the use of its cash recognition awards went up significantly when the annual pay review was cut, suggesting that the awards were not being used as intended. Small cash awards have little, if any, impact because they are easily absorbed into everyday spending.

Non-cash gifts can also have more memory value. If chosen well they can be more personal and have a higher perceived value. For example, for a highly paid employee, a cash bonus of $100 might not mean very much. However, a bottle of good champagne with a note of thanks would be entirely different. That $100 in cash would have been converted into something appreciated.

Even if tangible awards are used, it does not mean that they need to be given to everyone. An alternative approach for organizations to consider is using some form of drawing. In such a program, an individual who has been recognized will be eligible for entry into a prize drawing for a gift, rather than automatically receiving a gift. This has a number of advantages, including the following:

  • Even with low-value awards, the costs can mount significantly if they are widely used. However, using a prize drawing allows for more predictable budgeting;
  • A prize drawing can add an element of fun and does not diminish the value to the individuals because the emphasis remains where it should be - on the message and not the award; and
  • It allows all successful nominees to be recognized to some extent and therefore avoids the potential for some to feel left out.

Similarly, an initial low-cost recognition may trigger a nomination to progress from a local award to a site, regional, national or even international level award.

One award option that is now common is to enable individuals to nominate a charity to receive a donation from the company as an award. This can be particularly effective for team awards. It is also likely to reduce any allegations of "favoritism" toward particular employees, while still giving significant recognition. In addition, it can assist with the employer's corporate social responsibility agenda.

If the organization wishes to promote role models, presenting awards publicly will assist with this. If the recognition program is informal, this could entail a presentation at the weekly or monthly team meeting. This can be particularly effective if employees value the recognition of their peers.

Eligibility for Recognition

The objectives of the program and the culture of the business will usually determine who is going to be eligible for nominations and for recognition. Programs focused on external customer contact will, for example, limit the eligibility to those who have external customer contact.

All employees should be recognized for the great things that they do. However, the form of recognition may well differ by level in the organization. For example, many organizations limit the nominees under a formal program to more junior staff, as they consider that senior employees have a higher profile and do not need recognition in this public form. If a program encourages peer recognition, the employer may choose to allow anyone to nominate anyone else, and powerful recognition may occur when employees nominate their supervisor.

Some organizations take an open-to-all approach, allowing even senior staff to be nominated for their formal program. When evaluating if recognition is merited, the evaluator needs to take into account the individual's position and what is normally expected of a person in that role. A program that appears disproportionately to recognize senior employees will soon fall into disrepute. Recognizing a junior employee who proposes a minor change to working practices may have a more positive impact than recognizing a senior manager who finds a way of saving a significant amount of money.

In line with their objectives, many programs recognize teams as well as individuals. They sometimes incorporate cross-functional or cross-departmental awards to encourage:

  • The breakdown of internal barriers;
  • Effective working between departments or sites; or
  • Overall business efficiency.

Care needs to be taken when recognizing teams, because it can be difficult to determine where a team starts and finishes, particularly in relation to large projects or informal fluid teams. Leaving some people out can cause resentment and undermine the positive outcomes.

Communicating the Program to Employees

As with any major corporate initiative, the publicity and communication around launching a recognition program will be critical to its success.

Posters, flyers on desks and payslip inserts are traditional forms of promotion of a recognition program, while promotion of the program by senior managers in team meetings and general corporate communications will illustrate their support for the plan. Social media, company intranets, email, online payslips and self-service portals are also all low-cost and effective methods of promotion.

The program design and the budget available will also shape the focus of the communications. No P.R. campaigns are really required regarding a simple program run by supervisors spotting behavior that deserves recognition with a small award or voucher.

More formal programs will need to be actively promoted both before and after recognition with a clear communications plan.

Most organizations that are managing a major launch will want to "brand" their recognition program, so that it develops its own personality and enters the language of the organization. Many will want to incorporate a fun element and the branding should reflect the culture and behaviors that the organization wishes to promote.

Recognition programs usually require communication across the organization. The communication will serve two purposes: promoting the launch of the program, and reinforcing the importance of the behaviors and actions being put forward as the trigger criteria. This will help employees to be aware of the desired behaviors or values, and assist supervisors and other employees in recognizing the behavior in their colleagues.

To encourage and publicize the nomination process, organizations could consider providing a benefit for nominators during the first few months of their program. For example:

  • All those submitting nominations could be entered into a prize drawing;
  • A token award could be given to the individual making the nomination selected for the award; or
  • The name of the individual making the nomination selected for the award could be publicized.

One challenge of recognition programs is that corporate communications need not only launch the program, but also constantly remind individuals of the award criteria. As the program will often run throughout the year, there will need to be frequent reminders, so that the program is regularly brought to the forefront of people's minds. Running countdowns to nomination deadlines on a company intranet is an easy way of drawing attention to the program.

It can be helpful if examples of the desired behaviors or values that are likely to be recognized and merit an award are used in the communications. It may also be useful to include examples of completed nomination forms.

The successful candidates can be one of the best forms of publicity. For example, their awards could be presented at team, department or company-wide meetings or other company events, and their achievements recorded in the company magazine or on the intranet.

Publicizing the winners will give the program transparency regarding who won and why. Telling the story behind the achievement will demonstrate the benchmark against which others can assess the level of behavior or contribution that is likely to result in future awards, and will help to attract future nominations. It will also make the program real for those who know or work with the winners. Many organizations capture the stories behind the nominations to demonstrate what a particular value looks like in reality.

Managing the Recognition Program


Even if only a very informal recognition program is introduced, it is wise for the organization to appoint someone to coordinate the program. The program administrator/coordinator can:

  • Be the point of contact for information about the program;
  • Oversee the processes;
  • Potentially order the awards, gifts, vouchers or certificates as appropriate;
  • Ensure delivery of the awards; and
  • Keep necessary records.

Additionally, the program administrator should have an overview of the assessment of nominees to ensure a common standard, and train and guide evaluators if appropriate. The more formal the program, the more important it is for the organization to appoint someone to coordinate the program, carry out its administration and manage the budget.


A gift or anything of financial value awarded as a result of employment will be taxable unless it is considered a de minimis fringe benefit. See Taxation of Employee Compensation: Federal. However, cash and cash equivalents (e.g., gift cards, charge cards and credit cards) given to employees can never qualify as de minimis fringe benefits. The full fair market value of cash and cash equivalent awards, gifts or prizes are subject to federal income and employment taxes (i.e., FIT and FICA withholding and FUTA). In certain situations, in-kind awards, such as length of service awards, may be tax-free. See Taxation of Employee Compensation: Federal.

There is a potential that giving someone a gift and then withholding the applicable tax from his or her pay can be demotivating and could undermine the purpose of the program in recognizing excellence and achievement. Therefore, tax-free options should be explored whenever possible.

Reviewing the program

An organization should review its program regularly, particularly in the early days of implementation. This could perhaps be done after three and six months, and then annually.

If a clear set of objectives is set at the start of the recognition program and a baseline identified at that time, the impact of the recognition program will be easier to measure.

In reviewing its program, an organization should consider the following:

  • How many nominations have been made? Too few may indicate that there are barriers to making a nomination easily or that the criteria for recognition are too demanding. Too many may indicate that the criteria are too weak or ill-defined.
  • Have any individuals or teams won more than one award? This may be an indication of some underlying issues. Are there individuals who nominate too often, which may indicate that more training is required and/or that others need to be encouraged to make nominations?
  • Who are the nominations for in terms of location, level or department? The organization should seek to identify trends and bias and whether or not the message about the program has been consistently presented across the business. Is recognition reaching all employee groups, particularly those who are not office-based or who have little or no access to computers?
  • What has the cost of running the program been, and what is the perceived and measured impact on the business? In measuring the impact of the recognition program, the employer may review employee engagement or other employee survey feedback, both about the program itself and about the behaviors that were targeted to be recognized. Managers should be approached for feedback on the impact of the program and potential improvements, while employees can be asked for feedback on their perceptions of the awards and award winners. Sources of information including productivity data, absence statistics and exit questionnaires can be used to assess the impact of the recognition program. All this can be used to assess whether or not there is a real return on the investment.
  • Are the awards still appropriate? Do the award values need to be changed to reflect, for example, inflation?
  • What are users' experiences of the program? The organization should collect feedback from award winners, other nominees and those making nominations. Those nominating other employees can be asked if they found the process easy and how it could be made simpler, as well as whether or not they felt the evaluation process was transparent, fair and equitable. If their nomination was not successful, they should be asked if they understand why this was the case. Nominees can be asked how they felt about being nominated, and whether or not being nominated influenced them to change their behavior or way of working, as well as their views on any award received.
  • Are the objectives of the program still appropriate for the business? Over time, the organization's objectives and priorities may change.

However successful a recognition program is, after it has been running for a while, it may start to appear "tired" and lose impact, meaning that it needs to be refreshed and re-promoted. This can be done by making changes to the frequency or nature of awards, or rebranding. For example, if recognition has been introduced through limited informal programs, greater interest may be stimulated by adding additional higher-profile tiers.

Case Study

A financial services business with approximately 1,500 employees introduced an annual employee engagement survey. The results showed that employees did not feel that they were praised or recognized for their achievements. This was one of the lowest scoring issues from the survey. The business arranged a short series of focus groups to try to understand the issue better.

It found that there were two main ways that employees saw this lack of recognition. First, team leaders and supervisors would commonly pick up on things that went wrong or needed improvement, but rarely acknowledged when things were done well.

Second, employees said that, although the company had carried out a launch of its new corporate values, very little seemed to be done with them. No one ever said anything about whether or not people were living the values, and some departments were not clear exactly what they meant. Even when employees thought that they were doing something that reflected one of the values, this was never acknowledged by managers.

The HR team set up a small working group including the reward manager, learning and development manager, two supervisors and an external consultant. They were able to identify some managers who seemed to be effective at recognizing their people and they drew on their experiences and practices.

The working group determined that there were some fairly simple things that they could do in the short term, as well as some longer-term developments. They came up with a number of recommendations.

In relation to the short term they agreed to the following:

  • The importance of recognition should be included in the new team leader training and the wider management training programs;
  • Simple guidelines would be introduced for managers and team leaders about how best to recognize people. These would reinforce the company values; and
  • A small budget would be created to allow supervisors to provide small gifts to employees, such as a bunch of flowers or a bottle of wine.

The working group also agreed that over a longer time frame they would develop a corporate recognition program based around the organization's values, and would also capture some stories about what people had done within the values to help bring the values to life.

The short-term initiatives were signed off for implementation by senior management, which also supported the longer-term corporate recognition program in principle, subject to a more detailed cost proposal.

A decision was made that the short-term changes would not be widely communicated, with the emphasis in the first instance on supervisors changing their behavior. The learning and development team worked on the changes to the training programs and along with the external consultant developed a two-page guide for supervisors. The guide captured best practices in recognition and encouraged those supervisors who were already using it to explain their approach to colleagues at meetings. Short briefings for supervisors and team leaders on the new guide were arranged.

The finance department was able to make small adjustments to budgets, creating a new cost code so that supervisors could make small recognition awards, such as flowers or wine. Since cash or cash equivalent awards are always taxable, the employer paid the applicable taxes on the employees' behalf. Taxation of employee cash or cash equivalent awards was processed by Payroll.

The next employee engagement survey was run approximately six months after these initial changes were introduced and the company saw a significant rise in the recognition score.

The company then launched its corporate recognition program. The program allowed anyone in the company to nominate anyone else who they saw strongly living the values. There was a simple online nomination process in which the particular value was highlighted and the reason for the nomination given.

Under the recognition program, the nominations were reviewed by HR and all nominees received a letter of congratulations and were also featured on an honor roll on the intranet. All the nominees for the month were entered into a prize drawing and 10 or 10% (whichever was the greater) received an award with a value of $25.

Every six months a panel reviewed the nominations for the period and selected what they thought were the best of the best; they aimed for between 10 and 25. The names of these people were announced with a summary of the reason for their selection. The employees received a gift worth $100 and a certificate. Some of their stories were used in internal corporate communications to illustrate the corporate values in action.

The following employee engagement survey showed a further rise in the recognition score, which brought the company to a higher score than that of the benchmark group provided by the survey organization.

Sources and References

"A Guide to Non-Cash Reward", Rose, M, Kogan Page, 2011

"Reward Management", Rose, M, Kogan Page, London, 2014

"The 1001 Rewards & Recognition Fieldbook", Nelson, B & Spitzer, D, Workman, 2003

"The Carrot Principle", Gostick, A & Elton, C, Free Press, 2007

"365 Ways to Motivate and Reward Your Employees Every Day With Little or no Money", Podmoroff, D, Atlantic, 2005