Meaningful Employee Rewards when Budgets Are Tight

How do you engage employees and motivate them to high levels of performance and productivity when budgets are tight in this strained economy?

Global consulting firm The Hay Group recently issued advice on things employers should avoid, including this nugget:
Reward only with cash: Many employees work in organizations for reasons other than money - and there are a number of ways to reward employees besides salary increases and bonuses. Recognizing and showing an appreciation for employee's efforts in ways other than monetary compensation can go a long way.”

We at Globoforce agree. We do not advocate cash-based recognition programs, which neither maintain program consistency on a global scale nor ensure local participants feel motivated and involved in the organization. Additionally, people become habituated to cash no matter how much you give them, viewing it as an entitlement. A study finalized in August 2008 and recently highlighted in the New York Times found that in eight of nine tasks, the promise of a bigger bonus actually significantly decreased people’s performance. I’ve blogged about these findings before.

Multiple studies have proven that simple recognition delivers better results than cash. A Japanese National Institute for Physiological Sciences study found “paying people a compliment appears to activate the same reward center in the brain as paying them cash.” White Water Strategies found acknowledging staff achievements – praising employees – had the same impact on job satisfaction as a 1% increase in pay, which would equal £5.2 billion for UK businesses alone. These 2008 studies reinforced research results from a 2004 University of Chicago study that found non-cash incentives were 24% more powerful at boosting performance than cash incentives.

Non-cash recognition programs save money by reducing manual intervention and eliminating the paper chase while also creating a positive work environment where employees see that best practices, strong ethics and exceptional performance are recognized and rewarded consistently, openly and fairly – an environment that encourages loyalty, commitment and honesty of effort. It is this kind of environment that drives greater morale and productivity when company leaders need it most.

To derive the most value from a strategic recognition program, offer employees the Reward of Choice - give them access to millions of options that are culturally relevant and personally meaningful. Don't fall into the trap of sending watches to a Chinese employees or steakhouse gift certificates to a vegetarian. Let them choose for themselves.

What meaningful rewards are you offering during this recessionary time to motivate and encourage high levels of productivity? Be sure to take our weekly poll.

4 comment(s):

At February 11, 2009 9:27 AM, A vida não pára said...

After been searching the web for consistent writings on this subject just luckely stumbled upon this blog. Thank you so much.
My comment is that as I am all for recognition, one of my employee is 'addicted' to it and whenever commendment is done, he gets back expecting a money raise... Do you have comments to help me? THanks, Roger.

At February 12, 2009 10:50 AM, Derek Irvine said...

Roger, you've struck on a very common misconception -- the difference between being PAID and being RECOGNIZED or rewarded.

Too often, employees have received a cash bonus as the means of recognition for exceptional efforts. This leads to confusion as the same "currency" -- cash -- is being used for compensation as for recognition.

To help employees understand the difference you must use a different currency for recognition. I blog about this extensively in this section:, which also includes a great deal of research on why non-cash is a much better reward than cash.

Another consideration that may or may not apply in your situation is the level of base compensation. Some employees who regularly receive cash bonuses come to rely on those payouts as part of their regular compensation. In some cases, those employees may actually deserve a raise in their base compensation to reflect their increased value to the organization. When base compensation is out of alignment with regular contribution, then no amount of recognition for above-and-beyond efforts will meet the lower-order needs of the employee that should be met by compensation.

Further discussion on this topic is available here:

I hope this helps. Let me know if I can provide any additional advice.

At December 02, 2009 4:29 AM, Employee Rewards Incentives said...

Sometimes Employees work for reasons other than money.Recognizing and showing an appreciation for employee's efforts in ways other than monetary compensation can go a long way.

At December 16, 2009 6:58 AM, Nspire said...

Recognition and Appreciation always works!! For this it is necessary to appreciate your employees for their good work by giving Rewards,even when budgets are tight.It will increase your business rate.