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.