The Dark Side of Employee Awards?

Timothy Gubler, Ian Larkin, Lamar Pierce have conducted a provocative new study regarding employee awards.  They collected data about an attendance award program at a private commercial laundry services company in the Midwestern United States.  One of the company's five plants chose to implement an award for good attendance.   Managers wanted to reduce absences and tardiness.   The other four plants did not institute this program.   The program was rather simple.   All employees without an unexcused absence or tardy in the prior month received recognition before their peers, and they became eligible for a drawing for a $75 gift card.  The program lasted for a bit less than a year.  Senior executives at the company eliminated the program because they felt it rewarded behavior that should be expected of everyone.

The scholars studied this program, and they found that the award produced two important unintended consequences.  Here is an excerpt from the paper's abstract:

First, employees game the program, improving timeliness only when eligible for the award, and strategically calling in sick to retain eligibility. Second, employees with perfect pre-program attendance or high productivity suffered a 6% to 8% productivity decrease after program introduction, suggesting they were demotivated by awards for good behavior they already exhibited. Overall, our results suggest the award program decreased plant productivity by 1.4%, and that positive effects from awards are accompanied by more complex employee responses that limit program effectiveness.

I don't think we should be surprised by these results.  When creating any type of incentive or recognition program, we should remember the law of unintended consequences.   Still the paper documents the phenomenon in a powerful way.   I find it particularly interesting that this award program clearly created a perception of injustice.  People felt that people did not merit recognition for simply showing up when they should anyway.  Perceptions of inequity should be top of mind when creating reward programs. These feelings are likely to trigger discontent and unintended consequences.  

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Employee engagement: The importance of public recognition

Many firms expend a great deal of resources on merit review systems these days. Providing employees 360 degree feedback for evaluative and developmental purposes has become standard in large companies. Coaches and mentors provide feedback too. Managers meet one-on-one to provide "constructive feedback" as well. Incentive compensation exists, in some form or another, in most firms. Nevertheless, many company executives fret these days about the low levels of employee engagement in their organizations.

Many reasons exist for the lack of engagement, but let's start with a simple cause. Despite all the "feedback" provided to employees these days, they often feel that they receive little public recognition for their good work. Yes, employees enjoy a bonus or a raise. However, they also value those occasions when a manager or executive praises their efforts and accomplishments publicly. Yet, that public recognition comes very rarely in some firms. Tomorrow's holiday reminds us that a simple "thank you" and "job well done" expressed in front of one's peers can be very motivating.

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