Abstract: Rewarding employees the wrong way can be patronising and demotivating.  It is better to not reward at all, than to reward in demeaning, belittling ways.  Key contributors want meaningful recognition that speaks to their autonomy and significance.  Top-down rewards, only bestowed from on high, reinforce the meritocratic injustices in the company hierarchy and cause discontent.

How do you encourage people to do their best work?  It’s an important question, because excellent work contributions translate into company advantage and better earnings.  The need to reward people for doing good, valuable work would seem to be a straightforward thing, yet the way those rewards are handled can actually have the opposite effect to that intended.  Instead of being a factor in promoting consistently high quality work, it can instead lead to demotivation, dissent and withholding of an employee’s best ideas and contributions.

Traditionally, employee recognition took the form of token spot awards.  These are small amounts of money, awarded for a job well done.  The problem with spot awards is that psychological research tells us they only work when the task rewarded is mechanical, routine and largely brain-dead.  For anything that requires initiative, novel thinking or taking personal responsibility, they fail.  In fact, they cause worse outcomes than no reward at all, for those kinds of tasks.  The implication of the small amount of money awarded is that this is all the employee cares about.  It is an explicit way of calling your best contributors “coin operated”.  That can be demeaning and insulting for those whose vocation gives them a higher, more worthy calling.

Also, the amount of the award can be pathetically small, compared to the impact on the company’s bottom line that the employee’s contribution caused and this is not something that employees are unaware of.  Telling an employee that their “good job” was worth £10 or $10, it doesn’t matter which, when it causes the company to earn an additional million, simply outlines the fact that the employee should be working for themselves, not harder for the firm.

Incentives, based on the amount you sell or the amount of profit you generate for the company, are like an unearned bonus, when the orders would have come in, irrespective of your work contribution.  They are relatively easy to scam and they erode teamwork.  They also come to be expected as an entitlement and so, instead of motivating, they merely cause displeasure and dissent, when they are withdrawn or reduced in value.

The other kind of recognition traditionally used is the “attaboy” award.  It’s a token gesture, like sending an e-Card or putting their photograph on the “employee of the month” wall.  Usually accompanied by a fruity and over the top citation, relative to the achievement, the award is both worthless and cringe-worthy, causing embarrassment, rather than pride in a job well done.

Also popular is the share option, which offers the chance of a possibility of maybe earning an indeterminate amount of bonus money some day, if only you willingly submit to inhuman and degrading work practices, or else tolerate excessive top-down management abuse, in order to earn the carrot.  It is an attempt to convince you that you are an owner of the business, who should therefore be willing to make greater personal sacrifices for the good of the business, but an option is not the same as a vested share.  Fully vested shareholders, with voting rights, actually own the business.  Rest assured that the bonus is far from indeterminate.  It has been very carefully determined to ensure that not too much is given away.  In exchange, the employee so incentivized is expected to give their all, sacrificing personal time and relationships, if need be.

All of these recognition techniques can leave the workforce feeling belittled, unappreciated in significant material ways and “owned”, like some kind of pack of good doggies.  If a company’s intention was to encourage their employees to do their best work, there are few things as undermining of that aim as making everybody fully realise their impermanence, replaceability, interchageability and lack of recognised uniqueness, through patronising employee reward schemes.  It’s almost like rubbing their noses in it.

If you ask employees what motivates them, it’s genuine peer respect, autonomy in setting their tasks, assignments and schedules, better conditions, when travelling on business, flexibility in hours worked and place of work, control over their working environment (furnishings, decoration, noise abatement, lighting, comfort), the ability to easily inject their own ideas, innovations and direction into the company’s roadmap, the resources they need to get their job done and realistic, proportionate participation in the good fortune of the company, if their work contribution causes the company’s earnings to rise significantly.  They want to have more of a say on company policy and direction.  When being recognised for their contribution, they want it to be for the things that add purpose and meaning, to the lives of their customers and colleagues, not for things that undermine, destroy, cheat or short-change, as profitable as these might be.  In essence, they want to matter more to the company their work efforts are helping to build and grow, through increasing ownership and to feel genuine pride in their achievements.  How many employee recognition schemes offer that?

On the one hand, companies are fully aware that their value depends critically on the quality of their people and the work contributions they make.  On the other hand, they deny it outright, insisting that the top-down hierarchy is a pure meritocracy, with the earnings, accruing from individual outstanding work, flowing directly into the pockets of upper tiers of management and shareholders, predominantly.  There is clearly a conflict apparent here.  The more that employee recognition rewards are bestowed, exclusively from on high, the more obvious it is that the awarders are not in their positions based on merit.  It becomes quite literally patronising.

Were it the case that the hierarchy really did reflect a pure, internal meritocracy, the most valuable work contributions would always come from the top and it would be obviously the case to all, but this isn’t what we observe.  Just having a recognition scheme that attempts to extract better work from the lower tiers of the organisation reveals the truth.  The top tiers are free-riding.  The things that matter most, to the company, come from people who aren’t in the highest positions in the hierarchy.  Employee recognition has to be a peer-to-peer collegiate thing, or it tends to lose its legitimacy and potency.  Expecting outstanding contributions consistently and returning only crumbs sends a clear message to employees that they are being blatantly exploited and manipulated.  Retention problems and disengagement soon follow.

Employee recognition schemes have traditionally been a system that asserts value comes from the unique contributions of individuals, while the internal organisation of a company, its hierarchy, tells the opposite story.  Few reward effective teamwork.  Whereas employee recognition programmes try to get the most valuable contributions from low level employees, because those things really do significantly affect company earnings, the amount awarded tells the opposite story.  Most importantly, a badly designed employee recognition scheme draws the contradictions into sharp focus, in the minds of those participating.  They cause dissatisfaction and despair, instead of encouragement and motivation.

There is a contradiction between the structures of company ownership and to whom the spoils ultimately go, for the effort and success of the enterprise, versus the reality of where company value actually comes from.  In wanting better company performance, it is imperative for firms to share the resulting success generated by those individual contributions, many of which are turning points for the entire enterprise, more equitably, or their efforts at encouraging superior work contributions will backfire.

Proprietorial ownership of the company, in proportion to the significance of one’s contribution, matters more than money, in most cases, though money is not an insignificant factor.  The best employee contributions cost a meaningful equity stake in the company.  In so doing, the employee gradually transitions from paid hired hand to beneficial owner.  Of course, very few enterprises are rewarding and recognising their employees in this way and consequently, failing to unlock the value that otherwise could be made available to all.  In some cases, that unrealised potential value dwarfs the value of the company, even when taking into consideration the best case growth projections.  Staying in charge and in control is a very costly choice.