Your employee-recognition program may be doing more harm than good, new research shows.
Although many employers believe handing out awards like "Employee of the Month" is an expensive and easy way to motivate workers to give it their all, these programs can actually hurt a organization's overall performance, according to a study recently accepted for publication in the journal Organization Science.
"The common knowledge is that non-monetary awards can subtly motivate people in ways that are fundamentally different to financial-reward programs, such as by increasing organizational loyalty, encouraging friendly competition, or increasing employees' self-esteem," Timothy Gubler, one of the study's authors and an assistant professor at the University of California, Riverside's School of Business Administration, said in a statement.
However, the study found that these types of nonfinancial awards are detrimental to businesses because they can influence perceptions of equity and fairness, which can disenfranchise employees who are internally motivated and don't need the extra motivation to perform well.
For the study, researchers examined field data from an attendance-award program used at one of five industrial laundry plants. The program recognized all employees who came to work on time and didn't have any unexcused absences each month, with one person receiving a $75 gift card through a random draw. [See Related Story: Lunch Is Served! Workplace Meals Improve Productivity ]
The researchers analyzed data from all five plants both before and after the award was implemented, exploring the award's effects on individual performance and plant productivity as a whole.
They discovered that while reward-motivated employees initially responded positively to the award by cutting down on their tardiness, they reverted to their old behavior by showing up late and missing work once they lost eligibility for the award each month.
The study's authors said the awards decreased motivation and productivity for internally motivated workers who were are already showing up on time and not missing work before the program started. They found that these workers started showing up late and were absent more once they weren't eligible to win the award.
Overall, the award program cost the plant 1.4 percent of its daily productivity, mainly because of the productivity lost by internally motivated employees.
"Conscientious internally motivated employees who were performing well before the award program was introduced felt the program was unfair, as it upset the balance of what was perceived as equitable or fair in the organization," Gubler said. "So their performance suffered — not just in terms of their attendance but also through a motivational spillover that affected other areas of their work — including productivity."
The study's authors say the research shows that organizations need to realize that while some award programs may seem innocuous or even highly beneficial, they can cause the same issues as a monetary bonus.
"Employees value workplace fairness and they care about how they're perceived relative to others in the organization," Gubler said. "To be effective, companies offering award programs need to consider not only the group they are targeting — such as those that are coming late to work — but also those that are already doing the right thing, as there is a possibility of demotivating some of their best employees."
The study was co-authored by Ian Larkin, an assistant professor at the University of California, Los Angeles, and Lamar Pierce, an associate professor at Washington University in St. Louis.