You read the title and wonder how can there be any cons in providing employee recognition. How is that possible since all you are doing is providing a well-deserved reward to somebody who did a great job – how can that be bad?
Not bad per se but there are pros and cons in my view that need to be considered when setting up a system for recognition.
Let’s start with the pros:
Recognition of work
Handing out employee recognition in whatever form it comes, be it with a special mention at the next jour fixe or even a big company event, a handshake and a big thank you from the CEO, or be it by paying out a bonus, the magic is in the word itself: the work that was provided has been recognized and it has been recognized as something worthy. Sometimes a few nice words at the right moment are all a person needs to feel recognized and their contribution acknowledged. I don’t know why but we tend to criticize fast when something goes wrong but are very slow at recognizing something good. And trust me, an honest thank you goes a long way.
If recognition is linked to a bonus, it means more money in the bank. There is a financial gain to be achieved here, which is very often regarded as the best way to be awarded a thank you. Especially in economically challenging times, a little bit more in your account is nice and for sure feels better than a handshake. My personal experience is this: if you receive a bonus and it is paid out with your salary to your account, great! What is even better: the same amount is mentioned in a letter from the CEO, with your name on it and a few words of gratitude. And what affected me the most in terms of realizing that I did get something extra, and the company acknowledged it: the extra money (it was the same amount for all employees as a general thank you for a great year-end result) came on a gift card, with the personal letter and the words of gratitude. I had to activate the card and whenever I used it in a store, I was reminded of how grateful my company was and how nice this was of them. Well done in terms of recognition!
SMART targets need to be set up
When speaking about employee recognition in the form of a bonus, that bonus needs to be based on something to be able to judge if it was reached. Such targets should be:
S as in Specific
M as in Measurable
An as in Achievable
R as in Relevant
T as in Time or Time-bound
There are often three types of targets: company-wide, group related, and personal. Sometimes all exist, sometimes just one. Setting up the targets with the SMART rules in mind will result in tangible results that a company or an individual can strive for. Setting up these targets and discussing them in detail with the employee could be regarded as another pro: a manager takes the time to focus on one employee, think about his or her potential contribution, and discuss it with him/her. And the same goes for the year-end meeting when the results have been calculated and are discussed by the manager and employee.
There are also short-term and long-term goals or targets. These are company-wide achievements that all contribute in different ways. Both need to be clear to the employees across the company, knowing that the long-term goals might not be very precise and therefore harder to relate your work to. In the Entrepreneurial Tool to be developed by The Cecily Group, all goals are constantly visible on the Dashboard for everyone to see and remember, and also the projects each employee is working on will carry an icon behind it that points to a specific goal. That way everyone knows what their contribution is related to.
When employees feel appreciated and valued, they are often more motivated to work hard and contribute to the success of the organization. This can also be achieved by non-monetary recognition and appreciation such as already mentioned thanks or praise by higher ranks or by something like an award. In the process of target setting, employees are more motivated to reach the targets if they have been set up wisely and have been discussed with them and are not only understood but also agreed to. Targets linked to a bonus draw attention to them and employees tend to focus their attention on making them happen.
And now we turn our attention toward the cons:
Focus only on the work benefitting targets
If targets have been set up and they are linked to a monetary reward, some employees can resort to focusing only on tasks that will result or at least help in reaching the targets and thereby securing the monetary benefit. It lies with the manager to set up the targets wisely to prevent such behavior. So, a manager will be advised to make the SMART targets for their employees challenging but not seemingly impossible and reachable within an employee’s capabilities and time frame while at the same time also assuring the fulfillment of the manager’s targets. Usually, a manager can only reach their targets by making sure that their employees fulfill their part.
Personal targets are linked to the overall company result
If there are several kinds of targets like an overall company target, then a group target, and boiling down to a personal target these are often linked to one another in one specific way: the company target needs to be reached for the other targets to have an effect. So, in other words: employees might have reached all their targets through hard work but if the company targets were not reached, nothing is being paid out. Nothing. If you have been receiving such a bonus for longer, you probably have come across this phenomenon when the economies lost their stability. And to some, it was a surprise that the company was in such bad shape that it affected the targets. The system itself is clear from an economic point of view but the underlying problem is that it becomes visible in numbers only at the end of the reporting period. Employees who have worked hard will be very disappointed when in the end the numbers reveal the overall bad company results and the no-bonus-situation related to it. The flip side is an annual bonus that is being paid out to all, and also to those who did not do all that much. There is no motivation here to involve yourself much in anything as long as you can still count on this bonus, regardless of your contribution to the company’s success.
If employees are consistently rewarded for their work, they may begin to expect rewards for every little thing they do, which can create unrealistic expectations. Even worse, receiving monetary benefits such as a bonus leads to false expectations in terms of payouts for the following year. The phenomenon of customary law, meaning here expecting the same kind of recognition again, can be very tricky. The good deed that management did one year e.g. paying out a lump sum because the fiscal year ended so well and they wanted to reward all the same way, could lead to employees expecting something similar the following year. And if that does not happen, the demotivation is much higher than the joy of receiving such recognition ever was. Another problem in companies that pay out an annual bonus every year to all is that discontented employees will wait until that expected bonus has been paid out and then leave.
Overseeing the B players
Depending on the system that has been set up to handle employee recognition, the danger is that the so-called B players, the ones that do good work and do not boast about it, are overseen. This could result in them deciding to leave the company because they see others getting rewarded constantly while they are being ignored for their hard work. If employee recognition is not distributed fairly or consistently, it can lead to resentment and dissatisfaction among employees. Harvard Business Review wrote an article about How to retain and engage your B player (How to Retain and Engage Your B Players (hbr.org)), pointing to the fact that you need to hold on to them in a way that suits their needs.
Recognizing employees for their contributions can help foster a sense of teamwork and collaboration among team members. But watch out for overemphasis on individual performance. While individual recognition is important, an overemphasis on individual performance can lead to a lack of focus on team goals and collaboration.
And finally: the cost
Depending on the type of recognition, it can be costly for the organization to implement and sustain, which may not be feasible for all organizations.
Overall, employee recognition – monetary or non-monetary – can be a powerful tool for motivating and engaging employees, but it is important to be aware of the potential drawbacks and implement recognition programs thoughtfully and consistently. Used with sensitivity, it can yield the success aimed for and inspire and encourage employees to go far and beyond.