In contrast to an informal program, a formal recognition program strategically reinforces established employee behaviors through material incentives or rewards. Organizations may identify specific objectives that employees can work towards in the course of their daily work, which align with the overall goals of the company. Employees are then rewarded when they achieve these objectives. This recognition of behavior has been shown to increase morale and give employees a sense of worth in their organization. In turn, employees show greater work ethic, dedication, and loyalty to the company, leading to higher retention rates.^[1] 

When creating a formal incentive program, it is critical to think about the organization and its management style and culture, specifically:^[2]

The following steps can be used to develop a formal recognition program as adapted from The Fundamentals of Employee Recognition  and Employee Recognition: Selling, Implementing and Communicating the Program:

 

Budget for the Program. Before developing the incentive program, establish a pool of money from which the company will draw for program activities only, so that funds are available when the program is announced to employees. Establish a means by which to distribute money to different departments or branches so that employees view distribution of funds as equitable and fair.

 

Establish Eligibility Guidelines. Specify who is eligible to participate in the program. Consider whether all employees are eligible or only select groups, for example, full-time employees, employees of certain departments, or other groups. Clearly define and document eligibility criteria, and do not leave room for misinterpretation.

 

Define Performance Measures. Establish performance measures that will elicit rewards. It is important to keep in mind the organization’s culture and select objectives that align with and reflect the company’s goals. This will help employees make a clear connection between the organization’s mission and vision, and the behavior that is rewarded. Objectives may include meeting specific goals, increased productivity, teambuilding efforts, attendance, safety, or any other relevant measures. WDRC contains information on performance reviews in the following resources:

Identify Decision Makers. Identify which employees will make decisions regarding the distribution of awards. It is important to select decision makers from as widely across the organization as possible. Explain which behaviors should be rewarded and by what means, using examples when possible, so decision makers can implement the program in a fair and timely manner.

Select Awards. In order to make the program meaningful, select rewards appropriate to the culture of the organization, the specific achievement, and the individual employee. An employee who worked overtime for a week to finish a project should be awarded differently from an employee who saved the company millions of dollars by catching an error.

Learn about the unique interests of employees, and choose a variety of cash and non-cash rewards that reflect the unique motivations of each person. Avoid designing a program that assumes that every employee is motivated by the same thing even though their job responsibilities, work environments, and personal interests may differ greatly. Awards may be in the form of cash, gift certificate, personal gift, or any other incentive.

Communicate the Program. Inform managers and supervisors about the program in advance of a company-wide announcement, so that they are informed and prepared when employees have questions. Facilitating focus sessions and/or providing program manuals including frequently asked questions may be effective ways to do this.Once managers and supervisors have been informed, communicate the program to employees. This announcement should include the purpose of the program, eligibility criteria, and possible rewards.

Present the Awards. Present awards consistently to staff who meet a performance objective in a manner that reinforces the behavior. Awards should be presented in a sincere and heartfelt manner as shortly after achievement of the goal as possible. Present the award in a way that the employee is comfortable with and that is appropriate to the accomplishment, for example, in a company-wide setting, department meeting, or one-on-one.

 

When presenting the award, thank the recipient by name, outline the achievement, state how you felt about the accomplishment, and explain how it impacts the organization’s larger goals and mission. It is beneficial to communicate different ways of presenting awards to employees, so that the presentation of the award is, in fact, reinforcing to the individual receiving it.

 

The following resources provide more information on formal recognition and ways to implement it: