Why Free Recognition Beats Costly Awards

free recognition most meaningful

The Employee Recognition Paradox

While people say they want cash awards, studies have shown free recognition is most meaningful. Despite all the billions spent on recognition each year, the evidence seems clear: most meaningful recognition is free recognition. You might be thinking, “Wait a minute, the people in my company have confirmed that they prefer recognition that is accompanied by cash awards.” And you wouldn’t be wrong. Years of research into what people say they want from workplace recognition supports this conclusion. When asked about preferences, money, either as cash bonuses or gift cards, is a top priority. Yet it also true that studies show that most meaningful recognition is free. This poses a critical paradox:  free recognition is most meaningful, but people want recognition accompanied by cash awards. Solving this paradox can mean the difference between a successful business and one plagued by turnover and unmotivated employees.

People want costly recognition, but are motivated by recognition that doesn’t include a costly award.

I became personally acquainted with this paradox early in my consulting career. Time and again I would bring together focus groups to discuss what they would prefer from recognition, and the most common selection would be cash awards in some form. Most groups would be adamant that money demonstrates value, but get them talking about previous recognition they have received, recognition that really made them feel valued, and the conversation rarely comes around to money.

research free recognition

The Research Into Meaningful Recognition

In a 2013 survey we found that over 70 percent of the most meaningful recognition people receive is free recognition! In this survey, we asked respondents to think of the most meaningful recognition they have received in the past twelve months. We then asked a them a series of questions about that recognition. One of the questions we asked was, “How much did the recognition cost?” We provided choices that ranged from $1000 or more to costing nothing. Most chose “cost nothing.”

Over the past 15 years we have run this survey several times. I also survey audiences regularly during presentations. Without fail, in all venues, responses show that majority of meaningful recognition received is free. In fact, the percentage of free recognition has increased each time we have formally run the survey.

Why Free Recognition is More Meaningful –
Reason #1 People Aren’t Rational

There are a couple of factors at work that make free recognition come out ahead. The first comes from the field of Behavioral Economics. If you aren’t familiar with behavioral economics, it is the study of how cognitive, emotional, and social factors affect economic decision-making. Instead of looking at economics through the traditional lens of rational decision-making, behavioral economics studies how we really make decisions. Two of the most well known books on this topic are Drive by Daniel Pink and Predictably Irrational by Dan Ariely.

Social Ideal vs. Transaction

In behavioral economic terms, when we offer recognition we are acknowledging that the recipients have met a social ideal. They are behaving in a certain manner because they believe is the right thing to do. If we then recognize that behavior with praise or appreciation, we offer a confirmation that their behavior is desirable, and do so in a manner that recipients find meaningful.

In contrast, when we provide an award we can quickly move the recognition offered from social ideal into the realm of a transaction. The recognition and accompanying award become payment for services rendered. The question that typically follows is, “Is it payment enough?” The answer to that question is often, “No,” leaving people feeling short-changed. This is why low cost awards are least frequently listed as meaningful recognition.

You might find yourself doubting the social ideal/transactional premise and believe that awards provide the most meaningful recognition. That is understandable. It isn’t logical that free recognition provides more meaning, but then behavioral economics has repeatedly demonstrated that people aren’t always rational.

Feeling recognized isn’t rational; it is emotional.

Feeling recognized isn’t rational; it is emotional. So, instead of proving the point with statistics, let’s do a comparison from an emotional perspective. Put yourself in the following situation and consider, not what you would think, but how you would feel:

Imagine, you help your friends move to a new home. You spend the entire day packing, hauling, and unpacking. When the work is done your friends thank you and extend an invitation to join them for dinner the following week. How do you feel? Probably pretty good. The social ideal says we help friends. The thank you acknowledges the ideal, while the invitation to dinner does two things: 1) it reinforces that you are friends and 2) your friends appreciate what you have done (meeting the social ideal).

Now compare that scenario to a slightly different variation. Again, imagine that you help your friends move and they thank you. Now imagine, that instead of the invitation to dinner, they hand you a gift card so that you can buy yourself dinner. How do you feel? You probably aren’t feeling quite as good about this variation. The gift card creates a transaction and overshadows the social ideal that the thank you was meant to reinforce. You feel as though you have been paid, and not particularly well. You have just experienced recognition from both the social ideal and transaction perspective.

There are exceptions.

Any hint of a transaction can erase the meaning of accompanying recognition. There are, of course, exceptions. In the Make Their Day survey nearly 30 percent of respondents were exceptions. Their meaningful recognition examples included awards that cost their organizations anywhere from a few dollars to thousands. Of these respondents many had received opportunities, trophies or gifts, but some had received cash or cash equivalent. In Make Their Day!: Employee Recognition That Works I offer this example provided by an employee who does customer support:

“I was given a tough customer to assist. The underlying message was ‘We don’t entrust really important relationships to just anybody. We believe in you. You have proven yourself.’ After I was successful, they let me pick from a catalog of gifts. The opportunity was the recognition, but the mixer I selected reminds me of it—every time I walk into the kitchen.”

Selecting a gift from a catalog was a cash equivalent award. How did this employee’s manager avoid the transaction trap? The answer lies with the second factor in the recognition paradox.

Reason #2 Awards Can Make The Recognizer Lazy

The second reason why the majority of meaningful recognition is free comes from how awards and recognition are presented. Simply put, the use of awards can make the person offering recognition a bit lazy. Consider this scenario. Two managers each want to recognize an employee. One has access to $100 gift cards; the other only has a box of note cards (free recognition). Which is going to pay better attention to the recognition message they deliver? In most instances the one with the note card will expend more effort, providing specifics that clearly communicate that the employee is valued. The other will give the gift card with a few words of thanks; mistakenly thinking the gift card itself provides a message of recognition.

Awards themselves are never the recognition. In our previous example the employee expressly states that the opportunity was the recognition and the award the reminder. The manager communicated his trust in her abilities while delegating. “I have confidence that you can handle this difficult customer,” was the recognition message. The reward was the opportunity (non-transactional). After she was successful, the manager reinforced the earlier message with more positive words and the selection from the gift catalog. By putting thought and effort into both messages, the manager helped this employee come to the conclusion that the opportunity was the recognition and the mixer was a reminder of how much she was trusted.

Awards Still Have a Place

We have two factors that help to ensure that the majority of meaningful recognition will not have an award attached. Yet, this doesn’t mean we should stop using awards altogether and offer only free recognition. It does mean, however, that we should use caution and consider the following three rules for awards:

Three Rules for Awards

1) Offer non-tangible awards such as new opportunities.

Approximately half of memorable recognition examples will include some type of opportunity: training, new responsibility, exposure to decision-makers, or a chance to participate outside their normal job responsibilities. Experiences have several advantages over cash and cash equivalent awards. Experiences avoid the transactional trap; we rarely think of them as payment. Experiences also provide a high level of satisfaction and tend to be more memorable than either physical awards, cash, or cash equivalent awards according to a 2003 study reported in the Journal of Personality and Social Psychology (Van Boven and Gilovich).

2) Consider symbolic awards.

Symbolic awards are items that represent a value or specific behavior that is important to you and your organization. You may have heard the story of the HP Golden Banana award for technical innovation. In 1501 Ways to Reward Employees, Bob Nelson describes an engineer who finds a solution to a problem the group had been struggling with for weeks. His manager gropes around his desk for some item to acknowledge the accomplishment and finds a banana from his lunch. The story goes on to say the engineer is initially puzzled, but ultimately the Golden Banana becomes a prestigious award for inventive employees. The symbolism of this award isn’t inherent. Like that first engineer, most of us wouldn’t associate a banana with innovation. The symbolic association needed to be developed through story telling; the better the story, the stronger the symbolism.

Most of the symbolic awards that I have seen used successfully are a bit more obvious in their symbolism: a toy giraffe for “sticking your neck out (risk taking),” a light bulb for a “bright idea,” or a scissors for “cost-cutting.” With a bit of imagination the possibilities for symbolic awards are endless. What you choose as the award isn’t as important as how committed the leadership is to the award and the symbolism behind it.

You can create symbolic awards that are playful, but these awards can also be serious. A manufacturer uses an engraved pen presented by the president to acknowledge actions that are far above and beyond the norm. Again, because the symbolic connection isn’t obvious, the story, had to be developed.

Symbolic awards can be organization-wide, but also at the team level. A team leader who wants to recognize teamwork presents a piece of a jigsaw puzzle to each of her team’s members. Together they assemble the puzzle with its message of congratulations on their teamwork. The award reinforces the message.

3) Focus on the message.

Ensure that all awards are accompanied by well-thought out and beautifully communicated words of praise or appreciation. Provide details and describe the contribution in terms of organizational objectives. Acknowledge the skills and attributes of the recipient. The message will last long after the award is gone. To quote a manager who received a large cash bonus along with a letter from the president (outlining his accomplishments and signed by every manager in his reporting structure), “The money was nice, but I will treasure that letter forever.”

Cash and cash equivalent awards have a place in most work environments. Done well, their presentation draws attention to the behaviors and achievements we want to reinforce. For the majority of recognition occasions, stick with just the message, or the message and a non-tangible award or inexpensive symbolic award. Your recognition will be more likely to be perceived as meaningful.

Join the discussion: What have you observed? Do you have additional tips and tricks for avoiding the transactional trap?

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One Response to “Why Free Recognition Beats Costly Awards”

  1. Michael Zroback July 29, 2015 2:45 pm

    This article makes so much sense! I particularly liked that it was based on how employees actually make decisions not the way a manager thinks they make them. I am sending this to our whole management team with a view to changing how we reward our employees.
    Thank you for sending this to me.