Giving out non-financial awards such as “Employee of the Month”  tends to upset perceptions of fairness. Despite being seen as a motivator, these programs leave those already motivated but unrewarded employees to feel frustration and inequality, causing them to reduce their productivity.

Researcher Timothy Gubler, an assistant professor of management at the University of California, Riverside says many believe that non-monetary award programmes increases loyalty, self-esteem and encourages healthy competition among co-workers, unlike financial reward programmes where employees play the system and become more focused on doing tasks that are recognised financially and less motivated on performing tasks that won’t bring them monetary reward.

Employee recognition. Photo from Workible

Employee recognition. Photo from Workible

Apparently, 80 percent of the companies who use these programmes, however, are unaware that such practices cause more harm than good. The researchers studied an industrial plant in the Midwest United States where the company practiced an attendance award programme.

Employees who came on time to work and without any unexcused absences were acknowledged in the whole plant and through a random draw, one of them can even be rewarded with a $75 gift card (AU$100.59).

The researchers found out that employees reduced their tardiness when motivated by the rewards but once they lose eligibility, they lost their motivation to come to work early. Some even used their sick days to still qualify for the reward programme.

Those who already came to work early and did their jobs well even before the programme started became less motivated to come to work and less productive because they did not see this programme as fair, hence they lost their eligibility. Overall, the attendance award programme reduced the plant’s productivity by up to 1.4 percent daily.

“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 says. “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.”

However, Gubler maintains that the problem can be solved. The assistant professor suggests that companies should analyse these non-financial award programmes before implementing them to avoid any productivity loss and other problems.

Gubler concludes, “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.”