STRATEGIES FOR

DEVELOPING A SUCCESSFUL
EMPLOYEE RECOGNITION PROGRAM

by
Mark M. Whitney and Jennifer M. Bombard
Morgan, Brown & Joy, LLP
200 State Street
Boston, MA 02109
www.morganbrown.com

EMPLOYEE RECOGNITION
PROGRAMS
By: Mark M. Whitney ([email protected] and
Jennifer M. Bombard ([email protected])

Introduction: What is an Employee Recognition

Program?
All employees like to be recognized and appreciated. An employee
recognition program can be the key to motivating employees and infusing
a healthy dose of creativity into an otherwise stale corporate culture.
Traditionally, recognition programs were viewed as a nice thing for
companies to do. Today, companies are thinking about recognition more
strategically and aligning their employee recognition programs with their
business goals. Large employers have added employee recognition
sections to their websites to inform prospective employees about incentive
and reward programs. Some recruiting firms encourage applicants to ask
employers at job interviews about whether they have a formal recognition
program and how they encourage or reward employees. In addition, the
number of recognition strategy/services firms, employee recognition
program vendors, and corporate rewards/corporate loyalty sponsors has
dramatically increased in the past twenty years. Bob Nelson, President of
Nelson Motivation Inc. and best-selling author of 1001 Ways to Reward
Employees, estimates that the U.S. incentive industry is a $27 billion-dollar
enterprise.
Employee recognition programs, when developed and administered
appropriately, can improve communication between employees and
management, as well as increase employee loyalty by giving employees
more of a stake in their companys success.

Page 1

www.morganbrown.com

Benefits of an Employee Recognition Program for

Company Managers and Executives:
1. Quicker identification of low performers.
2. Increased customer loyalty and retention; lower turnover.
Employees who feel appreciated and respected will be more
productive and motivated, and are likely to remain longer with the
company.
3. Higher employee productivity overall.
4. Increased retention of mid to high performers.
5. Overall increased employee morale. Employees often go above
and beyond what is expected of them in most cases. Showing your
appreciation creates an environment of respect and gives
employees a sense of ownership and belonging in their place of
work.

Fundamentals of an Employee Recognition

Program
Prior to developing the nuances of an employee recognition program,
employers are advised to consider the following facts and figures:

The total number of your employees;

The total amount of money you wish to allocate for recognition gifts
and incentive awards;

Funding: Your per employee budget for each employee recognition

gift or award. For comparison purposes, recognition awards
provider Hinda Incentives calculated that large organizations allot
approximately 1% of base pay for non-sales staff and 4%-7% of
base pay for sales staff, which equals an average cost of $100$400 per employee annually. Smaller companies recommend first
researching what similarly-sized companies in their industry are
spending.

After engaging in some raw calculations, employers may move towards

the more creative aspects of the process actually designing the incentive
program.
Employers are encouraged to consider the following preliminary inquiries
Page 2

www.morganbrown.com

when developing an employee recognition program:

I.

Program objectives
It is imperative that the employer has a clear idea of the goals it
hopes to achieve with its employee recognition program. Specifically,
what do employees need to do? What employee actions will the program
reward? What specific employee achievements should be highlighted and
recognized? What outcomes are you looking for? And what policies and
practices will drive your recognition program?
For example, one objective articulated by many employers is to
improve safety performance. With this goal in mind, employees may be
recognized by receiving rewards or incentives based on achieving a
specific desired set of circumstances, such as:
1. A set number of days without recordable accidents;
2. A set number of months without lost-time injuries;
3. Significant decreases in workers compensation claims (over
time, i.e., one month or one year).
Any of the results mentioned above can be achieved in connection with a
successful employee recognition program. Moreover, meeting each
desired result will yield a different impact on a companys bottom line.
Employers should also draft a statement of program objectives to serve as
a guide when making decisions about the program. This statement may
be referenced when determining the amount of resources to allocate to
the program.
Employers may choose to hire an external recognition consultant or
awards supplier/vendor.
II.

Program administration
Employee recognition programs are typically administered by one
person in the company, i.e., a program administrator, who may be a
manager or member of the HR department. The program administrator is
entrusted with the administrative and technical duties of running the
program, although this person usually has other responsibilities unrelated
to the recognition program. Large organizations, such as Royal Bank of
Canada, have created positions entitled, Manager, Recognition
Programs. Mid-size companies may have recognition departments which
are separate from human resources, and some mid-sized and smaller

Page 3

www.morganbrown.com

employers have established recognition committees that include a wide

range of employee representatives from each department.
III.

Program communication
A successful employee recognition program is one that allows
employees to participate easily. Employees are more likely to participate
in an employee recognition program if they are made aware of the
programs existence at the outset. To promote awareness of an employee
recognition program among its employees, an employer should advertise
its program details in conspicuous workplace locations, such as in the
cafeteria and on company bulletin boards. Employers may also wish to
include an explanation of the programs rules and procedures in the
orientation packets distributed to new employees and in the employee
handbook.
IV.

Program eligibility and participation

Along with the programs rules and procedures, employers should
widely disseminate to its employees information about how to participate
in the recognition program. Regarding eligibility requirements, most
employers permit all employee groups, including managers, to participate
in the employee recognition program, although top-level executives and
department heads and members of the evaluation committee may be
excluded.
Program dates
Employers need to establish concrete beginning and end dates for
each program cycle, even though a recognition program may be
ongoing. For example, many companies boast a Salesperson of the
Year or Employee of the Month award. Employees achievements are
evaluated pursuant to an established period of time (i.e., each month to
determine employee of the month), but the incentive program itself
continues throughout the year (another employee is recognized the
following month).
Program awards and publicity
There is a wide array of methods at an employers disposal to use
when rewarding employees in connection with the recognition program.
For example, employers may offer a cash reward, a gift certificate to a
local department store or restaurant, or use a point system to assign value
to an employees successful participation in the program, tailoring the
employees reward accordingly (See Section II below for a more in-depth

Page 4

www.morganbrown.com

analysis of different types of awards). However, it is important to note that

cash awards are treated as bonuses subject to taxation by the Internal
Revenue Service. To offset an employees tax liability associated with a
cash rewards, some employers have included an additional amount of
money as part of the award.
It is essential that awards are consistently and timely distributed to
successful employees to maintain enthusiasm and high levels of
participation in the recognition program.
Publicity is essential to giving employees the recognition they
deserve, and as such, should be considered an integral part of a
companys recognition program. Employers may utilize the following
advertising venues for publicizing award recipients:
1. Company website
a. External website internet (visible to the public)
b. Internal website intranet (visible to other employees)
2. Company newsletter
3. Companys Annual Report
4. Staff Meetings
5. Day of Appreciation
6. Photo display on Company bulletin boards
Program training for managers
Some employers emphasize the importance of their recognition
program to managers by providing training up front and building
recognition directly into the supervisor training curricula.
Program evaluation
Many employers have formed a committee to evaluate the success
of the employee recognition program. To provide a diversity of viewpoints,
it is recommended that the committee include both managerial and nonmanagerial employees who will track and measure the programs
operation. Members should also include a cross-section of the
organization and include employees from the various departments and/or
divisions (i.e., accounting, mailroom, marketing, engineering, etc.).
Employee feedback is essential, yet it is also critical that senior
management level executives support the program because a recognition
culture starts at the top with the CEO and trickles down to the rank and file

Page 5

www.morganbrown.com

employee.
Measuring the success of a recognition program is not easy. One
measure of success used by employers is total participation levels.
Companies also ask their employees about recognition as part of an
overall employee satisfaction or engagement survey. Managers may be
able to provide additional feedback based on their observations. Another
option involves retaining an independent company specializing in
measurement processes and program effectiveness.
Tax Treatment of Awards
Tax implications abound for individuals receiving cash awards and cash
equivalents (including gift certificates). Tax issues vary by state and by
type of award and are subject to complex federal regulations.
Under the Tax Reform Act of 1986, an employer may deduct the cost of
achievement awards given to the same employee up to $400 in any year.
If the incentive rewards are awarded as part of one or more of the
employers written, established plans or programs, the $400 deduction
limitation is increased to $1,600 per employee. This means that if an
employer has a formal safety or years of service incentive program, it can
award up to $1,600 for an individual employee, but no more than $400 per
employee for all employees.
The IRS defines an employee achievement award as an item of tangible
personal property transferred by an employer to an employee for safety,
achievement or length of service. Such an award must be presented as
part of a meaningful presentation and cannot be disguised as
compensation to the employee.
To be tax exempt, an employee incentive reward cannot be in the form of
cash, charge, credit/debit card or a gift certificate. Other items not
comprising tangible personal property (and which are not tax exempt)
include travel, vacations, meals, lodging, tickets to theater or sporting
events and stock certificates.
Length of service awards can be excluded from an employees income
only if it is tangible personal property and is received by the employee
after his or her first five years of service.
Gifts bearing the company logo that are under $4 in value are tax free.
Anything with a value of $4 or more is taxable, whether or not it contains a
logo.

Page 6

www.morganbrown.com

Awards for employee achievement or in recognition of employee

productivity were eliminated from the tax regulations under the 1986 Tax
Reform Act.

Page 7

www.morganbrown.com

Types of Employee Recognition Programs What

Behaviors will be Rewarded?
Types of Behaviors Meriting Recognition:
1.

Recognition for Performance in any specialized area:

Recognizing individual high sales, cost reductions, safety, or
increased profits

2.

Recognition for Length of Service:

Recognizing employee contributions made over time (not
merely an employees tenure with the company)

3.

Recognition for Superior Customer Service

4.

Recognition for Perfect Attendance

5.

Recognition for High Quality Work Product

6.

Recognition for Improvement

How often should a desired behavior be awarded?

Weekly?
Monthly (Employee of the Month)?
Yearly?
How should the desired behavior be awarded?
Based on recommendations from employees supervisors?
Should employees be nominated by their peers? (peer recognition)

Page 8

www.morganbrown.com

Matching Incentive Awards to Program Type - Pros

and Cons
Michael LeBoeuf, a management consultant, lists ten basic categories of
employee incentives. They include the following:
1. Cash
2. Recognition
3. Time off work
4. Stock Ownership
5. Special Assignments
6. Advancement
7. Increased autonomy
8. Training and Education
9. Parties and other fun activities
10. Prizes
The most popular and widely utilized incentives are outlined below:
Cash Rewards (Including Debit and Credit Cards)
Pros:
1.

Cash rewards are easy to administer and most people will not
complain if you give them free cash.

2.

Easy to distribute.

3.

Can be used to purchase anything.

4.

No shelf life it comes and goes (sometimes more quickly than

one would expect).

Cons:
1.

To serve as an incentive, a significant amount of cash may be

necessary (one large cash prize as opposed to many smaller
cash prizes).

2.

Must be given separately not as part of an employees

paycheck or regular compensation (bonus or commissions)

3.

May have tax consequences.

4.

No trophy value cannot display this in your office for other

employees to admire.
Gift Cards (For a specific retailer)
Page 9

www.morganbrown.com

Pros:
1.

Employees can treat themselves to merchandise in a store

(or likewise in a restaurant) they may not otherwise frequent.

2.

Easy to distribute to employees.

1.

Gift cards often go unredeemed because they are forgotten

or discarded.

2.

May be treated like cash for tax purposes.

3.

Many gift cards (that are redeemable anywhere) are used by

employees to purchase household necessities, as opposed
to gifts or other non-essentials for themselves.

4.

They are not always effective performance enhancers

because people may not connect emotionally with cards, as
opposed to travel or other merchandise

5.

Recipients cannot and are not likely to show off gift cards to
colleagues.

6.

Gift cards can expire (sometimes in as little as six months).

7.

Gift cards may have hidden fees.

Cons:

Other Merchandise or Tangible Awards (Movie passes, electronics)

Pros
1. Employees may not have otherwise purchased this item and
so they feel as though they earned this award through hard
work (obviously this logic applies to awards such as
electronics, and not company t-shirts or coffee mugs).
2. Offer long lasting value and serves as a reminder to the
employee of a job well done.
3. Offer budget flexibility for employers (items may be
anywhere from $10 to $1,000)
4. Catalog award programs or point-based incentives can offer
flexibility for both employers and employees in administration
and choice of award.

Page 10

www.morganbrown.com

Cons
1.

Too many mugs; employees no longer desire pens,

watches, clocks, paperweights or t-shirts bearing the
company logo

2.

Smaller gifts may not be effective motivators (again,

employees will not be motivated to work hard if all
they can expect to gain is a company t-shirt or mug)

Praise
Pros
1.

Cheap and easy.

2.

Employees appreciate praise.

3.

Of all the recognition incentive listed, simple praise is most

likely to boost an employees performance and self-esteem.

4.

High visibility; serves as a message to other employees that

the recipient of such praise performed well and that such
hard work is noticed and acknowledged.

1.

None

Cons

Page 11

www.morganbrown.com

Successful Implementation Strategies

Incentives only work if they are meaningful and if the goals set are
realistic, attainable, and measurable. Hybrid models (encompassing a
broad base of distinct incentive programs) are usually effective and appeal
to different groups of employees. Most employees desire a choice of
rewards as part of their employers recognition efforts. Frequent
communication, management support, consistency, fairness and a
balanced approach with more varied award choices are just some of the
essential ingredients of a healthy recognition program.
Best Practices: Real World Examples
AFLAC (Columbus, GA): Recognizes all employees birthdays with a card
and a gift of their choice from a vendor. Holds an employee appreciation
week featuring random drawings for prizes and family-friendly events
(including movie night). Division managers are encouraged to reward
employees performing above and beyond the call of duty with stock
options, cash or time off.
Blanchard Training and Development (Escondido, CA): Employees
receive two movie passes on their birthday.
Merle Norman Cosmetics (Los Angeles, CA): The company president
keeps track of everyones birthday and when possible, makes a point of
seeking out people to wish them well on that day. The company chef
bakes a birthday cake for the employee.
Southwest Airlines (Dallas, TX): Administers a Halloween costume
contest, a Thanksgiving poem contest and a design contest for the
December newsletter.
Celestial Seasonings (Boulder, CO): Every employee receives a $25
check on his or her birthday, a $50 check at Thanksgiving and a $100
check at Christmas.
Hewlett-Packard (Palo Alto, CA): Golden Banana Award, originated
when a company engineer burst into his managers office to announce he
had found the solution to a problem the group had been struggling with for
many weeks. The manager looked around his desk for an item to
acknowledge the accomplishment and ended up handing the employee a
banana from his lunch, saying Well done! and Congratulations! The
Golden Banana Award became one of the most prestigious honors
bestowed on an inventive employee.

Page 12

www.morganbrown.com

Communication Briefings/Newstrack Communication Services

(Blackwood, NJ): Each employee receives 20 coupons to distribute.
When an employee observes a co-worker doing something extraordinary,
he or she simply fills out a coupon, including the reason for the
recognition, and presents it to the co-worker. Recipients can save and
redeem them for special awards, including:
1 coupon = certificate for a free car wash
5 coupons = $25 gift certificate for dinner at a restaurant
10 coupons = $50 Macys gift certificate
15 coupons = one-night stay for two in Atlantic City
20 coupons = one-year membership to the Four Seasons Health
Spa.
Walt Disney World (Orlando, FL): Spirit of Fred award, named after an
employee called Fred. When Fred first transferred from an hourly to a
salaried position, five people taught him the values necessary for success
at Disney, inspiring the award in which the name Fred became an
acronym for friendly, resourceful, enthusiastic, and dependable. Each
award consists of a certificate mounted on a plaque. Multiple recipients of
the Spirit of Fred award are eligible to receive the Lifetime Fred Award, a
bronze statuette of Mickey Mouse.
AT& T Universal Card Services (Jacksonville, FL): World of Thanks
award, a pad of colored papers shaped like a globe with Thank you
written all over it in different languages. Any employee in the company
can write a message of thanks to someone else and send it to that person.
In four years, the company employees had used more than 130,000
notes.
Cyanamind Canada (Canada): Key to Innovation Campaign, which
encourages workers to contribute ideas and become frequent
innovators. For productivity-enhancing ideas, employees receive
anywhere from 40 to 1,000 points, redeemable for awards featured in a
catalog, including glassware, radios, televisions and weekend trips for two.
Todays Temporary (Dallas, TX): Gives temporary employees who have
worked during the previous six months a card with a scratch-off panel
concealing a named prize. Prizes include a diamond watch, $50 or $100
in cash, calculators, and six months of free long-distance telephone calls.
T. Rowe Price (Baltimore, MD): Spotlight on Excellence program,
focusing on employees who, in the long run, perform work that embodies
principles and values the company wants to emphasize. Co-workers and
managers are encouraged to nominate employees whose work
demonstrates teamwork, service, leadership, integrity or initiative.

Page 13

www.morganbrown.com

Mercury Interactive Corp. (Sunnyvale, CA): Incentive programs

purpose is to motivate field staff who maintain and troubleshoot clients
computer systems by traveling outside the office. Field staff can access
the companys online awards program to report holes they encounter in
existing client systems. Employees receive points for leads identifying
weaknesses and even more points for leads that generate business.
Boeing (Puget Sound, WA): Pride@Boeing program. Includes an
instant awards program accessible to employees and managers. Fifty
employee volunteers serve as recognition focal points (focals) and
provide their colleagues with prizes, valued at $10 or less, to use as spot
awards (examples include movie tickets, personal fans, calculators, or a
voucher for a 10-minute massage available onsite with a service with
whom Boeing has contracted). Focals provide these prizes to any
manager or co-worker who wants to recognize a colleague. Administers a
book program, which awards books covering leisure-time interests such
as cooking, travel and running to employees sharing these interests.
21st Century Issues: Recognition Programs and Remote Employees

See Mercury Interactive example above

Develop an online tool with eye-catching e-cards and e-certificates

that can easily be customized and sent to offsite employees.

Consider unusual ways to communicate praise, such as sending an

offsite employee a box with a helium balloon inside attached to a
thank you note. The extra creativity put into the effort will make a
lasting impression.

To be certain customers are getting consistent, high-quality

customer service from both onsite and offsite employees, measure
customer satisfaction. Results can be used to support coaching
and development activities to address specific needs and reward
desirable behavior.

Invite remote employees to key onsite staff and group meetings.

These meetings will provide an opportunity to recognize offsite
employees contributions in-person and in front of their peers, as
well as evaluate any areas for improvement.

One size does not fit all when it comes to learning, especially with
offsite employees. While web-based learning provides an efficient
solution, it is important to take advantage of onsite time when

Page 14

www.morganbrown.com

possible. Onsite, classroom sessions demonstrate managements

commitment and provide employees undivided, uninterrupted
attention.
Source: Study Shows Offsite Workers Feel Less Connected With
Employers, Maritz Incentives, accessible at
http://www.maritz.com/newsreleases/maritz-study-shows.html

Page 15

www.morganbrown.com

Additional Resources*
National Association for Employee Recognition
www.recognition.org
Nelson Motivation Inc.
www.nelsonmotivation.com
The Bill Sims Company, Inc.
www.billsims.com
The Light Group
www.incentivesmotivate.com
www.promolight.com
www.cybercentives.net
Real Recognition
www.realrecognition.com
Maritz Incentives
www.maritz.com

*
Please note that we have listed these sources as possible places to seek
additional information about employee recognition programs. Morgan, Brown & Joy does
not specifically endorse these sources or recommend the services they provide.

Page 16

www.morganbrown.com

About the Authors:

Mark M. Whitney is a partner at Morgan, Brown & Joy, in Boston, MA,
and practices in the field of employment law, specializing in management
representation. He represents employers before administrative agencies
and the courts in disputes arising under the myriad State and Federal laws
that regulate the employment relationship. An important part of Mark's
practice is helping clients prevent such disputes by providing consulting
services on a variety of employment law issues, such as risk management
practices, personnel policies, and statutory compliance. He also conducts
seminars and employee/management training on a variety of employmentrelated topics.
A significant part of Mark's practice involves helping companies protect
their trade secrets, customer goodwill and other proprietary information,
which includes evaluation of critical company policies and practices and
drafting of employee agreements (noncompete, nonsolicitation,
nondisclosure, intellectual property, separation and other employment
agreements). Mark regularly represents companies in court seeking to
prevent the misappropriation of trade secrets or other methods of unfair
competition; he also assists companies who find themselves embroiled in
noncompete litigation with their new hire's former employer. Mark edits the
Massachusetts chapter of the leading national treatise on noncompetition
law. [Covenants Not to Compete: A State By State Survey (BNA 2005)]
Mark has been recognized as a "Rising Star" in the field of employment
litigation by a poll of Massachusetts Lawyers conducted by Law and
Politics Magazine. This is the second time that this poll has been
conducted in Massachusetts, and the second year in a row that Mark was
selected. Mark's "Rising Star" selection is featured in the May 2006 issue
of Boston Magazine.
Before joining Morgan, Brown & Joy, Mark gained large-firm practice
experience in New York City, New Hampshire and Boston. In addition to
law firm experience, Mark worked as in-house counsel for a New Englandbased insurance company where he oversaw its Employment Practices
Liability Insurance program.
Mark is a graduate of the University of Rochester (B.A. 1987) and
Brooklyn Law School (J.D. 1993), where he was an editorial member of
the Brooklyn Law Review and member of the Moot Court Honor Society.
He is admitted to practice before the Bars of: the States of New York,
Connecticut, New Hampshire, and the Commonwealth of Massachusetts;
the United States District Courts for the Southern and Eastern Districts of
New York, the District of New Hampshire, and the District of
Massachusetts; the United States Courts of Appeals for the First, Second
and Third Circuits; and the United States Court of Federal Claims.
Page 17

www.morganbrown.com

Jennifer M. Bombard is an associate at Morgan, Brown & Joy, having

joined the firm in 2006. She represents private and public sector
employers in state and federal courts and before administrative agencies
in matters involving employment discrimination and retaliation, wrongful
discharge, separation and severance agreements, non-competition and
trade secret litigation, employee investigations and discipline, wage and
hour issues, unfair labor practice charges, union avoidance, collective
bargaining, and labor arbitrations. She also advises managers on litigation
avoidance techniques involving compliance with Federal labor and
employment laws, including the Fair Labor Standards Act, the Family and
Medical Leave Act, Title VII, the National Labor Relations Act, the
Americans with Disabilities Act, the Age Discrimination in Employment Act
and related State statutes. Prior to joining Morgan, Brown & Joy, Jennifer
practiced law at Robinson & Cole in Hartford, Connecticut.
Jennifer graduated from Colgate University in 2000 (summa cum laude,
Phi Beta Kappa), and earned her law degree from Boston College Law
School in 2004, where she was recognized among her peers as the Best
Third-Year Moot Court Oralist for her oral advocacy skills. She received
the Best Oralist award for her participation in the J. Braxton Craven
National Moot Court Competition and helped lead her team to victory as
the national champions. While in law school, Jennifer also coauthored an
appellate brief with the Middlesex District Attorneys office and
successfully argued before the Massachusetts Appeals Court.
Jennifer is a member of the state bars of Massachusetts, Connecticut and
the District of Columbia, and is also admitted before the Federal District
Court in Connecticut. She is a member of the Labor and Employment
Sections of the American Bar Association, the Massachusetts Bar
Association, the Boston Bar Association, the Connecticut Bar Association,
and the Womens Bar Association of Massachusetts.

Page 18

www.morganbrown.com