The price is wrong

Experts agree: monetary rewards are not the way to motivate employees

By Diane Dierking

Which is worse: Not being recognized for a job well-done, or receiving the “wrong” kind of recognition? According to Louise S. Anderson, president of Anderson Performance Improvement Co. (APIC), Hastings, Minn., the wrong kind is the worst.

APIC works with companies to develop programs that communicate, reinforce, measure and reward key behaviors through incentives. She says she has talked with some chemical companies, and most seem to use recognition quite well. “I don’t have to understand the business to look at its critical practices and help the company duplicate the best,” she says. In one case, Anderson worked with a refining company to design a program to incent engineering and maintenance personnel to work together more effectively. This change in culture allowed the refiner to increase capacity.

Effective collaboration can benefit any chemical company. “I’m shocked at how important collaboration is to an engineering company. If you can create an environment that is open to communication, innovation will thrive,” Anderson says.

Engineering and chemical companies are using various forms of employee recognition. Some engineers I spoke with say they have received thank-you e-mails or employee-of-the-year certificates. Others say they have received cash gifts (up to $1,000). Often such recognition is made public, but some of the cash rewards were confidential.

“What really [motivates] me is when my contribution is successfully used by the company,” says one engineer. Another says, “Once in a long while I will receive a gift certificate for a nice meal at a steak house, and I like that better than a certificate [of appreciation].” Yet another says, “My boss encouraged me daily during the project, which was more motivating than anything. I think monetary rewards are the best for recognition purposes.”

Anderson, however, disagrees. She says cash incentives are not the way for employers to get what they want out of employees. Anderson warns that employees see cash incentives as an entitlement, and taking them away will be perceived as a pay cut.

As one of the worst examples of using cash to reward employees, Anderson cites a company that pinned $5 bills to a bulletin board and allowed employees to help themselves after they sold a certain product.

The award was meant to improve sales. It didn’t. Instead, the campaign resulted in a 10% loss in revenue per phone call.

APIC worked with this company to achieve the sales increase they were seeking with their disastrous $5-bill campaign. Unlike the cash gift that rewarded employees for a single action, Anderson’s program rewarded employees for new behaviors that built on past success. After 90 days, revenue per call had increased 15%. After two years, revenue per call was still on the rise.

In her book, “Cream of the Corp.,” Anderson outlines her strategy for improving the bottom line using a mix of cash (i.e., salary), verbal recognition and rewards. She espouses an e-points system where employees earn points for behaviors the company feels will improve business. Such behaviors can include proving knowledge through an online quiz or making a sales call while a manager observes. E-points are later exchanged for something of value to the employee, such as a toaster, television or steak dinner.

“If your rewards focus on behavior, then your employees know what matters to the company. They want to feel they are contributing and making a difference,” she says.

“When employees feel they are being recognized for their work, they will put forth more effort,” says Christi Gibson, executive director for the National Association for Employee Recognition (NAER), Naperville, Ill. Gibson echoes Anderson’s warning about using monetary rewards. “An employee only remembers a monetary bonus until the next paycheck comes.”

NAER ( was founded in 1996 and has 563 member companies. The organization provides guidance and resources to aid members in developing effective recognition programs.

Gibson says there needs to be a consistent program in place, and it doesn’t have to cost a lot. “You might only receive a coffee mug for outstanding work, but it will mean a lot if it is presented by the CEO of your company and he expresses his appreciation,” she says.

So managers, think again next time you want to improve your company’s performance. If the price isn’t right, you might get it wrong.

Diane Dierking is senior editor for Chemical Processing magazine. E-mail her at


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