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Skip the Bonus and Pour on the Praise

Tom Grill | age fotostock | Getty Images

When it comes to rallying the troops, bonuses aren't always the best way to go — or the cheapest.

As common as holiday bonuses are, some workplace experts argue that the little something extra some companies tack onto paychecks come December isn't the greatest way to say thanks for a job well done.

"The $500 bonus check is a sugar rush," said Razor Suleman, chairman and chief evangelist at Achievers, a company that sells employee rewards and recognition software. "You're happy when it hits; you pay for your January credit card bills. But you don't feel it."

Pay annual year-end bonuses long enough and employees start to feel entitled to them regardless of how they have performed, Suleman said.

Others agree. Using money to motivate people doesn't work, especially if they anticipate the reward before they've finished the task, Edward Deci, a University of Rochester human motivation psychologist, says in this Entrpreneur.com blog post.

Companies do better at engaging workers if they pair bonuses with employee recognition programs, according to a recent Society of Human Resources Management/Globoforce survey. Companies that spend 1 percent of payroll on programs that publicly call out employees for above-average performances see an 85 percent positive impact on worker engagement, and 61 percent hang onto workers longer, according to the survey.

Acting on employees' suggestions is just one way companies can recognize and reward workers in addition to or in lieu of year-end bonuses -- and not spend a lot doing it.

At the Las Vegas Cosmopolitan Hotel, for example, employees get three minutes to pitch new business ideas to the company's executives a la "Shark Tank," an ABC television series in which budding entrepreneurs pitch their ideas to potential investors. In the past two years, the hotel has adopted more than 70 suggestions from staff members, including creating an internal mentor program and starting a "Costar Closet" employees can use to swap household items and clothing they no longer need, according to Alyssa Anderson, a company spokeswoman.

Companies can please employees by keeping communications open between managers and subordinates, and between co-workers, says Robert Levering, co-founder of Great Place to Work Institute, publisher of annual lists of exemplary U.S. employers. The real distinguishing characteristic of great places to work "is the level of trust, how much employees trust the management," Levering says.

Here are other ways companies can show the love to employees and not break the bank:

Create a formal employee recognition plan. A plan doesn't have to be complicated. It could be praising that week's all-star performers at the end of a routine meeting, or recognizing stand-out employees at a monthly town hall or in a company newsletter.

Praise peers in public. At Achievers, staff meetings end with employees sharing something about one of their co-workers' accomplishments. "It costs the company nothing, and it leaves (employees) with a different level of enthusiasm," Suleman says. "Recognition is free, that's the brilliance of it. Every company can afford free."

Don't wait until December to pay bonuses. If you have money set aside for bonuses, pay it out a little at a time throughout the year instead of in one lump sum at the end.

Offer rewards that employees value. If companies offer a recognition plan that includes financial rewards, make sure they're rewards that employees perceive to be high in quality and financial value, according to a study from human-resources researcher Bersin & Associates. Forget one-size-fits-all prizes; employees want a say in the types of rewards they get, according to the Bersin & Associates survey.

Offer flexible schedules. Another way to recognize employees: Offer them more flexibility. Employees want more work/life balance, whether they're parents juggling caring for kids and aging parents, or older employees who want to work part time, Levering says.

Provide challenging work. Interesting work is a more powerful incentive than money, says Charalambos Vlachoutsicos, an adjunct professor at Athens University, in this Harvard Business Review blog post. As an example, Vlachoutsicos shares how he once helped a Russian sawmill with an employee whose bad temper and drinking caused problems for his foreman and co-workers. The man also was the mill's only employee with certain technical skills, so Vlachoutsicos put him in charge of running a new machine -- and he rose to the occasion. "When you're thinking about ways to motivate your work force, always acknowledge and praise their worthwhile contributions and try to find out more about their interests, their backgrounds, their skills," Vlachoutsicos writes. "These will give you insight into their non-financial, intrinsic motivations."

Let employees share recognition on their social networks. Companies can use social media-style internal networks or smartphone apps such as Achievers, iAppreciate, GiveaWow and Sparcet to give digital shout outs to employees. On some of these networks, employees can display awards on their profiles and share them with friends on public social networks such as Facebook and Twitter.

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