Article: How to design a strong employee recognition program

Employee Engagement

How to design a strong employee recognition program

Abraham Lincoln once said, “Don't worry when you are not recognised, but strive to be worthy of recognition.”As employees work hard to achieve recognitions in today's corporate world, having a strong employee recognition program is a must for organisations
How to design a strong employee recognition program

Rewarding an employee is an event based outcome for the good companies, whereas reward and recognition is a way of life for great companies


Ultimately, it is the company's mission, vision and values that decide what and who are to be rewarded and what kind of behaviour should be instilled in the company


Abraham Lincoln once said, “Don’t worry when you are not recognized, but strive to be worthy of recognition.” As employees work hard to achieve recognitions in today’s corporate world, having a strong employee recognition program is a must for organizations.

Rewarding an employee is an event based outcome for the good companies, whereas reward and recognition is a way of life for great companies! As we come out of one of the biggest recession in world economy and organizations go back to hiring, the biggest battle is going to be for the acquisition of talent. At times like these, HR departments can add real value by focusing on areas that enable retention of quality human capital, which an organization can not afford to lose. Reward and recognition systems create the platform in a company on which the culture of affinity and belongingness is built that ultimately translates into better productivity from employees. Therefore, reward and recognition programs may build very strong connect and also address some deeper cultural issues.


Only a good design can define a great implementable system that satisfies all stakeholders and achieves its goals.

a. Overlooked Tenets

There are many areas that are overlooked while designing the rewards and recognition programs and organizations end up making mistakes. Some of the most common of them are:
• The effect of a collective reward is the same as that of an individual award
• The actual presentation is not important
• Reward and Recognitions are same
• Outsourcing rewards is all about outsourcing the merchandizing part
• Rewards and recognition system don’t have complexity based on employee base, their culture, background, et al.
• Recognizing all employees or doing it too often actually underplays the contribution of hard working employees
Keen interest from all the stakeholders, expert advice and a lot of attention to detail is required to ensure that one does not commit these most common mistakes.

b. Design Principles

Having discussed what not to overlook, let’s discuss about designing the system. From the organization point of view, there are multiple ways a reward program can be structured to recognize employees. It is a multi-faceted approach with several criteria some of which are presented below:

Categories Examples

  • Time Based Recognition Awards: Rewards that are time based like monthly, quarterly, half-yearly, annually, et al.
  • Rewards for Operational Excellence: Rewarding best delivery team, rewarding for customer delight, et al.
  • Functional Groups: Rewards for excellence in functions like sales, finance, et al.
  • Popular Awards: ‘I want to be like you’, ‘My Mentor’.

Ultimately, it is the company’s mission, vision and values that decide what and who are to be rewarded and what kind of behaviour should be instilled in the company. The rewards and recognition program must incorporate these guiding principles.

c. Build or Buy

Today’s organizations are becoming diverse in all areas and have workforce from various cultures, ethnicities and societies. In such a case, it is very important to understand the nuances of different cultures and society. For instance, appropriateness of merchandise given as a reward is so very important. Gifting a clock to a US employee is perfectly fine while the same is not true for a Chinese employee. Giving a Chinese employee a clock means that you are indicating that you wish to attend their funeral. Scary isn’t it! Picturing in such nuances and factoring it in the design of rewards and recognition system requires detailed work.

A company must decide whether to build or buy the system based on the competence it has and the resources required to run it. There are several factors that help a company decide on which path to take, for example: the complexity within the organization in terms of locations, reporting structures, type of business etc.

FACTORS SEVERITY (1-5, 1 meaning no severity and 5 meaning very high severity)

• Complexity of the Organizations

  1. Numbers of locations
  2. Reporting structure
  3. Type of business
  4. Diversity among employee

• Budget constraints
• Service Level Requirements
• Requirements of Consistency in Employee Experience

If an organization rates itself using the above framework and the severity score is more than 50%, an outsourced model might be better suited. For instance, if a company has high severity score on number of locations, diversity among employees and requirements of consistency in employee experience, clearly outsourcing the reward and recognition system is the better option.



When a company decides to buy rather than build its rewards and recognition program, it must ensure that the chosen vendor has the right people, processes, technology and experience to implement the envisaged program. The vendor appreciation and understanding of client’s organizational culture is the key for success of the program. If there are too many approvals to reward an employee, it means too much of lost time and loss of value of the entire program. So keep it simple!

a. US Example

Large companies in US like IBM, HP, Xerox, ADP, Autodesk, Capital One, SAP, et al, have outsourced their rewards and recognition programs. As the western market is pretty mature, with many players and well defined services, the evaluation criteria as well as the services offered are well defined.

Evaluation Criteria for recognizing outsourcing vendor Increased Employee Engagement, Employee Participation, Redemption rate, On-time delivery, Percentage of Objectives attained, Management of Global Delivery System, Technology: dashboards, Online tracking, Single Sign On, Integration with ERP like SAP, Oracle
Services offered by recognition outsourcing vendor Total recognition solution, Recognition system design, Performance based programs, Customer co-branded merchandize, Pre-paid cards, Point based awards, Anniversary/Retirement awards, Loyalty programs, scratch and win cards, holiday gifts, Cash award management program, Nomination based program including peer-to-peer nomination

b. Communication Model

Communication, top-down and bottom-up, hold the actual key to success. The criteria of the awards and what behaviour is being recognized must be clearly communicated to all the stakeholders. The rewards and recognitions must be in sync with the behaviour that the employer wants to encourage. And most importantly, it must be connected and aligned to performance management, personal development, and reward and career progression programs.

c. Governance Model

A 3-tier governance structure involving stakeholder from the client and the outsourcing vendor should be in place which monitors the success of the program and make changes to the overall program if need be.

d. Indicative Commercial Model

Let us look at a typical commercial model for a company whose strength is 10,000 and the company wants 10% of its employees to be covered in the reward system every year. With a servicing expense of Rs.10- 15 per employee per month (excluding the cost of merchandise), an outsourced vendor should be able to run the program. This would include the technology, the man power and all other resources to run the entire program. For the client, it translates to an expense of Rs. 100,000-150,000 per month. Generally the design and one time setup is over and above. Is it not a worthy investment?


a. One size does not fit all

Reward systems vary significantly across companies. The system that’s a success in one organization might be a big failure in another company. The solution must be customized and in case need be, tailor made for each organization.

b. Determining what employees will most appreciate

The outsourcing partner must try and understand as to what the employees want. Continuous innovation to keep the program relevant and exciting is very important. Right from the CEO to a manager to the front line staff must understand and support the program. In case any part of the value chain fails to realize the importance of the exercise, the program does not meet the purpose it is set out for.

c. Vendor Relationship

We have seen many times that recognition outsourcing project does not realize its full potential. This is invariably because the relationship with vendor is transaction oriented rather than relationship oriented. The real reason why companies outsource recognition is because of the process advantage rather than the cost advantage. The recognition outsourcing partner must be treated as a partner and work as an extended arm of your HR team. When a relationship like this is set, the real advantages of the deal are realized.


N=1 is the mantra of today’s world, be it FMCG companies trying to create a beauty product to cater to each possible consumer group or an outsourced rewards and recognition program trying to make each employee feel special. The outsourcing partner must design and run the program that makes it possible for each employee to be heard and taken into consideration and that too without losing the personal touch. The rewards system must be designed in a way that the subordinates, peers and superiors all have a say on who gets awarded and that too without too much of hassles. Not to forget that peer-to-peer recognition is the key!

It is very important to understand that it is not the material value of the reward that’s important but the intention and process used to zero down on the employee who is to be awarded. Sometimes, a few words of praise can do the trick which a very expensive merchandize cannot.

In a world, where the only differentiator among companies is the human capital, nothing is a more important asset to a company than a connected and motivated workforce. A strong recognition and reward system built on the ‘foundation of genuine and deserving appreciation’ will ensure that the human capital is kept intact. If the structure and system is aligned and designed for this principal, a company can never go wrong. Organizations, however, should be extremely worried if those who are worthy of recognition are not recognized by them!

Pankaj Bansal is Co-Founder and CEO, People Strong. He can be reached at


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Topics: Employee Engagement, Compensation & Benefits, #TotalRewards

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