5 Steps to an Effective Employee Rewards and Recognition System

The significance of employee appreciation and recognition in enhancing the satisfaction and motivation levels of the workforce has been well-established. However, many small and medium level business organizations still feel that setting up an effective employee and recognition rewards system is likely to put an extra burden on them in terms of time, money and resources. Such organizations tend to be ignorant of the fact that employee recognition programs can be developed with a minimal budget. Moreover, any investment in terms of time and resources will pay back with huge dividends through the enhanced loyalty and efficiency of employees for assured business growth and success.

Consequences of Absence of Employee Recognition Programs

The promise of frequent appreciation and rewards for their good work is what drives most employees to handle their various tasks and responsibilities in a highly dedicated and efficient manner.

However, when an organization fails to establish a proper rewards and recognition program for its employees, it unwittingly sends the wrong message to its existing as well as potential employees.

They feel unsure about their value in the organization as well as the kind of professional growth opportunities they would likely get there. Most importantly, the lack of a pat on the back for their hard work, innovative ideas and effort create a sense of loss of interest in their work. This naturally reduces employee engagement levels leading to a significant downfall in their productivity

Having understood the pitfalls of not having employee rewards and recognition program, it is time to look at the five easy steps that can lead to the development of such a program:

What are the key steps to develop an Effective Employee Rewards and Recognition System?

Having understood the pitfalls of not having employee rewards and recognition program, it is time to look at the five easy steps that can lead to theĀ development of such a program:

1. Have a Clear Vision of the Program Goals

Before starting with the development of a reward and recognition program for their employees, it is important for organizations to have a clear understanding of the reasons for setting up the program. They should be absolutely certain about the benefits they intend to gain from the program in addition to boosting the morale and productivity of their employees.

In addition, they also need to be well aware of the values and behaviors they intend to reinforce among the members of the workforce through the employee recognition program. Having a clear vision of the program goals and communicating the same to the members of the workforce will help establish a strong base for success.

2. Seek inputs from a cross-section of employees

Once the objectives of the program have been defined, organizations should seek inputs from employees across different levels and departments. Their opinions and concerns about the type of rewards and recognition to be offered, the eligibility for participation and even the frequency of offering the rewards should be heard and addressed in an appropriate manner.

This helps in establishing a sense of trust among the employees and makes them feel like an integral part of the entire process of setting up the reward system. It also lends greater credibility to the system in their eyes as their views and opinions are taken into consideration.

3. Set up a Rewards and Recognition Steering Committee

Setting up a committee for running and managing the rewards and recognition program is of utmost importance. It ensures that all the decisions are made in a fair and transparent manner with proper representation of the interests of HR, management, supervisors, and employees themselves.

The committee also handles the nitty-gritty of organizing regular reward functions, deciding about the best rewards to be handed out and procuring any tangible items from their trusted sources in a cost-effective manner.

4. Establish Nomination and Selection Guidelines

Setting up proper guidelines to ensure that only the most eligible employees get nominated and selected for receiving rewards and recognition is the next important step. For this, the management of the organization needs to work closely with the committee members and the HR managers to ensure that the guidelines provide an equal opportunity for every employee to participate.

To avoid any complications, the rewards may be divided into different categories to ensure fair participation and selection of employees working at various hierarchical levels within the organization.

5. Announce and Launch the Program

Finally, it is time to announce the good news to the employees and launch the program by making them aware of its objectives, eligibility criteria and selection process. It is also advisable to send a mass email detailing the various aspects of the rewards and recognition program to enable the employees to understand the same in detail.

In addition, the rewards committee should be willing to answer any questions and queries of the workforce to further improve employee engagement and program efficiency.


Most great employee reward and recognition systems are not established overnight but these basic steps can help to move in the right direction.

These steps may need to be modified as per the unique requirements of individual organizations to get the maximum benefits.

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