Acknowledging and appreciating employees can be done in a flexible and informal manner, without strict guidelines or procedures.

We recently had two individuals in our company take the initiative to plan a surprise baby shower for a fellow team member. They secretly communicated with colleagues, collected contributions, arranged for food and gifts, all for someone who had only been with us for a short period of two months.

One of the co-conspirators led the expectant mother into the room, and when the lights came on, she was genuinely surprised, which was a success. We all gathered around to unwrap presents and share baby name suggestions, and the mother-to-be became emotional as she thanked everyone for the thoughtful gesture. After enjoying a slice of cake, we engaged in conversations about family, children, and more. It was an incredibly meaningful experience for everyone involved, leaving us with a sense of recognition and connection as a team.

Recognizing and appreciating employees at work are crucial elements for fostering high employee retention, engagement, and performance. This is why companies invest significant amounts of money annually, estimated to be around 1%-2% of payroll, in material incentives such as gift cards, trips, and merchandise, which are commonly used in employee recognition programs. However, compared to what individual employees spend on surprise baby showers for their colleagues, the company’s investment in such gestures is likely much less.

The primary issue with the majority of current employee recognition programs is their failure to consider the informal social systems that effectively drive human motivation and appreciation. Instead, a significant portion of the budget is allocated towards external incentives, which inadvertently establish transactional relationships with desired behaviors rather than fostering sustainable motivation.

Acknowledging employees’ contributions plays a crucial role in stimulating human motivation, which is the underlying concept behind the term “employee engagement.” While numerous definitions of employee engagement exist, they all concur that engaged employees display various positive traits and behaviors. These may include cooperation, investing discretionary time and effort, and sharing innovative ideas. It is important to question how many of these engaged employees exhibit these high-performance behaviors solely because they receive incentives every time they do so.

All of them.

I understand what you’re thinking. An engaged employee is someone who is naturally motivated to assist their colleagues and dedicate extra time to a project, rather than being driven by external rewards. However, the reality is that engaged employees also seek rewards, but of a different kind. Their intrinsic motivation is fueled by chemical “rewards” released by our endocrine system in response to specific behaviors.

In the past, chemicals like dopamine, serotonin, and oxytocin played a crucial role in enforcing essential survival behaviors among hunter-gatherers by creating feelings of accomplishment, pride, and belonging. Although we are no longer hunting for survival, these chemicals remain just as significant and influential.

Organizations have developed recognition programs primarily focused on external rewards, which unfortunately have a counterproductive effect. An analysis of 128 studies examining the impact of external rewards on human motivation concluded that these rewards significantly undermine free-choice intrinsic motivation. Furthermore, when an established external incentive is removed, it becomes a deterrent for the desired behavior.

In simpler terms, over time, target behaviors become increasingly reliant on external incentives, which can be costly. For instance, Wells Fargo employees created 2 million fraudulent customer accounts largely due to the extrinsic incentive system in place that rewarded such behavior. This resulted in the company facing $185 million in fines and negatively impacted its brand and employees.

This is not to suggest that external rewards are completely useless; they just don’t hold as much importance as many believe. Each individual is motivated differently, but research indicates that monetary compensation is one of the least influential factors. Timothy Judge’s analysis of over 90 studies involving a total of 15,000 participants showed a mere 2% correlation between job satisfaction and pay. Another study conducted by Kronos and the Workforce Institute revealed that compensation ranked 10th out of 11 reasons for employee resignations, whereas not feeling appreciated ranked 1st, with 60% of respondents citing it as the primary factor.

So, how can companies begin acknowledging employees to cultivate intrinsic motivation?

1. Fund micro-recognition for personal achievements and milestones

Employees already engage in informal social interactions to recognize and appreciate each other’s achievements, such as organizing small gatherings, surprise thank-you gifts, or supporting colleagues during difficult times. By financially supporting these “micro-recognition” efforts, companies can enhance their impact. Implementing a matching contribution system ensures that employees and the company both invest in this recognition process.

2. Offer opportunities for employees to connect

Emphasize activities that encourage employees to come together based on shared interests and passions. Whether it’s participating in an intramural softball team or joining employee resource groups, these activities naturally foster cooperative behavior, provide performance opportunities, and contribute to micro-recognition. Companies should consider these initiatives as investments in motivation, rather than just a way to enhance their employer branding.

3. Invest in leadership alignment and training

Company leaders play a crucial role in setting the tone for micro-recognition. It is essential to empower leaders to actively seek opportunities to acknowledge and appreciate their team members, whether it’s starting a meeting with recognition, celebrating achievements with high-fives, or organizing support for colleagues. Furthermore, leaders should reinforce these behaviors within their teams.

4. Pursue digital reinvention

Current employee recognition platforms primarily support large-scale recognition programs, managing reward systems, administering awards, and providing a space for public acknowledgments through content and badges. However, these specialized solutions are too isolated to effectively support micro-recognition. They lack the spontaneity and informality required for such interactions. Macro recognition systems need to be integrated into a comprehensive employee engagement platform that serves various purposes for employees.