What are employee rewards?

Rewards and recognition often get conflated, but they're really two different concepts. Recognition can be useful if done correctly, but rewards generally cause harm.

Here's a definition of rewards from my book, Getting Service Right:

Rewards are if-then propositions that are designed to incentivize employees to engage in certain behaviors. The actions or results required to earn the reward are spelled out ahead of time so employees know how to win the prize.

Examples of rewards I've seen customer service leaders use include:

Cash incentives for earning good survey scores.

Contests to see who can reply to the most emails.

Prizes for getting good mystery shopper results.

Games where employees can earn badges for completing training modules.

Company swag for achieving perfect attendance for a month.

Rewards typically cause two big problems.

The first is rewards can diminish employees' natural motivation. Offer a $100 gift card for good survey scores one month, and employees will come to expect a $100 gift card for good survey scores going forward.

The second problem is even worse. Rewards often incentivize the wrong behaviors. For example, offering a reward for good survey scores often leads to manipulated survey results, not better service.

What is employee recognition?

Recognition can be very helpful, if used correctly. Here's a definition from Getting Service Right:

Recognition is given when an employee does something positive as a way of encouraging the employee to repeat the behavior. It can be something tangible—like a gift card or a day off—or something intangible, such as praise from the boss or an employee-of-the-month award. Unlike rewards, the path to earning recognition isn't shared with employees beforehand. It's an unexpected surprise for a job well done.

Examples of recognition I’ve seen customer service leaders use include:

Praise for helping an upset customer.

A gift card as a thank you for solving a tough problem.

Lunch for the team to celebrate a successful project.

A “wall of fame” where positive customer feedback is displayed.

Company swag to commemorate a big accomplishment.

Unlike rewards, recognition is difficult to game. That’s because it happens after the behavior occurs and is not predictable. Used in this way, rewards are a clear signal to employees that their performance is valued.

Customer-focused companies I've studied often use peer recognition programs where employees are recognized by coworkers for outstanding contributions.

Paul was feeling pretty good about his new incentive program.

He had devised a game for the cashiers he managed where the cashiers on each shift were placed on teams. Throughout the month, he would randomly select cashiers to observe using the same criteria that the company's mystery shoppers used. The cashier's mystery shopping score would be added to their team's total, and the team with the highest score at the end of month would receive a bonus.

The cashiers loved it the first month. It did okay in month two, though performance slipped a little. By month three, Paul started wondering if he needed to do something new or scrap the game altogether.

That's when he noticed the problem he had unintentionally created. The cashiers who won now expected the bonus to do their jobs. The cashiers who didn't win performed even worse than they did before the contest was created.

Paul tried unsuccessfully to come up with a new incentive program, but service didn't get any better. Then he tried scrapping it altogether and service got even worse.

His experienced revealed a dark secret of incentives: they crush motivation.

Money Kills Motivation

In 1971, Edward Deci ran a groundbreaking experiment on the use of incentives.

He recruited students for what they believed was a study about problem solving. Each student attended three, one-hour sessions where they tried to solve four different puzzles using a Soma cube, a puzzle toy consisting of seven pieces that can be assembled into different configurations. An experimenter was in the room ostensibly to time how long it took subjects to solve each puzzle.

The real experiment was a test of intrinsic motivation. During each one-hour session, the experimenter left the room for eight minutes and instructed the subjects to do whatever they liked. This was in the pre-smartphone era, so the options were:

Play with the puzzles
Read one of the magazines placed in the room
Do nothing

Deci placed the subjects into an experimental and control group. The first session for both groups was identical, but there was a twist in the second session. The people in the experimental group were given $1 for each puzzle they solved. This meant they could earn the equivalent of $25 (adjusted for inflation) by solving all four puzzles during the hour.

In the third session, neither group was paid, just like session one.

The real test was to see how much of their free time each group would spend playing with puzzles in round three. Here were the results:

Graph showing the time spent working on puzzles.

The experimental group spent less time on the puzzles after they had previously been paid while the control group spent more time. This shows the motivation to play with puzzles decreased after an incentive was introduced, but increased when there was never any incentive.

Thinking back to the manager, Paul, and his cashiers, Deci's experiment helps explain why the incentive program did little to improve service.

Incentives Create Bad Behavior

There's more at stake than just poor service. Incentives often cause bad behavior.

According to Nate, a former support team leader, contests can easily demotivate employees. "We used to try to do little competitions between agents. It just never worked. One or two would go all in and immediately turn off everyone else, who just would not participate."

Beth, a customer support manager, told me "We would occasionally do a ticket blitz that came with prizes, but it had a hard end date and was, frankly, mostly about volume at that point."

Many companies offer incentives to employees who get good survey scores. The scores might go up, but often through manipulation and gaming the system rather than better service. If you've ever experienced someone pleading with you to give them a "10" on the survey, you've seen this in action.

A lot of companies tie incentives to revenue generation, which can also go badly. This example comes from Erica. "We had a month-long dialing contest to encourage new business development. The idea was that the salesperson who made the most calls in any given week would be eligible for a prize. Some of the salespeople started making random calls to ridiculous places to get their tally up. I don't think we landed a single new piece of business that month."

The list of egregious behaviors goes on:

Entering fake surveys to boost scores
Creating false accounts to earn sales incentives
Pressuring customers to avoid account cancellations
Closing service tickets before the issue is solved to increase productivity
Hanging up on customers to keep talk time low

These are just a few examples. You can find even more stories of incentives creating the wrong behaviors in my book, Getting Service Right.

Take Action

Managers often ask me how they can possibly motivate their employees without incentives.

The answer might surprise you—if you hire right, your employees are naturally motivated! Most customer service professionals truly want to do a good job.

The key is to make it easy for your employees to do the right thing and take care of their customers. You can learn more and see examples in this webinar I facilitated with Five9's Darryl Addington and ICMI's Erica Marois.