Should managers give employees performance awards?

Recognizing employees who do great work can benefit firms.

Naming an "employee of the month" can spur higher output from other employees on their team and improve the team's collective output. Similarly, awards for contributions to the team can motivate employees to prioritize their team's performance over their self-interest and boost their performance on unrelated tasks. Even awards that can't be leveraged for career gains seem to motivate effort: Wikipedia editors who randomly received a participation award were more likely to keep editing, compared to non-recipients.

Recognition can substitute for other motivators, too, like money and task meaningfulness. By one estimate, publicly announcing an award to an employee's colleagues is as valuable as attaching a $1,000 cash bonus.

But employers should proceed cautiously: awards can backfire if they break implicit social contracts.

For example, at workplaces that emphasize teamwork and collaboration, awards that highlight competition can demotivate employees. Likewise, awards for things motivated employees already do can dampen their internal motivation. When a company introduced attendance awards, for instance, it improved attendance among employees who were previously delinquent but worsened attendance and performance among employees who already showed up on time consistently.