As noted in chapter 15, one of the chief shortcomings of merit pay as a means of recognising and rewarding individual performance is its formalistic basis and once-a-year payment regimen. To address these problems, in recent times many organisations that are committed to rewarding individual performance have opted for a range of more flexible and timely practices known generically as ‘recognition awards’. This chapter considers the rationale of such plans and the variety of recognition practices, especially the competing claims of cash and non-cash plans. We then canvass the arguments for and against such plans, and conclude by considering the situations to which special recognition plans may be best suited as well as least appropriate.

The logic of recognition plans

Recognition award exponent Donald Hay (1998: 1) notes: ‘The primary goal of a recognition program is to express appreciation for the efforts and achievements of employees. Recognition can be as simple and informal as a verbal or written thank you or as sophisticated and formal as an organization-wide nomination process.’ A key attraction of recognition awards is that they represent a flexible, low-cost and potentially effective alternative to regular merit increments or bonuses, and it is no accident that recognition awards have risen to prominence during the era of shrinking merit pay budgets. Hay (1998: 1) suggests that while recognition cannot replace pay, it can be a significant adjunct to a well-designed reward system: ‘Regular and frequent acknowledgment of employee contributions can be a powerful addition to an organisation's reward strategy.