Competition Is Good, Except When It’s Not: The Difference between Incentives and Recognition

I’m often asked, “What’s the difference between incentives and recognition? Aren’t they the same thing?”

No, they are not. Incentives and recognition are two distinctly different mechanisms that can be used to boost employee productivity, but each has its proper place and time for use. Incentives in particular can cause unintended consequences if not thought through fully.

A recent LA Times article provides an excellent example of incentives in the form of leaderboards gone awry.

“In the basements of the Disneyland and Paradise Pier hotels in Anaheim, big flat-screen monitors hang from the walls in rooms where uniformed crews do laundry. The monitors are like scoreboards, with employees' work speeds compared to one another. Workers are listed by name, so their colleagues can see who is quickest at loading pillow cases, sheets and other items into a laundry machine. …

“Isabel Barrera, a Disneyland Hotel laundry worker for eight years, began calling the new system the ‘electronic whip’ when it was installed last year. The name has stuck. … According to Barrera, the whip has led to a sort of competition among workers, some of whom have tried to race to the head of the pack. But that has led to dissension and made other employees worry that a reasonable pace won't be enough to keep the boss happy. Barrera and Beatriz Topete, an official with Unite Here Local 11, said employees have been known to skip bathroom breaks out of fear that their production will fall and managers will demand an explanation. They say they felt bad for a pregnant employee who had trouble keeping up.”

The Difference between Incentives and Recognition

The chart below illustrates the primary differences between incentives and recognition.

Most importantly, incentives are focused on the “What” while recognition is focused on the “How.” For example, the laundry scoreboards are purely an incentive focused on the “what” of employee deliverable of number of pillow cases loaded into a machine, etc. Recognition, on the other hand, would perhaps praise and reward Beatriz for chipping in to help her pregnant colleague keep up with the work but still take needed bathroom breaks. In this example, Beatriz is being recognized for “how” she is getting her work done.

Ensure Incentives Remain on Track

1. Set reasonable parameters and expectations. Competition can be an effective motivator as long as employees don’t believe their jobs are on the line based on the outcome. Overcome this challenge by setting clear goals at the outset and sticking to them.
2. Take into account individual employee situations. To be fair, incentives must take into account individual exceptions (such as the pregnant employee at Disney). No employee should ever feel as if they need to put their health or well-being in danger to meet incentive expectations. This is often the primary problem with safety incentive programs in which employees simply do not report safety issues to ensure they will meet safety goals.
3. Don’t rely solely on incentives. Incentives serve a purpose for motivating teams to meet or exceed short-term, highly visible goals. But necessarily only a few employees will benefit. Recognition, properly implemented, is designed to reach the vast majority of employees, acknowledging and praising employees frequently and in the moment for actions and behaviors to demonstrate core values and contribute to key objectives.

Do you use incentives or recognition in your workplace? Which do you find more effective?

As Globoforce’s Head of Strategic Consulting, Derek Irvine is an internationally minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the world. His articles on fostering and managing a culture of appreciation through strategic recognition have been published in Businessweek, Workspan and HR Management. Derek splits his time between Dublin, Montreal and Boston. Follow Derek on Twitter at @globoforce.

Comments

[Paul Hebert]

I think you need to make the distinction between “recognition” as an act and “recognition” as a program. I can provide recognition for achieving an incentive goal – that is still recognition although part of an incentive.

I’d also argue that incentives are focused on the elite few. In fact, most incentive programs are designed to reward those that achieve a specific goal – that means – everyone has the opportunity (assuming goals are set appropriately.)

And while recognition can be (and should be) done frequently for as many as possible – assuming they demonstrate the appropriate behaviors… too often they are designed into programs that typically reward only the elite – think President’s Club or Millionaires Club for sales people.

[E. James (Jim) Brennan]

Paul gives examples of what I would call double-duty incentives: ones that both drive a specific pre-announced output result and supply personal recognition. Cash can't do that, because it is socially unacceptable (even in the money-grubbing capitalistic USA) to brag about the monster commission you earned. Even allowing the boss to identify you as the top cash-prize winner is not particularly PC.

This is a very helpful article. I would add that there are temporal orientation differences, too. Incentives tend to be forward-looking goal-focused formal programs, dangling rewards promised contingent on the achievement of certain outcome results. Recognition tends to occur after the fact, can be informal and spontaneous and involves public announcement of an achievement, celebrating demonstrated success and publicized in the hopes of inspriring emulation by others. While incentives can be private, recognition is usually public.

The targets make a difference, too. Those lottery or casino winners shown in ads did not play for the recognition. No, their payoff terms required them to permit their success to be advertised as an incentive to others to play the game in the future. Their recognition is an incentive for others to similarly gamble. One wo/man's recognition can be another person's incentive.

Also, lest we forget, incentives are generally taxable while recognition usually is not.

[Rodney Hulsey]

In accordance with Jim's comment, incentives are forward looking mechanisms meant to drive behavior and/or results toward some outcome or goal. Recognition is given after-the-fact. Recognition can be done for meeting the goals of an incentive or for anything else that is worthy of such accolades. While it may be true that some people do things with the hopes of being recognized has the "feel" of an incentive, it doesn't satisfy the requirement that an incentive is mutually understood by the party providing the incentive (and the recognition) and the party being coaxed to achieve it.

[Derek Irvine, Globoforce]

Thanks for the great comments, all. You have each added greater clarity around a complex topic. My overriding point is that "incentives" and "recognition" are two entirely different approaches - both with valid, proper roles depending on the goals you want to achieve. Too often, the terms are used interchangeably, adding to confusion in the market and in well-meaning HR pros.