Estimates from organizations, including Mercer and WorldatWork, put next year's average U.S. base salary increase at approximately 3% - a healthy gain for most of the industrial world, which actually saw pay drop this year, but a disappointing "new normal" for benefits professionals who remember sunnier days. With budgets for rewards and compensation stretched like sausage casings - thin and fragile, but holding together - companies will be looking for even more low- and no-cost ways to recognize top performers than they have in the past.

That works just fine for David Olson and Dr. Bob Nelson, co-founders of Recognition PRO. Olson and Nelson have spent years tracking incentivized behavior and corporate rewards, and, like the song says, the best things in life are free. They say the best-motivated workforces aren't driven by plaques, coffee mugs or even bonuses; they're driven by deeper personal connections with their managers and co-workers, and the kind of personalized recognition that comes out of that.

"Most of the $50 billion [incentives] industry has tried to solve the problem by throwing merchandise at employees," says Olson. "That doesn't really create a culture of recognition; creating a culture of recognition comes down to strengthening manager-employee relations ..."

Nelson, the author of "1001 Ways to Reward Employees," looks at the problem from a psychological perspective. The ultimate goal of psychology, some say, is to improve behavior - in this case, group behavior.

"I'm not in the incentive industry," Nelson says. "I'm really a behaviorist." Out of the 13 most motivating management behaviors, he says, the top nine cost an organization nothing at all.

"I start from behavior that will help lead to the results that organizations want with their people, whereas I think most places start with stuff to do and give people," Nelson says. "It's almost like a knee-jerk reaction: 'We need to improve morale; what can we give people? Can we get some Starbucks gift cards?' And it ends up kind of being a Band-Aid that, research is now showing, actually has a negative impact on really trying to connect with people's deep-seated motivations if you want them more loyal and productive.

"The right way is focusing more on the behaviors between managers and leaders and the people who report to them - how they manage, what they talk about, what they model - in terms of value to the organization."

What Nelson and Olson recommend is more of "a systematic behavioral approach" toward how an individual is integrated into a company and how they're treated inside.

People want to be thanked personally for a job well-done; they want to be involved in communication and decision-making. These approaches make them feel far more valued, and, Nelson says, "it'll make this a place where they're going to keep giving it their best shot."


Not about the money

The pair point to research indicating that the main reason employees leave a job is lack of recognition. Companies, being companies, think it's all about money; surely, they say, quantitative rewards are worth more. So the coffee mugs and watches persist, even when they do more harm than good.

Employees can game a system for set rewards, and will, and others who've already reached a given achievement can grow bitter.

What's more, Nelson says, "old school" methods of back-patting, like the photos and parking spaces for employees of the month can be ripe for parody. They feel quaint and can give the impression of applauding sycophants. "I've talked to a lot of employees who don't want to be employee of the month," Nelson says. "There's a stigma; they're worried their friends are going to make fun of them."

Of course, that's not true for everyone. The dedicated career worker who's looking forward to her 20-year mark with pride might not react well to being told such antiquated benchmarks are being phased out; don't throw out the baby with the bath water. And there's a generational element to it, as well.

"For the millennials, who are going to be at their current job for less than a year and a half, they don't have any sights on their five-, 10- or 15-year tenure," Nelson says. "If you're trying to attract them, hold on to them, get a lot out of them, you've got to start looking to see what does it for them, and I guarantee it's not going to be logo jewelry or crystal. It's going to be the trust and respect of their managers, learning opportunities, meeting with upper management, selection for task forces and special projects. That's going to hit home 1,000 times more than the latest iPod, which they already bought with their own money anyway."


Personal relationships crucial

Interpersonal relationships are crucial to proper rewards and recognition, Olson and Nelson say. They advise against remote workforces as much as possible; people work harder for managers they know personally. If you have a mental block on how best to show appreciation, try going directly to the recipient.

"Start with the person you're trying to make a difference with," Nelson says. "Find out what's important to them - ask them what would make them feel special, and if you do that, you're going to be starting at a better place where you're enhancing the motivational value."

He recalls the story of a woman named Jackie whom superiors were struggling to properly motivate. It got to the point where she was "on the verge of being fired," but a new project came up and management said to her, "Jackie, if you turn this around, I'm going to be pretty excited. What could I do to motivate you, to thank you?" And it turns out all she wanted was increased visibility.

"I'm over here in the corner," she said. "No one knows who I am or what I do - if I'm successful, I'd like you to help get the word out about me."


Tailored rewards

Olson says Nelson's original 1,001 rewards have blossomed to more than 1,500, and they can be tailored to practically any workplace situation.

"We created a tool, an online, cloud-based Web app that helps managers by giving them ways to motivate and engage their team members that are much more helpful and authentic," Olson says. "Let's say you have 20 employees who work for you. They all have different preferences on how they want to be recognized, they all have hobbies and interests, they all have different workplace motivators. And basically, what we did is we took some of Dr. Bob's research and put these into our process, called our recognition generator, so a manager can get advice to match a particular instance within a company, as well as fitting a particular employee."

Ron Carl, director of operations at Rothrock Motors in Pennsylvania, says, "You always think that you're doing enough because the people aren't quitting," but there's more to get out of people than just sticking around.

"Every year we would throw 'employee appreciation day,' where we have a huge smoker that comes in and this guy cooks all this beef brisket," Carl says about his old methods. "At Christmas we have a holiday party, and we give them a $25 gift card to, you know, the local Giant. If you hit five years, you get a gold ring, and for every five after that you get a diamond to put in your ring. And pretty much, that was about it."

With part of his team working on commission and part working for flat rates, Carl says rewards programs could be tricky. You try to offer ecumenical, nonoffensive gifts, but, "If you think a gift-card to Red Lobster is good for any employee, how do you know they're not allergic to seafood?" he asks.

"We thought we were doing a good thing, but we really weren't seeing any traction," he says. "Our employee satisfaction scores weren't going up; manufacturing was just kind of flat-lined. We talked to Dave and realized wow, we need to do a better job of it, but I think the bigger realization is that we couldn't do it on our own."

Rothrock Motors is undergoing an $8 million renovation that is going to leave all its employees "living in trailers" temporarily. So, partially, the concern was "How are we going to keep our employees' heads screwed on?"


What makes them tick

With top-down implementation, Rothrock's managers were introduced to the Recognition PRO program, which keeps track of how often they recognize and show appreciation for their sub-teams. Each employee is given a questionnaire that asks after their interests, their hobbies and "what makes them tick." When a supervisor seeks to reward an employee, they must first click on their name in the Recognition PRO software and be reminded of what the individual likes.

"And then acknowledge them," Carl says, "not off on the side, but in front of their peers."

But whether with Recognition PRO's help or on your own, the key to finding out what workers want may just be to simply ask them. If nothing else, it means you have that personal relationship, which is its own motivator. "It hand fits the solution to make it more meaningful," Nelson says.

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