Sunday, 27 January 2013

Reward vs recognition

More often than not the terms reward and recognition are used interchangeably by reason of the similar meaning habitually attached to the two different words. These expressions, notwithstanding, are actually associated with two dissimilar concepts and are, or rather, should be used in practice by employers to achieve two different objectives. Many employers are conceivably not fully aware of these differences, but having crystal clear ideas about their real meaning and aim can definitely help employers to design and introduce in their organizations more effective and consistent total reward systems.
Limaye and Sharma (2012) claim that recognition is mostly intended to thank employees for doing the “right thing”, whereas rewards are basically offered to individuals to compensate them “for their efforts and contribution” to organizational success. The Authors also contend that whilst recognition is mostly expressed in the form of non-financial means, reward is aimed at meeting individual financial expectations.

Rather different appears to be the definition of reward provided by Stewart (2011), who defines reward as a financial or non-financial item conferred to an employee for “completing/reaching an achievement/milestone.” This definition is indeed evidently overlapping with the definition provided by the same Author of recognition; the difference between the two terms apparently being exclusively due to the different motive for the award, in both cases represented by events occurring before the acknowledgment, to wit: the attainment of a significant objective in case of reward; the behaviour exhibited, the efforts made or the performance of a feat favouring the attainment of the organizational objectives in the case of recognition. These definitions of reward and recognition could have been indeed regarded as consistent in the event a further definition, for instance, that of compensation or remuneration, would have been considered to refer to base pay. In this case rewards and recognition would have been provided by employers to award individual special achievements, deeds and results, whereas compensation or remuneration, that is to say base pay, in exchange for employee regular work. The definition provided by Stuart basically omits to include the fixed component of financial reward, which should be indeed regarded as unavoidable; reward appears to be thus entirely composed of variable components. Adding a third element would have led to a classification very similar to that used by British Airways, which makes a distinction between:
- Reward, which is associated with base, fixed pay;
- Incentives, which are offered when employees attain their objectives;
- Recognition, whose purport is basically that to say “thank you” to employees for their achievements (Rose, 2011).
Considering the term reward as also including incentives at large, the difference between reward and recognition would essentially result to be time-related. Rewards are promised by employers to individuals from the outset of the working relationship, whereas recognition arises as an after-the-fact award (Silverman, 2004). Yet, rewards represent an important part of the working agreement; these are in fact agreed, identified and included in detail in the written contract of employment, whereas recognition is not usually part of any legal written contract. As aptly summarized by Rosabeth Moss Kanter (Rose, 2011): “compensation is a right, recognition is a gift.”

Inasmuch as employers regularly paying salaries and financial rewards to their employees can be deemed legally compliant, those who do not implement any recognition schemes and allow their employees to benefit from its introduction can be considered as somewhat of breaching the psychological contract. Nowadays, individuals are no longer expected to receive from their employer the payment of the financial rewards contractually agreed only, but also to be recognized and acknowledged for their efforts, achievements and exceptional contribution.
An additional significant element underpinning the differences actually existing between reward and recognition can be identified in the definition provided by Juran (2003), who defines rewards as the money paid by employers to individuals in the forms of salary increases, bonuses and promotions, which are linked to the assessment of individual performance and are habitually offered in private, and recognition as the appreciation of commendable performance and remarkable achievements expressed by means of events or ceremonies aiming at giving these publicity and visibility. Similarly, but even more explicitly, Ostendorf (APQC, 2002) suggests that “recognition is more than likely going to be public. Rewards don’t have to be.”
The reason for recognition needing visibility is associated with the same scope justifying the introduction of these schemes, that is to say thanking individuals for their particular contribution and efforts. A public formal “thank you” is clearly likely to produce much positive effects than a private one would and is also likely to be remembered for a longer period of time by the individuals concerned. What matters the most is the message which recognition in reality aim at conveying. Irrespective of the incidence of the tangible, para-financial component of the identified form of award, the main element of recognition invariably rests with the “thank you.” Completely different is the case of rewards, these have been contractually agreed and represent thus somewhat of a debt for the employer; these are hence practically due to the employees, not negligibly, for the largest part regardless of their performance and behaviour.


The establishment of recognition programmes within organizations helps employers to differentiate salary from the other initiatives (Rose, 2011). This process is basically enabled by a psychological state which Jeffrey (2003) calls separability. The tenet at the basis of this human attitude is that individuals essentially tend to aggregate and separate things and phenomena according to their sources and the way these are perceived. Employees who receive in addition to their base pay cash supplements for their outstanding performance, efforts or achievements, especially whether later consolidated into fixed pay, are likely to regard the overall amount of money as deriving from their regular work and to disregard the circumstance that part of the overall sum of money has been received by virtue of a particular accomplishment, something special. Recognition initiatives are, by contrast, much more likely to be remembered for a longer period of time and are thus habitually appreciated by individuals the most. The same perceptions are likely to be generated by the payment of non-consolidated cash bonuses awards, keeping these amounts separated from salary will help individuals to differentiate these and induce employees to attach to them a much greater significance and value (Rose, 2011).
The so-called “memory value”, mainly based on non-financial and para-financial rewards, definitely represents an additional distinct asset of recognition programmes. Its concept is underpinned by the idea that individuals are most likely to remember non-cash and para-financial awards, rather than money. Findings of an investigation carried out in 2006 by Workspan revealed that a remarkable 18 percent of respondents did not even remember how they spend their cash awards. Inasmuch as individuals may be delighted and proud to show to their relatives and friends an object that they have received as a “thank you” from their employers, these are likely to be even ecstatic to tell their relatives and friends about, for instance, a voucher for a holiday to a popular tourist destination received from their organization. In the latter case the memory of the benefit received is destined to last longer (Rose, 2011), also thanks to the pictures which will be taken and showed to friends in different occasions and perhaps posted and shared online in social networks.
Recognition awarded by means of non-financial and para-financial rewards provide individuals with external in addition to internal visibility. This clearly makes employees even gladder and prouder of their work, giving them to understand that whether their employer is publicly awarding them is because the activities they have performed and the results they have yielded are deemed by this meaningful and useful for the attainment of the business objectives. Yet, by means of recognition programmes an employer can give employees to understand that the organization is giving them genuine opportunities to express their potential and engage in activities which are appreciated and valued by the employer. This should in turn provide individuals a sense of self-fulfilment which should ultimately contribute to increase their gratefulness and loyalty to the employer.

The emotional impact spawned by non-financial and para-financial awards, which can also result amplified by the circumstance that these are handed to employees on occasion of specifically planned public events, is also correlated to other two mental processes called by Jeffrey (2003) evaluability and justifiability. The concept of evaluability is concerned with the value which different individuals can place on a non-financial or para-financial award, which in some circumstances might also be perceived as higher than the real purchasing cost of the item or service provided by the organization. The idea of justifiability is instead associated with the circumstance that, albeit individuals could have actually bought by themselves the items they receive from their employer as a “thank you”, they do not in that consider those items or services particularly costly and in some ways not necessary for themselves and their families. This, nonetheless, does not entail by any means that employees would not justify and appreciate receiving them whether offered by their employer for the results these have produced.
Para-financial rewards will be even more welcomed and appreciated by individuals whereas these have been chosen by an employer taking heed of the beneficiary likely expectations and wants. This will unquestionably proof that the employer has dedicated time and thoughts to the individual and that its efforts were focused on providing the employee with something s/he would have genuinely appreciated; by no means that the employer is giving anything, maybe even cheap and outdated, just for the sake of offering something (Rose, 2011).
Reward managers and specialists, nonetheless, have to be extremely careful when designing and most of all managing these schemes and need to do whatever they can to prevent the flip side usually associated with these programmes implementation, which can trigger dissatisfaction and discontent amongst the individuals not receiving any form of award (Armstrong, 2010).
As maintained by Rose (2011), it is somewhat of ludicrous that employers spend more than a half of their overall annual budget in reward and employees neither appreciate their worthiness nor “understand what it is about.” The real true is that in many cases employers too have not totally clear how and why they offer rewards to their employees. This is certainly causing confusion amongst employees, but also amongst managers. Whether reward is intended as the sum of pay and incentives, and recognition as a means to say “thank you” to individuals, managers need to be aware that in order to award a specific achievement is not a salary increase that they have to propose to the employer for their report. Likewise, whether these want to acknowledge the regular and sustained outstanding performance of a direct report it is not a flat-screen colour TV that they have to suggest to properly award the employee. In order to prevent triggering potentially dangerous downsides, unintended negative outcomes and inadvertently foster undesired behaviour the mechanic of reward programmes have to be first and foremost clearly identified and hence shared with the entire organization management.
The BA model distinguishing fixed salary from incentives and recognition schemes, outlined earlier, is fairly clear to understand and thus to explain and execute. Yet, this scheme enables managers and employees to promptly identify and associate the specific reason for the award with each component of reward:
- Base salary – based on the organization salary grade system;
- Incentives – for outstanding performance and results;
- Recognition – to thank employees for specific achievements and behaviour.

Longo, R., (2013), Reward vs recognition, Milan: HR Professionals [online].

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