Happy employees are more productive employees. The power of that happiness was made clear by a Sears, Roebuck and Co. survey of 800 stores that showed when employee attitudes improved by 5 percent, customer satisfaction rose 1.3 percent and revenue grew 0.5 percent. In a tight economy, many business owners believe they don't have the means to make their employees happy because they can't increase their salaries. While all of us want and appreciate salary increases, money is not the only, or even the best, motivator. According to several studies, as long as we are paid competitively, or even close to competitively, the money issue is not the deciding factor in whether we remain at a job and how enthusiastically and competently we do that job.

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According to a "National Study of the Changing Workforce" conducted by the Families and Work Institute of New York City, the factor that ranked highest for the surveyed employees when it came to choosing their jobs was "open communication." People want to know what is happening in the organizations they work for! In the same survey, salary ranked 16th. Gerald Graham, a professor of management at Wichita State University in Wichita, Kansas, evaluated 65 potential incentives in a study of 1,500 employees. The winning incentive was "personalized, instant recognition from managers"; second was a letter of praise for good performance.

As Rosabeth Moss Kanter, a management consultant based in Cambridge, Massachusetts put it, "Compensation is a right; recognition is a gift." And therein lies the power of recognition: Everyone loves gifts. Here are some tips for rewarding employees even on a tight budget:

  1. Personally thank an employee for a specific job well-done. Specify what was good about it and why you appreciate it, which tells the employee you do pay attention. For example, say: "Thank you, Jim, for organizing that project so well. You made it very clear what should happen, when and why."
  2. Put that specific praise in a letter or thank-you note. When you take the time to write something down, you clearly value it. This makes the praise even more meaningful. When appropriate, copy the employee's manager on your praise letter. Sharing the praise with management lets the employee know you support his or her success at your company.
  3. Provide as much information as possible about the company. Share as much as you can about how the company is doing, where it's making money, where it's losing money, how its products are doing in the marketplace, what new initiatives are being considered and why, and how the employee can best contribute to these efforts.
  4. At every opportunity, include your employees in the decisions you make. In many cases, your employees understand a side of an issue that you may not. If you need to create a more efficient delivery system, ask your delivery men and women how they would improve the current system. If you want to improve work flow for support staff, discuss with your secretaries and clerical workers how to best keep the work flowing. Use their ideas, and give them credit for them.
  5. Give employees the opportunity to learn as many new skills as they are able to. Most people like to learn, to grow, and to improve their marketability, and the more skills you enable your employees to learn, the more they will value their position with you. Cross-train whenever possible so employees know each other's jobs. An added benefit is that employees who understand the realities of one another's positions are more willing to cooperate and feel more like members of the same team.
  6. Celebrate successes. Celebrate an employee's successful completion of a project, a salesperson's landing a big client, your company's improved sales figures, your organization's successful year-end. After a particularly tense week, bring donuts and coffee and gather everyone together to applaud a hard-working team. Provide balloons and noisemakers for a rousing chorus of cheers for the completion of a difficult project. Buy a plastic crown at a party store to place on the head of an employee who mastered a difficult skill or finished a course of study. Mark the successes of your staff and celebrate them. Don't be afraid to be goofy in your celebration; it's a refreshing change from hard work.
  7. Provide free time and flexibility. Set aside an hour here and there for employees who have delivered an extra level of work. Make it clear that the free time is a reward for a specific accomplishment, such as finishing a challenging project or delivering month-end reports early. Alternatively, you can reward all your employees together, for example, by letting them leave an hour early to miss rush-hour traffic on a day of expected heavy traffic. Give extra time for lunch to an employee or team who has worked through lunch to deliver something to a client. Allow time off for personal or family responsibilities.

    Admittedly, these rewards are not entirely free. They require time and energy to implement, sometimes a few dollars for donuts or a plastic crown. However, your investment will be rewarded by happier, more dedicated employees who make it their job to make you and your company more successful. It's a classic win-win situation.


    Scott Miller is vice president of Kirk Miller & Associates Inc., a management consulting firm that writes and presents highly interactive workshops designed to improve productivity, retention and morale through developing employees' soft, or interpersonal, skills.