Is Non-Financial Recognition Cheaper AND More Effective?

Motivating employees provides a challenge for almost all companies. Many fall into the trap of financial rewards and incentives. While financial rewards are important and in many cases absolutely necessary, it’s easy to think that they’re the answer to motivating and retaining employees. However, non-financial recognition is more powerful and effective than you think.

Non-financial recognition is simply recognition without a financial reward attached to it. It’s still an acknowledgement of an achievement by an employee that wasn’t dependant on a pre-determined target. That said, non-financial recognition doesn’t necessarily always have zero financial value, it just doesn’t involve just money.

Forms of Non-Financial Recognition

This can range from the most basic forms of recognition including a “thank you” from a manager, a show of appreciation in a team meeting or through a newsletter or company communication or an employee of the month award. Sometimes employees can be rewarded with tickets, vouchers or even a reserved parking space.

Benefits of Non-Financial Recognition

There are a number of benefits to a non-financial recognition scheme as opposed to a financial one.

Cost Efficiency

Non-financial recognition schemes tend to be more cost-effective. This is because the recognition itself is the focus and the value to the employee is derived from the act of recognition.

It Makes an Immediate Impact

Rewarding employees with bonuses or a pay-rise can take time, whereas recognising employee achievements can effectively be done immediately. When the reward itself is handed out sometime after the performance it’s rewarding, it loses its effectiveness.

Better for Retention

If an employee stays with you because you’ve increased their pay, they can be easily lured away by another company who’ll pay them more. The last thing you want is for employees to only stay with your company because you’ve increased their pay. Through non-financial recognition, you’ll build a relationship with employees. An employee that has built up good relationships and a bond with the company and their manager(s) will find it difficult to get from another company.

Employees value recognition over pay

The research shows that recognition is more effective than increasing pay. Research in The Management Agenda by McCartney and Holbeche found that non-financial recognition was cited by 65% of managers as a popular motivator, with job enjoyment, personal drive and challenge also mentioned. The research findings also showed the biggest demotivator at work was a lack of recognition.

Keys to an Effective Non-Financial Recognition Scheme


The more inclusive your non-financial recognition scheme is, the more likely it is to be seen as fair. All employees should have the opportunity to be nominated for awards, whatever their role. This doesn’t necessarily mean everyone should win awards all the time, but as long as every employees feels they have a chance, your scheme should work at its most effective.

Have the right number of awards

Too many awards and your scheme becomes devalued, too little and employees will feel they’ve got no chance of winning anything. Either could be demotivational, so finding the balance is key. If you’re looking for new awards to hand out to your employees, check out our 12 staff awards ideas.

Get the value of the award right

Speak to your employees and get an idea of what they would like. This can be done through surveys or focus groups. Reward them with something they value rather than what the company values. Do this regularly enough to make sure your scheme is up-to-date.

Have a credible assessment process

Assessment of who gets awards needs to be fair. If employees feel there’s any favouritism the scheme could have the reverse effect.

Maintain momentum

They key to an effective recognition scheme is momentum. They should always be considered as ongoing projects and should be continually assessed and improved. The last thing you want is for your scheme to happen briefly only to be forgotten down the line.

As mentioned, many reward schemes can fall into the trap of just handing out ‘stuff’ to employees on a regular basis. It’s actually the recognition part that employees value the most. Get that right, and you’ll find your recognition scheme not only to be more effective but more cost-effective as well.

Struggling with your employee recognition scheme? Check out our complete employee recognition guide!