Many experts consider rewards and recognition programs compensation for the soul. If an employer neglects or cuts such a program during difficult economic times, they could risk losing their employees when the economy rebounds.

Employees are experiencing fear and uncertainty. For many, the economic crisis has been a shock to their systems.

For this reason, companies need to move away from a transactional contract with employees - that is, simply relying on salary and bonuses to communicate a job well done - to creating a psychological contract to rebuild confidence and trust, says Derek Irvine, vice president of marketing and strategic consulting at Globoforce.

Irvine, also the co-author of the forthcoming book, "Winning with a Culture of Recognition," explains that employers can accomplish this with employee recognition programs, which entail year-long feedback and encouragement, and foster a general positive atmosphere.

"Today, people need to be much more intelligent and clever about their spending, so they're seeking to maximize every HR tool they have available to them. Recognition is one of those tools which can go a tremendous distance, especially in these difficult times when people need a psychological and morale boost," says Irvine.

During the downturn, according to Globoforce research, 46% of employers cut their recognition program, while 12% increased recognition. Those that increased recognition kept their employees highly engaged or increased employee engagement.

In fact, Irvine claims, Globoforce clients who set up a successful rewards and recognition program usually see double-digit improvements in employee engagement in six months.

On the other hand, those that cut recognition programs experienced reductions in employee engagement. One such company's engagement levels dove from the mid-70s to the mid-30s.

"When you have higher levels of employee engagement, it often leads to higher performance in the workplace, higher levels of quality, higher levels of customer service, customer engagement and therefore, ultimately, a return on investment to the bottom line," says Irvine.

With foresight, the majority of Irvine's clients are restoring their programs to levels before the recession.

In addition, lots of companies are adding these programs where they didn't have them before because trust is at an all-time low and employees are in psychological shock.

Stephen Humphreys, president and CEO of Grass Roots for the Americas, a company that designs and delivers incentives and recognition programs, advises employers to fight the knee-jerk reaction to "cut back [on recognition programs], because it breeds bad feelings about the organization and will actually increase employee turnover," he says.

Humphreys reminds that with high turnover come disruptions to business; it probably costs less to maintain a rewards and recognition program, he says.

Even if monetary rewards are not a viable financial option, a simple "thank you" can go a long way.

After all, "a company without a recognition program is like living in a world without the words 'thank you,'" observes Irvine.

Aligning a 'thank you' with company culture

Employers can reinforce company values through rewards and recognition programs by identifying the value they're recognizing, such as determination and innovation.

"A great recognition program is one that's built to reinforce what the company wants to achieve in the marketplace, to reinforce their values and reinforce their strategy," Irvine says.

Innovation briefings are quarterly contests for ways Borrego Solar, a San Diego-based company that finances, designs and installs solar electric systems, could become more efficient, deliver better customer satisfaction and attract more customers.

Any of the 65 employees can publicly post ideas. At the end of each quarter, the entire employee population votes on the best idea. The winner gets $500, as well as the opportunity to present the idea at the next companywide meeting. Every submission is summarized in their companywide webinar when they present the winners.

Participation in the process has increased over time and in their semi-annual HR survey gauged to measure employee engagement and morale, employees' conception of whether their ideas are valued is trending upward.

Unlike many companies that cut or significantly decreased their employee rewards and recognition program, Borrego Solar actually started theirs during the recession in Q1 of 2009. They did this to encourage cost-saving ideas so they didn't have to lay people off.

"It was also a way for us to engage the team and give employees a way to directly contribute to the organization's success," explains Borrego Solar CEO Mike Hall.

Employees are further applauded for their innovation briefs during annual reviews.

"Taking time to show how the work that people are doing is creating good or helping a customer is a low- cost way to improve morale and make people feel good about what they do with their days," says Hall.

Irvine adds that "a great recognition program becomes a continuous reinforcer of a positive, forward-thinking culture of the company; the employees themselves reinforce that culture."

SimplyHired.com has a public employee recognition program as well for its 70 employees.

At the close of their All Hands meetings (where all of the staff is gathered together, whether in the office or remotely over a conference line), they share the Simply Thanks program.

Employees fill out cards and then stand up during the meeting to publicly acknowledge a job well done by one of their colleagues. The honoree receives a $25 gift certificate to a vendor of their choice, but they don't go the extra mile for the money, says Dion Lim, president and COO of SimplyHired.com. In fact, the amount of money is nominal, but it reinforces employees' efforts without outshining their intrinsic motivation to want to be better.

They've recognized about 1,000 employees since 2005, and employees' cubicles are filled with Simply Thanks cards.

According to Lim, the program works. Each year the company conducts an anonymous survey, with almost 100% participation rate, and finds 87% to 91% of employees strongly agree or agree with the statement, "I love working at Simply Hired." In June, SimplyHired.com was named one of the top places to work in the San Francisco Bay Area.

Lim and his company employ intrinsic motivation to get employees to take autonomy over a task by tying it to something meaningful. With extrinsic motivation, Lim argues, people care more about the things they're going to get, and their colleagues become competitors, not collaborators.

For this reason, they're careful how they use financial rewards. They never use them as carrots, promising money for a job well done. Instead, to encourage intrinsic motivation and avoid a transactional relationship, they give financial reward after the task has been completed.

SimplyHired.com also reward and recognize their employees with a lunch with the CEO, and in general attention from the senior management team. But they also encourage direct feedback not only from managers, but also from peers.

"Direct feedback is a form of 'psychic pay.' People, especially Gen Y/Millennials, care a lot about their personal development. They really feel like that is equally important to the pay that they get," says Lim. "Making 'psychic pay' a regular a part of your culture should absolutely be a top priority. Our Simply Thanks program democratizes appreciation."

Finding appropriate rewards

Experts stress that companies keep their rewards culturally relevant to the entire employee base. At SimplyHired.com, they use the Simply Thanks program to unite even the remote workers - that way people stay connected.

They have companywide fitness competitions online with online tracking software, which aligns values that help employees lead healthier lives. They also fly people out for holidays and the yearly picnic.

"We are very thoughtful about how we can include people from our other offices," says Lim. For example, when they celebrate a milestone that a remote employee can't come out for, they might give them a restaurant gift certificate of $100.

Irvine emphasizes this point, adding that keeping all employees satisfied no matter their location can be accomplished through employee feedback and partnering with local businesses.

In the United States, the most popular rewards for employees are gift cards for family dining, online shopping and movies. The latest consumer electronics are always widely desired items among American workers.

Some companies have begun handing out virtual rewards, such as ringtones, music, software applications, apps for smartphones, and retail or restaurant virtual gift certificates, says Humphreys. They also provide virtual currencies for games, like Farmville on Facebook.

In another direction, many employers are tying results and participation in wellness programs.

"Instead of a market-driven wellness solution, it's now more of an employer-driven solution; they're customizing it. Some are focused on smoking cessation, some are focused on absenteeism, some on diabetes, and one employer is totally focused on obesity," says Rob Butler, president of PayFlex, a third party administrator of benefit spending accounts, COBRA and Transit programs.

With so many options for employers to consider, "I believe the next few years will be exciting for our industry," says Humphreys. "We've all had a bit of a shock because of the recession, and I think as a result people are considering different options."

Harnessing social media for recognition

Employers also can turn to social media for recognition purposes, though some are reluctant to do so.

SimplyHired.com mainly uses social media for recruiting, not for their rewards and recognition program because "we [focus] on a more physical presence" when offering rewards and promoting recognition, says Dion Lim, president and COO of SimplyHired.com.

Nonetheless, many rewards and recognition outsourcers have created social recognition software that allows appreciative conversations to continue online.Setting up such a system can be done for free and can potentially maximize recognition by a factor of 10.

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