4 Levels Of Recognition To Help You Plan And Budget

February 18, 2014

In Management & Organizational Performance

4 levels of recognition

Everyone needs recognition. It is a fundamental human need. In business, the more our work is recognized, the more likely we are to offer a little more discretionary effort to our employer; this increases productivity, performance, and finally, the bottom line.

What level of recognition is best suited for an employee? How can we tell when we offer too much or not enough, and how do we budget it all? As leader, I’d like to posses unlimited funds to recognize my employees every second! But in reality, the main and most basic economic concept is always there: unlimited needs—limited resources!

Here are a few guidelines that will help you to better plan and understand the level of recognition that is appropriate in any given situation.


First, start with the budget. Various studies and authors agree that for recognition, one must foresee an annual budget of 2-3% of the total payroll; or at least $1000 per employee per year.

Some may think that this is really too much because already, “they’re paid to do their job”! True. However, employees are paid to do what is “normal”. It isn’t the salary that gives you access to their genius, their creativity, their devotion. If you want to access it all and ensure that your company is successful, you must use recognition. Although many recognition actions will not cost you anything, you will have to open up your wallet eventually.


Now, how much recognition and compensation should you give to someone? A team member, who succeeded in calming down a client, did a great job! Is it however as significant an accomplishment as that of another team member who implemented a new process that will save the company millions of dollars? Both employees deserve to be recognized, but probably not in the same way.

Adrian Gostick and Chester Elton are proposing 4 levels of compensation in their book The Carrot Principle: How the best managers use recognition to engage their people, retain talent and accelerate performance. The compensation level depends on the behavior we want to recognize. Here are the 4 levels:

Thank You: a small effort that brings us closer to the company’s values.

Bronze: a one-time accomplishment, where an employee went above and beyond the client’s and the organization’s expectations and increased the success of the business.

Silver: a continuous effort made by en employee whose actions demonstrate the company’s values and enhances the performance and the success of the business.

Gold: an action, a project or a behavior that has a significant impact on the profitability of the business.


These are everyday encouragements. A tap on the back. A “Thank you” for taking care of a client, for a small new initiative, for always having a smile in your voice when speaking on the phone, for helping a colleague, etc. Thank you is the most used type of recognition. It can be a private or public little note, email or congrats. It can be a chance to award a small compensation of less than $50: a gift card, a pair of movie tickets, flowers, fruit basket, etc.


The Bronze type of reward is awarded for specific accomplishments that demonstrate the values of the business. For example, for an employee who has taken really good care of a furious client, or who stayed late one evening to ensure that the job estimate is sent to the client as expected. Bronze compensation is usually tangible and has a value of $50-$100: a supper for two in a nice restaurant, tickets for a Canadians hockey game (or your employee’s favorite team), etc.


This type of reward is intended for employees who continuously demonstrate the values of the business. For example, by ensuring that the service offered is always above the client’s expectations, by showing continuous leadership, by improving processes, etc. These compensations must be awarded publicly, ideally with a certificate, a frame or a trophy, in addition to a tangible award of $100-$500.


This is the highest type of reward. It’s reserved for an employee that had a direct impact on the profitability of the business, for example, an employee who has found a way to improve a process that will save the company hundreds of thousands of dollars. This type of compensation must be awarded publicly, during a special event, accompanied by a frame or a trophy (that serves as a reminder of the accomplishment) and a tangible reward of $500 or more.


Regardless of the type of compensation, you must ensure to always recognize a person effectively. A quick “Thank you” between two meetings, or a bonus deposited directly on the employee’s pay without any explanation can have a negative impact. When you recognize your employee, you’re first and foremost taking care of another human being. Do it correctly.

Employee recognition leads to happy employees, satisfied clients, and a profitable business. What are you waiting for?

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