The 5 Red Flags of Peer Recognition Programs

With labor shortages and employee retention continuing to rank as key employer concerns in 2023, more organizations are upgrading their employee recognition efforts. An increasingly popular trend is peer-to-peer recognition programs, which allow team members to give public praise (or rewards) to co-workers who they don't manage.

Experts have always cautioned that such programs are no substitute for manager feedback. But peer recognition programs also have the potential to be toxic, mainly because they enable comparisons among employees, which can trigger feelings of unequal treatment, according to a landmark study from the University of Waterloo in Ontario.

"When employees feel that they deserve recognition from their peers but do not receive it, employees can conclude that they are unfairly treated, and this makes employees less willing to help other co-workers, not only the co-worker they feel treated them unfairly," says the study's lead analyst, Pei Wang, an accounting Ph.D. candidate at Waterloo.

Peer recognition programs can range from the simple to the sophisticated. An increasingly popular tool these days are digital platforms—such as Bonusly and Nectar—that allow employees to praise co-workers' accomplishments and earn points and gift cards.

In all peer recognition, it's important for leadership to clarify which workplace behaviors should be recognized and rewarded, such as teamwork, going above and beyond, or displaying innovation. Companies need to ensure that recognition is tied to the desired behaviors and outcomes that align with the organization's values and goals.

If not implemented carefully, peer recognition programs could create a competitive environment and lead to favoritism or bias.

"It may also inadvertently discourage employees who don't receive recognition, causing a negative impact on their motivation and morale," says Jared Weitz, CEO of United Capital Source, a business financing company in Garden City, N.J.

"When recognition becomes a public competition, it can create a sense of rivalry and resentment among team members," Weitz says. "It's essential to strike a balance between public and private recognition, considering individual preferences and the potential consequences of public comparison."

Recognizing the Red Flags

If you're running an employee peer recognition program, experts advise planning ahead and watching for these potential red flags:

1. Excluding certain employees. Peer recognition programs could inadvertently create cliques or exclusionary dynamics if certain individuals or groups are consistently recognized while others are overlooked. This can negatively impact team cohesion and collaboration.

2. Lack of training on the program. Managers shouldn't assume that people naturally "know how to recognize others effectively, which behaviors should be recognized or that people will automatically form the habit of peer recognition," says Jeff Smith, a senior vice president at 15Five, a performance management platform in Raleigh, N.C. "Providing the right combination of technology, education, coaching and feedback about feedback will help peer recognition have the intended impact."

3. Unfair favoritism and retaliation. "Senior staff should understand how the human mind and brain work in every stressful situation. Using the 'fight or flight mode' is still a strong part of our motivations," says Roza Szafranek, CEO of HR Hints, a Chicago-based HR services company. "That's why employees being part of such programs could cause them to give negative feedback to those who didn't give them satisfying feedback previously as well as give higher rates to those who rated them higher."

4. Proximity bias. Executives need to consider cognitive biases that people have, especially proximity bias, based on the risk of praising or rating employees higher if we interact with them more often (in person or online).

"Also watch out for status bias, which is based on respecting more those who look older and hold higher professional positions," Szafranek notes.

5. De-emphasizing the manager's role in recognition. Peer recognition should supplement—not replace—the role of the organization in recognizing employees and giving feedback.  

"While peer recognition is valuable, there are other methods of rewarding good employees," says Amy Spurling, CEO of Compt, a reimbursement platform, and a former HR leader. "As an executive, I believe in a multifaceted approach to employee recognition."

Specifically, the power of a sincere "thank you" from a manager is timeless. Remind leaders to take time to personally express appreciation to employees for their specific contributions and achievements. This can be in a private email or a Slack message, but face-to-face is always best.

Monetary recognition is also timeless.

"We have a stipend fund for team recognition, so managers can send their reports a spot bonus for a job well done and peers can send each other a cash reward as a means of saying thanks for help on a project," Spurling says. "We've also seen our team use this to send $5 to someone having a tough day with a note like, 'Here's for that afternoon cup of coffee to pick you up,' or a few dollars on a birthday. It has exceeded a traditional recognition culture and made things more personalized and meaningful for our team."

Brian O'Connell is a freelance writer based in Bucks County, Pa. A former Wall Street trader, he is the author of the books CNBC Creating Wealth (John Wiley & Sons, 2001) and The Career Survival Guide (McGraw Hill, 2004).