Awards: A strategic management perspective

Abstract

Research summary:Awards are a valuable strategic resource. Motivation theory and the emerging body of empirical literature suggest that awards can have a significant effect on employee motivation and corporate performance, though not always in the intended direction. Awards can also destroy value. The organizational award literature has so far largely neglected this important issue. We develop a synthesis of the dimensions critical for successful award bestowals, and analyze under which conditions awards generate firm-specific value that is sustained and difficult for competitors to imitate. The process of value creation and capture is contingent on the given firm's organizational characteristics and nature of production. The article concludes by laying out empirical implications. JEL codes: M52, M54, J24, J30. Managerial summary: Awards are widely used in the corporate sector. They fundamentally differ from monetary incentives, which risk crowding out employees' intrinsic motivation. Among the variety of awards, two general types can be distinguished: confirmatory awards based on explicit, pre-determined performance criteria, and discretionary awards, which rely on broad performance evaluations and may be used ex post to honor outstanding performance. Appropriately designed and adjusted to the specific firm's characteristics, awards enhance employees' motivation and corporate performance. They express recognition and support their recipients' perceived competence and social status. Awards help to retain valuable employees and to establish role models. However, awards may also backfire, for instance, when they provoke envy among coworkers. We propose when awards risk destroying value and when they are particularly useful.

Towards an Economics of Awards

“…Firms also commend their own employees for being Salesman of the Week or Employee of the Month . The media actively engage in choosing the Manager of the Year or even the Entrepreneur of the Century (Gallus and Frey, ).…”

Corporate social responsibility as an employee governance tool: Evidence from a quasi‐experiment

“…Relatedly, these key employees may be reluctant to make project-and firm-specific investments as such investments are not easily redeployable and would place them in a weaker bargaining position (Wang, He, and Mahoney, 2009;Wang and Lim, 2008;Wang and Wong, 2012). 2 Another type of incentives are awards (e.g., Gallus and Frey, 2015;Gubler, Larkin, and Pierce, 2015). Awards are generally seen as cheap and easy alternatives to pay-for-performance.…”

“…Another type of incentives are awards (e.g., Gallus and Frey, ; Gubler, Larkin, and Pierce, ). Awards are generally seen as cheap and easy alternatives to pay‐for‐performance.…”

Ripple Effects of CEO Awards: Investigating the Acquisition Activities of Superstar CEOs' Competitors

“…Awards, as nonfinancial incentives, provide a valuable means for motivating people because they can sharply increase award winners' social recognition and status. Awards are ubiquitous in social and economic life, ranging from the Nobel Prizes in academia to the Academy Awards in the arts (Frey, ; Gallus & Frey, ). The focus of our study is on prestigious awards granted to CEOs.…”