The pervasive Employee of the Month incentive is a poor strategy for motivating employee productivity. Normally the contest for Employee of the Month will take place merely among the top 15% of your workforce. These top employees will be the only ones motivated to compete for the award. The rest will either ignore the incentive or hold a grudge towards the company and the award recipients.
As a result, most organizations with Employee of the Month awards soon create rules limiting the frequency that personnel may earn the award-to avoid having the same few individuals always win the award. At the end, the honor is little more than taking turns to celebrate different employees.
An employee shared that she needed some extra cash in October so she was "going to go" for the award that month. She reported back that indeed she earned the October Employee of the Month award and then went back to her normal performance level after that-until she was eligible for the award again.
The fallacy of this incentive revolves around having employees compete for a fixed price. It would be better to design an incentive so that every employee who surpasses a certain performance level may earn the award-even if this means smaller awards.