Of all the resources, the human resource is probably the strongest and weakest asset a company can have. It's always in a dynamic state and has great potential to make or break a startup's way to success. The good news, as we know, is that we can continuously mold and remold this resource to achieve its highest potential, and all reward systems within an organization have essentially evolved to do just that.
The "Employee of the month" has been quite an old practice, made popular through movies and memes, and is found in both small and large business setups (especially but not limited to hospitality and healthcare sectors). In essence, it's a famous extension of the employee reward system and aims to recognize an individual for his highest performance for any given month. However, the deeper we dive in, the more diversity we find in how this concept is received by analysts, organizations, and the employee herself.
The challenge with Small vs. Large business setups
In a small business setup (say 10- 15 members), this practice perfectly serves to recognize and reward hard work, consistency, and dedication towards the company's short & long-term goals. It has also been found to positively impact work culture, thereby improving employee retention & overall performance with time. The winner motivates her team members, and often there is enough room for other teammates & employees to crack a chance at the wall of fame (12 months in a year and 15 of us, definitely some chance!). But many studies suggest it hasn't worked as effectively for larger setups. Why?
Herein lies the drawback and the reason why in most established organizations, this practice has become a thing of the past.
In many large organizations, the company's success and achievements do not particularly belong to an individual employee. Whether monthly or yearly, big or small, targets are achieved through consistent team efforts and effective coordination between many layers of the workforce. It often involves hundreds of employees working at various stages, from brainstorming to the ultimate execution process. In such a case, how fair does it seem to selectively reward someone when many may have equally put in their blood, sweat, and tears?
Add to it the arbitrariness of the selection criteria, and you land up in a hot mess of employee frustration and unintended rivalries. Here, the "Employee of the month" may not be as much of a winner as his teammates, who feel like clear losers. Discontent sets in and can deepen with time. It ceases to celebrate hard work & consistency and becomes a means to personal gratification. As time goes by, those who don't win start to defer in offering meaningful voluntary contributions as they feel they'll hardly be recognized for it.
The Manager/ selecting committee also risks coming across as biased. Ultimately it breeds an unhealthy workspace, with scope for favoritism, and the whole point of enhancing worker's performance based on appraisal goes in vain.
Team over Me
Over time, organizations have worked on such drawbacks and found solutions to improve the transparency of their employee perks & reward system, establish clear and achievable selection criteria, and build an overall satisfactory work culture. Many have moved steps ahead and now primarily recognize healthy interpersonal relations over singular employee appraisal. Simple yet effective events such as a lunch with the entire team or peer-based nomination scheme for bonus and benefits have slowly taken over the "Employee of the month" fancy, boosting productivity more effectively.