“The pervasive ‘Employee of the Month’ incentive is a poor strategy for motivating employee productivity,” contends Gregorio Billikopf, a labor management farm advisor for the University of California.

Billikopf explains that competition for the award usually takes place among the top 15 percent of your workforce, so only your top employees will be motivated to compete. The rest will either ignore the incentive or hold a grudge toward your business and the award recipients.

As a result, managers end up limiting the frequency that employees may earn the award to avoid having the same people win over and over again.

“At the end, the honor is little more than taking turns to celebrate different employees,” Billikopf says.

Billikopf explains: "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 incentive revolves around having employees compete for a fixed price. Billikopf argues that it would be better to design an incentive where every employee who surpasses a certain performance level may earn the award—even if this means smaller awards.