Customer loyalty is important. So is employee loyalty, for many of the same reasons:

  • Better quality employees or customers add to the value of your business.
  • Retain either for longer periods of time, and you reduce the need to replace them.
  • People who feel loyal to you will look out for your interests because they feel you look out for theirs.
  • Those tied to you and your company will promote both.
  • Stronger relations with either mean a healthier business.

The two interact, as well. For example, improve relationships with your employees, and it translates to better relationships with customers.

But while many entrepreneurs are aware of the need to build relationships with customers, they often forget that they must do the same with employees. It doesn't happen just because you pay someone to show up every day. When you rely on strict monetary rewards, you're developing a relationship with mercenaries. Even comp days, free lunch, and VIP parking "have resulted in a sense of entitlement," Paul Gordon, vice president of sales at Rymax Marketing Services, a loyalty marketing firm, told me.

Gordon has some ideas on how companies can reward and engage employees without depending on writing checks. Here are five that might prove to be good HR tools for you.

1. Custom shopping events

Have a vendor come in and provide a "customized shopping experience" for employees (Gordon, of course, notes that loyalty marketers can do this). Whether you do it on-site or at a third-party location, let people choose from a variety of demographic-appropriate gifts. You provide a stronger sense of connection with the employees than you get from writing a check (think of your own reaction to a thoughtful gift versus a gift certificate). An additional thought is that if you can get to know your employees well enough, you might think of something specific that would be appropriate but that is centered on what they would need. Leave the trophy glorifying the latest corporate triumph for another time. In any case, Gordon says that items with high perceived value resonate 74 percent better with employees than other types of rewards.

2. Race for rewards

This is a scavenger hunt that you set up at the office or an off-site location. At the end, the winning team members get their choice of products. The dual result is a team-building exercise and improved employee engagement. Letting the employees choose the reward allows them to pick what has most value to them. In addition, you're spending time with employees, something that will have its own value.

3. Create a "smile" committee

The committee creates celebrations of anything from employee birthdays to corporate milestones. The group also talks to employees to learn the types of rewards and recognitions that will mean the most to them. The employees again feel that someone is actually paying attention to their needs and interests. (From my marketing research experience, however, I'd also suggest paying close attention to the rewards that employees actually pick, not just what they say they would like. Actions will typically be a truer expression of interest.)

4. Themed rewards

Make use of holidays, seasonal activities, and cultural trends, like football tailgating activities or something tied to a major upcoming concert. You're employing the same sort of successful promotional approach that retailers have used forever. It helps keep things fresh.

5. Philanthropic day

Sometimes the best reward is to let people off for a day so they can volunteer at the charity of their choice. You help them do something they feel is important and support your community at the same time. After the day, ask them to write a short blog post on their experience and put it either on your intranet or even company website, if the employees don't mind. The latter can also help you recruit more quality employees.