As a business manager, you know your employees will be happier, perform better, and stay at their job longer when they're recognized and rewarded for doing a good job. Do your part as manager by using these guidelines for effectively recognizing and rewarding employees:
Specify the behavior you're rewarding. When you reward an employee, be sure that you're clear about exactly what behavior merits recognition. Say, for example, "You did a great job yesterday afternoon when you helped that customer figure out which product was the best for her needs," or "I really appreciate all the extra effort you put into the Scanlon project."
Give the reward sincerely. People greatly appreciate sincere expressions of thanks, but they won't accept insincere or false praise — in fact, they may be insulted by it. Only offer your employees rewards and recognition when they've truly earned them.
Be positive. When you give rewards and recognition, do so in a positive and uplifting way. Your goal is to inspire the employee — and, in turn, his or her colleagues — to continue exhibiting the behavior you're rewarding. And never immediately follow praise with a reprimand!
Give the reward as close to the event as possible. To have maximum impact on employee behavior, give rewards as soon as possible. Waiting days, weeks, or months will greatly lessen the impact and perhaps extinguish it altogether.
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Source:http://www.dummies.com/how-to/content/how-to-reward-employees-effectively.html
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