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Seth Godin took a minute Saturday to brilliantly answer the complicated question: "What sort of bonuses should we pay?"  I love his response:

People who really and truly love their jobs are in every single industry. And people who do great work because they love their jobs are paid at every salary level. What they have in common is a boss that gives them respect and freedom and responsibility. A boss that listens when they have something to say. Which, not coincidentally, is exactly the way the best companies treat their customers, too.

A few days ago, I received a comment on a rant I had about the EEOC (don't worry, I've calmed down) that asked "how can we also spark the [people] we already have -- where the fires dimmed over time. 

Seth's response may be clearer than mine was but I think his points run in the same vein--a true bonus, or a reward for a job well-done, must be equally rewarding to the recipient while motivating to those who did not receive it.

In my mind, here's two measuring sticks to know if your rewards are working:

1. This is the first thing the recipient talks about when a neighbor or obscure relative asks, "So, how's work going?"
2. The recipient's co-workers think and honestly feel the thought: "If they can do that, I can do that."

To me, the most-important element to create this is clear requirements--given in a constantly/publicly accessible format--at the beginning of the definite qualification period.  These requirement must be based on a well-defined set of accomplishments that can not--in any way--be subjectively altered. 

The fastest way to shoo top talent from your company is to give even the slightest impression that you're playing even a remote look-alike to the game of 'favorites'.

(P.S.  noticed that the other two bloggers who responded to Seth already are fellow Know More Media bloggers from Web Metrics Guru and Landing The Deal .  It's purely by coincidence, but funny that we all noticed.)