A faculty scholarship prize is a low- (or no-) cost way of encouraging and recognizing faculty members who are doing great work. For each of the last 6 years, my school has sponsored a scholarly paper competition, judged by outside reviewers on a "blind" basis.
Here's how it works. During or after each spring semester, the Dean’s Office issues a call for submissions. Works eligible for consideration in that year’s competition are those that are (1) published between July 1 of the preceding calendar year and June 30 of the current calendar year; or (2) accepted for publication in a volume that, by virtue of its date, volume or number, is scheduled to appear before June 30 of the current calendar year. That means, for example, that an article that has been accepted for publication in the "May 2011" or “Spring 2011” volume of a particular law review is eligible for the 2011 competition, even if the publishing journal does issue the hard copy of the volume until, say, November 2011. Book chapters can be substituted for scholarly articles.
The judges for the competiton are at least 2 faculty members from other law schools, chosen by the Dean. The Dean tries to select folks who have a wide view of scholarship (which means that research deans at other schools are particularly vulnerable to being asked -- sorry Jacqui!). The third judge is also chosen by the Dean, and can be a faculty member at another school, a judge or practicing lawyer. We've had experience with all three types of folks as the third judge. Because most of the works under consideration are published or available on SSRN, the judges are asked to refrain from taking any active steps to gather information that would tend to identify the author of the work. Could the judges discover the identity of the paper's author? Yes, but we hope they won't.
The 3 judges are meant to choose the "best" article, however they define that term. Despite the looseness in the criteria, there has been strong consensus among the judges each year on which paper should win. The judges do not provide written feedback on the papers. The actual prize is a small cash reward and the inscription of one's name on a plaque displayed in the scho0l.
I have heard of scholary paper competitions at other schools where the "best" paper is chosen by the Dean or Associate Dean, or determined on the basis of article placement (i.e., a placement in a journal at a school with the highest US News ranking -- not sure how specialty journals factor into the mix). I favor the outside reviewers model for two reasons. First, outside reviewers minimize (but admittedly do not eliminate) the appearance of some bias. Second, outside reviewers do not (inherently) raise or replicate problems presented by US News rankings, the law review article selection process, comparisons of speciality journals to flagship journals, and comparative "rank" of symposium placements vs. competitive placements, to name a few. Admittedly, the outside-reviewer model relies on the good graces of national colleagues willing to judge the competition, but so far, all of the judges who have been invited to participate have been gracious and willing. One person who was too busy to judge the competition in a particular year agreed to do it the next year.
At my school, we have only one scholarly paper competition for all faculty members, but I could see having more than one. It could be feasible to have one prize for private law topics and one for public law topics, or one for work by faculty who have been teaching for x or fewer years and one for faculty who have been teaching for more than x years. At some schools, there is also a prize for adjunct faculty scholarship (not sure how many adjuncts are able to write scholarly papers, though).
It shouldn't be like a fun run, where everyone who participates gets a ribbon, but what are some other ideas for recognizing faculty scholarship? What other variations are out there?