Several years back, before I had ever even heard of the "elf on a shelf" book, my sister told me about a tradition she did with her kids with a stuffed elf toy she hid around the house each day before christmas. I thought it was a great idea, but I didn't have an elf nor could I find one cheap enough that I liked (don't you think the elf from the book is a bit creepy?). I happened to already have two bendable reindeer that had been given to us as a gift though, and I thought they would make great reindeer spies.
I told the kids that these were special reindeer who were assigned to watch them and report back to Santa on their behavior. In the beginning we gave them names, but we forgot them year to year, so now we just call them "the reindeer spies". Each day I put them in a different place and each day the kids are excited to try and find them. Since they are pretty light weight and have wire in their arms and legs, they are easy to hang and put in interesting places.
Occasionally the reindeer spies will even leave them notes, pointing out especially good behavior they've seen and warning them against behaviors Santa won't put up with. We have a lot of fun with this tradition.