Reward and Recognition

By Liz Prudden

Reward and Recognition is typically used either to reward an employee for a behavior or recognize and employee for results. Despite the existence of various programs in the corporate culture, the purpose or goal is not always clearly defined. There is also debate around the most effective means of using the two types [monetary and non monetary (NMR)]. Lastly, there are numerous pitfalls in using various forms of reward and recognition. Based on the research, the assumption that rewards and recognition is necessary is most likely a true one. "There is a definite link between the intention of people to stay at their place of employment and reward/recognition. Indeed, some of our recent lab studies have shown that the correlation between the length of time people intent to stay with their current employers and the recognition given for work that is well done is .27 - a positive and statistically significant relationship. The relationship between monetary rewards and intention to stay also is, but somewhat less so." (MedicalSurveys.net). What is open to debate is the most effective means of reward and recognition. The purposes of many of the Reward and Recognition programs are multi-layered. As stated above, associate retention is the generally stated goal. Retaining associates will save the organization money "Cost estimates for turnover range from 33% to 150% of base salary. For a midsized company of 1,000 employees (average base salary $50K) with 10% annual rate of turnover, the cost is $1.7 million/ Society of Human Resources Management) to $7.5 million." (Bureau of Labor Statistics, Abstract). Associate satisfaction with the job and positive environment/morale impact the likelihood of retention. According to McKinsey and Company, 65% of respondents cited not "feeling valued" or "insufficient recognition or reward" for leaving previous employer (War for Talent, 2000). The two types of reward and recognition are easily distinguishable: Monetary, receiving dollar incentives for performance and Non Monetary (NMR), various forms of "soft" recognition. Formal and Spontaneous are additional distinctions of Reward and Recognition. Formal recognition is typically part of a program, put in place to exact a specific result (Service Awards, Sales Campaigns). Much of the research supports spontaneous NMR as the most effective means to incent employees and reach retention goals. "Recent studies conducted by the business Research Lab (Hauppauge, N.Y.) have shown that the correlation between the length of time people intend to stay with their current employers and "soft" factors - like recognition given for work well done or pride in the employer - is more statistically significant that the longevity/monetary reward correlation" (BCP Handbook). Praise and Recognition in the forms of notes, cards, or public presentation among teammates share the sense of accomplishment. Implementation of this type of Reward and Recognition can be done with minimal effort, minimal cost and with wide associate involvement. According to a Wichita State University study, the top five NMR motivating techniques are: Personally congratulating employees who do a good job; Writing personal notes about good performance; Using performance as the basis for promotion; Publicly recognizing employees for good performance; and Holding morale-building meetings to celebrate successes. These techniques, along with others, aren't only necessary from management. Peer initiated recognition is truly appreciated because of the understanding around the particulars of the job (Boswell). Carolyn Sowder, Vice President and Senior Change Consultant with Bank of America, provides information around the Spirit Cards (personal communication, February 11, 2004). Managers or peers recognize associates with a hand written or e-mailed formatted card stating the associates' contribution. In 2003, approximately 13,800 spirit cards were sent within a larger team of 7500-8000 associates. There is a year over year 1% increase to the Sirota Survey question: Rate the extent to which you receive recognition from management when you do a good job (Survey taken Fall 2003). Most organizations will agree that Reward and Recognition is important to associate satisfaction and it is important to have a program in place. Regardless of what is established practice for Reward and Recognition, there are many common pitfalls that develop once the program has rolled out such as: use of programs; competition of multiple programs; true measurement of desired outcome; match the reward and recognition to the recipient; and establish the Return on Investment. Many managers may not use the developed programs because they did not receive recognition or guidance on use themselves. According to Bob Nelson, (Why Managers Don't Use Non-Monetary Recognition) many of the managers who do not use the NMR were reinforced for this behavior (most notably by their employees) while the low use NMR managers do not know how to effectively provide NMR nor do they feel using NMR would lead to desired outcomes. For the managers who do use it on a regular basis, a positive cycle begins; the desired results are reached by associates. A second factor that can impact the success of a program may be other competing Reward and Recognition programs. For the associate, goals and priorities become blurry. Associates may also struggle with the actual Reward and Recognition itself - which one represents the "most success" - the trip to Hawaii or the Spirit Card? The priority is chosen on that basis. And the trip to Hawaii may overshadow the informal form of recognition. A third challenge to reward and recognition is the accuracy of measuring what success or desired outcome is. "Far and away the biggest single factor that determines output is the system and its capability. The systems capability is independent of the people doing the work." (Scholtes). In many cases, there is one number that is defined as the goal. What isn't always reviewed when setting this goal is the various ways it may be attained. For example: A strongly skilled worker (a high performer) is assigned the most difficult and time-consuming tasks in a bucket. However, the associate must complete the same number of tasks as a less skilled worker with less difficult tasks. Potentially, if the less skilled worker meets or exceeds the goals, recognition is given. The high performer will not get recognition for not meeting goals and may also be penalized for it. Furthermore, as the workforce grows more multi-cultural, what is in place today for workers may not be considered reward or recognition by others based on culture, role, need and so forth. The one-size fits all approach needs to be reviewed - with multiple associates in mind. Some cultures do not consider individual success as important. One potential way of overcoming this may be to look at more "work/life" centric forms of R&R. These would consist of things like convenience services, paid time off, wellness/fitness programs. Graph Five, in the overview of the 1999 Survey of Performance-Based Work/Life programs, indicates the overwhelming response of the associate feedback based on this form of recognition. Figure 1. From "1999 Survey of Performance-Based Work/Life Programs" Based on the information in this graph, 66.8% of the respondents determine the impact of this type of program would improve employee satisfaction. The increase in satisfaction would in turn improve associate retention. Lastly, very limited research exists on the Return on Investments - how reward and recognition limit associate turnover and increase job satisfaction and motivation. "Studies show that only 22% of companies measure their incentive programs. As with any capital investment, an incentive program should be subject to an ROI analysis." (Donna Oldenburg) Neither measurements nor goals around the effectiveness of reward and recognition are defined. Reward and Recognition programs continue to be redefined as the need for maintaining a strong and satisfied workforce grows. When goals are defined and ROI is appropriately measured, the effectiveness of these programs will increase associate satisfaction and limit the amount of attrition.

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Author Note

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