Recognizing Rewards

The numbers on employee engagement are out, and they’re compelling. Several leading research firms reporting on the quantifiable value of increased employee engagement concluded that engaged employees dramatically improve a company’s bottom-line performance. On the flip side, these studies also prove that disengaged employees do more damage than one would think (see Towers Perrin chart below).

One of the most powerful tools for engaging employees is strategic recognition. These programs engage a workforce by rewarding them—frequently and with meaningful awards—for behaviors, actions and attitudes that reflect an organization’s core goals and values. Effective programs deliver a unified global platform for giving rewards that are culturally relevant and personally meaningful worldwide.

These programs go beyond simple pats-on-the-back to act as a major communication channel that bridges the boundaries of culture, geography and position to permeate the company’s vision, values and critical messages for success throughout an organization. Today’s strategic programs raise recognition far above the old tactical approach, enabling clear measurement and reporting for enhanced corporate governance.

In the recent book Contented Cows Moove Faster, co-authors Bill Catlette and Richard Hadden illustrate namebrand companies like Marriott, Southwest Airlines and Chick-fil-A that truly understand the value of engagement. Their employees seem to go that extra mile to rise above and beyond and, as a result, are more motivated, engaged and productive. All are key elements to helping companies meet bottom-line objectives.

Untapped Opportunity

Unfortunately, too many companies today do not see the value of employee engagement, at least not from a strategic level. In those organizations, recognition programs get stuck as a tactical, HR-only driven initiative. They don’t get the necessary support from the C-suite to make the effort a truly strategic business initiative that has the potential to move the employee motivation needle, change a company’s culture and impact an organization’s financial performance. The reason? In many cases, management does not understand the potential high impact of the effort and has a shortsighted view of this type of investment.

“The challenge is having the ability to see beyond the next quarterly report,” explains Hadden. “We must have the philosophy that we are in business for the long term and that, although treating employees right may cost more in the short term, the return is going to be many times over.”

The CEO’s Role in Recognition

The first step in tapping into the enormous potential of strategic recognition is ushering this effort up the corporate ladder so that it gets the full support and attention at the executive level. While the program can be managed and driven out of HR, as a truly strategic initiative, it requires the support and attention of today’s chief executives. This means that CEOs will need to open the company’s purse strings for this effort.

However, the program’s success goes far beyond merely dollars and sense. It requires that CEOs fully endorse and support the effort, making it an integral part of the company’s culture and tying it directly to company goals and values. When the program is truly embedded into the day-to-day workings of an organization (i.e., when employees are recognized on a frequent basis for behaviors that reflect the company’s goals), strategic recognition can literally turn a company inside out— for the better.

What’s the roadmap CEOs must follow to elevate strategic recognition within an organization and realize its full potential? Below are three essential principles for success:

• Follow the Rules of Operational Excellence
• Fairly and Equitably Recognize All Employees
• Facilitate Corporate Governance over Recognition

1) Operational Excellence Means Measure, Hold Accountable, Realize ROI

BlessingWhite’s 2008 State of Employee Engagement survey found that executives need to “develop a measurement strategy that provides actionable insights.” Yet, according to a WorldatWork Trends in Employee Recognition Survey, only 36 percent of HR directors at large North American firms measure the success of recognition programs at all.

To achieve measurable results from a strategic recognition initiative, chief executives need to treat this as they would other strategic investments and apply the rules of operational excellence. By following the steps below, executives can advance recognition from a distributed, tactical model with no measurable outcomes to a truly strategic initiative with a measurable impact on employee retention, satisfaction and overall company performance.

Establish clear objectives and metrics to measure performance. Success of a strategic recognition program requires a clearly defined management methodology (such as SixSigma’s DMAIC) to demonstrate how the program will be measured against established corporate goals, illustrating the bottom-line value and long-term measurable outcomes of the program. Setting clear goals during program development is central to management methodology. This can be done through employee reviews or in a Management By Objectives (MBO) structure.

“Measurable process goals are critical to a successful global strategic recognition program,” says Terry Cain, vice president of operational excellence at Avnet, Inc., a company that is keenly focused on continually developing business process improvements across its global operations. “With the appropriate goals and a program to measure the outcome, you can begin to spot the frequency, appropriateness and timeliness of recognition and the levels of success against those goals.”

When measured appropriately, company leadership can begin to map patterns of recognition behavior and values adoption across the relevant demographic and geographic groups in the company. With greater insight into how employees from the various generations and cultures regard recognition and the company values, executives can begin to manipulate the social architecture of the company to better achieve strategic goals and the company mission.

Set a budget you can count on. Most global corporations today are spending millions per year on oldschool tactical recognition programs that are typically structured by division, unit or even local office. In this model, organizations are often unaware of the full level of investment because the funds are buried in dozens of different line items that are not visible at the corporate level, are not compliant with corporate governance standards or local taxation laws and cannot be managed consistently everywhere.

By contrast, strategic recognition programs take that buried and distributed budget, consolidate it into a single global program, track it, manage it and provide executives with reports on the value of the program across the corporation. By eliminating redundant overhead and administrative expenses, these “zero-budget based” projects often do not require additional investment—just greater strategic investment of what is already being funded.

Invest a minimum of 1 percent of payroll to achieve measurable ROI. At this level of investment, companies can encourage a high level of participation in the program, which drives high business impact. This level of budget allocation also allows a continuum of awards starting with non-monetary thank-you recognitions up to the highest value, with many options in between. The vast majority of awards given should be in the low value range and many less in the upper levels. This supports best practice and documented increased employee engagement levels that can be realized by recognizing five to eight percent of employees per week.

A recent business case study conducted by the Stanford Graduate School of Business, Intuit and Globoforce supports this model. Consistently recognized by Fortune as one of “America’s Most Admired Companies,” Intuit makes an ongoing investment in its successful strategic employee recognition effort. The program, called Spotlight, touches between 90 and 95 percent of its workforce through relevant, meaningful, on-the-spot rewards that are tied to the company’s values. By the end of 2007—three years since the program was launched—Spotlight was firmly embedded into the company’s culture. Intuit’s program was the focus of Stanford’s case study on employee recognition, which is being used as a teaching tool in a new course at the Stanford Graduate School of Business on managing employees for competitive advantage.

2) Fairly and Equitably Recognize All Employees Across Cultures and Borders

A culture of appreciation reinforces the company’s stated values to better achieve the company’s mission. It allows for individualism in approach to accomplishing tasks, but unites employees across cultural, geographical and divisional boundaries through a common attitude of recognition for tasks well done and goals achieved. It creates opportunities and a desire to say “thank you” frequently. What follows are three critical steps to achieving fair and equitable recognition across a global organization:

Overcome elitist and imperialist syndromes and recognize the majority. Jack Welch and GE blazed a trail with differentiation by mapping its workforce effectiveness into a bell curve of performance. The performance bell curve was merely a tool to separate employees into three categories based on performance. As Welch outlined in Winning, keeping the middle group  (where the vast majority of employees fall) engaged and motivated is the real challenge.

Therefore, developing a culture where recognition happens organically and naturally in the middle 80 percent returns the highest levels of engagement—exactly where the majority of work happens. When strategic recognition principles are made available to all employees, companies can change their very culture to one that is motivational, encouraging and engaging, resulting in improved performance across the organization.

It is equally important to ensure globally distributed employees have access to the same recognition opportunities as their counterparts based in the country of the company’s headquarters. A 2008 Worldat- Work survey found that only 39 percent of international or global employees participate in all or most of the same recognition programs as their North American counterparts. This imperialist approach demoralizes and disengages employees in those outlying global locations. To be effective, global programs must be implemented across all geographies in an organization. For maximum impact, deployment of the program itself should happen in all locations and divisions simultaneously.

Give the reward of choice: After making recognition available to all, offering a vast spectrum of culturally relevant and personally meaningful rewards to employees regardless of generation, location or cultural background is critical to success. Cash used to be the reward of choice, but that is quickly declining. Strategic recognition programs that offer locally based choices are becoming more popular as companies look to ensure rewards will always be culturally appropriate and desirable.

In fact, a recent study by First Data Corp. found that gift cards are outpacing cash as the gift of choice when it comes to employee recognition. According to the survey, companies that use gift cards as employee incentives spend nearly half (49 percent) of their incentive budget on the cards, compared to cash at 32 percent. Nearly two-thirds of incentive gift card purchases are for retail stores, including discount, specialty and department stores, followed by restaurants at 24 percent. This gives employees a wide range of options to choose from when selecting their reward.

Non-cash, gift card rewards to local, high-value venues also take rewards beyond compensation to a trophy award status, giving the recipient guiltfree enjoyment of a high-end luxury item or entertainment event. These tangible symbols of achievement are lasting reminders of that achievement and are socially acceptable to show off, again reinforcing the value of the recognition program across the company.

Train managers to properly acknowledge employees: Old-school incentives programs encouraged managers to hold small recognition ceremonies on a quarterly basis throughout the company where managers presented a staff member with an award. While a public ceremony does have value, constraining all recognition moments to such a formal exercise is a practice no longer valued by the online generation and requires too much time, which limits the volume of recognition moments.

Speed is a key component of today’s strategic recognition efforts. The recognition moment should happen quickly to ensure the recipient’s rewarded behavior is still “top of mind.” Frequency of recognition is also important, especially with Generation Y or Millennials. With more awards given, the program gains more visibility, thus creating more recognition moments. Ultimately, frequent and ongoing recognition serves to reinforce core values in the minds of employees and embed strategic goals into the fabric of the organization.

3) Facilitate Corporate Governance over Recognition in Every Country Formalizing recognition by con – solidating every recognition that happens in the company—from pats-on-the-back to high-value rewards— on one platform so that it is recorded and reportable gives leadership an auditable system with preset metrics to measure recognition activity and success throughout the organization. Only when properly documented key performance indicators are measured and target levels for those indicators are set can an organization track its success in creating a culture where recognition has traction throughout the organization.

These are the keys to achieving corporate governance over recognition:

Show concern for equity across borders, divisions and positions. Equity does not mean ensuring the same percentage of employees across predetermined groups receive equal rewards. Rather, equity in recognition means taking into account the various standards of living around the world when giving rewards.

Taking into account standard of living as well as currency exchange reduces the cost of a strategic recognition program while ensuring the equitable total value of the rewards the employees receive.

For example, $50 in the United States might buy a nice dinner for two, but if that same $50 was spent in India without any adjustment for the standard of living, a person could eat out for a week. So a manager giving a $50 reward to a team member in the U.S. would give an equivalent value reward of only $15 to the team member in India.

This ensures companies are appropriately and proportionally rewarding employees for the level or quality of work demonstrated.

Massachusetts-based biotechnology leader Biogen Idec, for example, had five key objectives when designing and implementing its global, strategic employee recognition program, Applause. One of the key objectives that was crucial to the program’s success when it launched in the summer of 2006 was to “encourage cooperation and teamwork across departmental and geographic boundaries.”

Susan McGowan, associate director of benefits at Biogen Idec, says that having a single recognition platform in place “helps us seamlessly address language and currency issues across our global organization.”

Demand clear, concise and comprehensive reporting. The chief benefit of applying metrics to strategic recognition is the reporting that results. Clearly defining the outcome desired during the program planning stage enables reporting against those outcomes. Suggested metrics for reporting include the percentage of employees awarded; geographic and demographic program penetration; the match of award distribution to the performance bell curve; the frequency of awards; employee satisfaction scores (compared to a baseline established before program roll-out); employee performance indicators; program spent against budget by division, region or group; and the company values selected as award reasons, parsed by division, region or country as appropriate.

Publicly share the distribution of recognition. By sharing regularly how the recognition program is being used in various countries, divisions or units, executives encourage lagging groups to catch up while acknowledging the exceptional efforts of those in the lead.

Additionally, this kind of highly public recognition from the desk of the chief executive resonates through all employees, helping to unite  them behind a common missionwith a consistency of purpose. And committed employees will help to drive program ROI.

The Future of Strategic Employee Recognition

Employee recognition done right— consistently and frequently—is the tipping point between “willing” employees who will do what is required to get the job done and “engaged” employees who put discretionary effort into their work to improve efficiency, effectiveness and results.

According to Jim Grenier, vice president of human resources at Intuit, “[Employee recognition] is all about trying to create excitement in the culture. It’s part of trying to build momentum and keep that momentum going. You want to let people know they are doing a good job and at the same time reinforce the same messages about where the business is going, and what’s important. That’s really why Intuit has been so focused on recognition.”

In today’s challenging economy, companies are looking for new and creative ways to enhance performance within the organization. Realizing employee engagement through strategic recognition efforts holds the potential to be the next significant ROI opportunity. These programs empower companies to create a unified, global workforce, aligning employees from multiple generations and multiple cultures around the very essence of the company, its core goals and values. What was once relegated to a tactical task that usually sat at the bottom of a priority list now sits squarely on the desk of the CEO. Are you ready to heed the call?