Effective Design Patterns for Employee Recognition Programs

Based on research from the Incentive Research Foundation, the majority of top performing companies in U.S. (those with the highest revenue growth, customer satisfaction, and employee satisfaction) are now using non-cash awards as a competitive advantage.  Based on this, the IRF analyzed several years of relevant research to identify the most noteworthy design elements that make these programs effective. The study looked at the design patterns of two main incentive type programs, employees and sales.  This post looks at the design patterns for employee programs.

EMPLOYEE RECOGNiTION AND REWARD PROGRAMS

Non-Core Job Roles

Organizations increasingly ask employees to take on additional roles and responsibilities that fall outside of their primary job duties (running innovation teams, increasing personal wellness, training other employees, increasing productivity, learning new techniques, etc.).  As these non-core roles do not typically fall under traditional compensation systems, companies are seeking non-cash recognition to award employees for this new engagement. 

Setting Program Objectives: Focus on Goals

Fifty years ago non-cash award programs were targeted primarily at two behaviors: safety and years of service.  Businesses now have a wide range of primary objectives with  their employee rewards programs aimed at achieving those objectives:

·       84% improving morale

·       58% improving productivity

·       48% improving customer satisfaction

·       41% recognizing years of service

·       28% promoting innovation

·       23% promoting wellness

·       14% promoting safety

·       9% rewarding training completion

·       8% promoting cost control

Determining Who Gets Rewarded: Reach is Key

The two key design priorities for these programs, by far, were making sure a program rewards the right people.  This was followed by a focus on ensuring the programs make recognition a part of the day-to-day activities.  These programs have shifted over time away from rewarding just the truly exceptional performance to as many solid-performing employees as possible…motivating the middle 80% to reach to improved performance.  

Developing Rules Structures: Goal-Driven

Of the top companies reporting, 68% used individual goal based earning schedules with awards earned at goal attainment.  In addition, 67% used top performing structures for individuals, 58% for team performance and 55% use discretionary awards.  39% of companies still use service anniversary milestone programs and 34% use nominated structures (person of the month etc.)

Top performing companies were significantly more likely to have goal-driven programs and significantly less like to have service anniversary programs. 

Measuring Effectiveness: Leverage Multiple Metrics

Research shows that top performing companies leverage analytics more than their average performing counterparts to measure program effectiveness. The top three performance metrics used were:

·       73% used productivity

·       49% used retention

·       49% used employee satisfaction

Funding the Program: Bottom Up

Most companies use bottom up budgeting and form total budgets from a % of participant income.  The exact budget % varies greatly by organization size and focus of the program. A small % of the budgets are developed top down by executives determining a budget number based on prior year spending adjusted by overall financial performance. 

On average, employees can expect to receive between $150 and $170 in non-cash awards on a annual basis.

Supporting the Program: Reach Outside

The study reports that the vast majority of businesses (two-thirds of more) use suppliers for awards and almost half look to suppliers for expertise in the best ways to recognize or motivate participants.

Program Consolidation: Key Design Pattern

42% of the companies have a consolidated program across the company but more than half the top companies having multiple programs. 

Determining Awards: Mix it Up

The most prevalent types of awards in employee programs are:

·       71% Gift cards

·       38% Merchandise

·       36% Travel

Over 80% of companies use more than one award with many using three to four types.

Administration: Investment in Tech and Communications

The research indicates that top performing organizations allocate a significant portion of their budget to design and operation (estimated at 49% of the total budget on average.)  As two-thirds of the respondents put program communications into broader companywide communications, some the estimated 49% may be a part of companywide budgets. 

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Award Program Value and Evidence

In our last post, we introduced the recent research conducted by the Incentive Research Foundation entitled 'Award Program Value & Evidence.' While the research provided more than ample evidence to support the use of non-cash awards for employee recognition, it went even further into the many other values of non-cash awards. 

Specifically it covers:

The Psychological Mechanisms Underlying the Advantages of Tangible

Non-Cash Rewards

• Mental Accounting
• Appreciation vs Entitlement
• Effort Justification
• Social Signaling
• Perseverance, Effort and Performance
• The Reciprocity Effect
• Caution in the Use of Tangible Non-Cash Rewards
• Hedonic Adaptation
• Lower Aspirations
• Financial Hardships
• Recognition at the Forefront
• Employee Benefits
• Organizational Benefits
• Timing, Specificity, and Authenticity Matter
• Caveats
• Measure the Benefits of IRR Programs
• Focusing on Hard, Tangible Benefits
• ROI Analysis
• Supplementing ROI with Change Point Analysis

For a copy of this important report please click here.

For more information on Ultimate Choice Inc.’s products or services or other white papers please contact us at Ultimatechoiceinfo@cox.net

Why Use Non Cash Awards

Just about every year the incentive industry comes out with some kind of survey, report or article on why you should use non-cash awards in your recognition and incentive programs.  Their most recent research leaves little room to dispute the fact that a well-conceived, well-run incentive, recognition, or reward program improves productivity and performance.

For a variety of reasons, non-cash has slowly become the dominant reward for non-sales employee recognition and incentive programs.  According to the Incentive Research Foundation, one study found that after six months of well-designed program companies will see average performance gains of 44 to 48 percent in productivity. Within this research, there was evidence that non-cash rewards work better than cash.

There has always been debate surrounding the best use of different types of rewards (intrinsic, extrinsic, cash or non-cash) but there is little debate as to whether rewards work to increase productivity.  While studies today focus on the emerging approach and the principles of award program design the discussion that emphasizes the use of cash and tangible non-cash rewards as symbols of recognition remains important, possibly even more so.

The recent study that discusses the cash/non-cash question quite extensively is titled “Award Program Value and Evidence.”  It is by far the best discussion we have ever seen on the subject.  While it covers territory that we have been discussing for years, it goes a lot deeper into those with sound psychological reasoning non-cash works so well. 

Executive management expects their investments in incentive, reward, and recognition programs to produce some return on investment.  This study presents a strong case for using non-cash reward programs to motivate employees and practical advice on how to measure the success of these programs to ensure goals are met.

You can download a copy of this study here.

For more information on Ultimate Choice Inc.’s products or services or other white papers please contact us at Ultimatechoiceinfo@cox.net

The Recognition Program Puzzle: Diversity – Inclusion – Intrinsic – Extrinsic?

With all these buzzwords floating around the employee engagement world how do you put them all together to come up with a great employee recognition program?

When in the process of designing or re-designing your recognition program, it will be easier if you keep the four important buzzwords, diversity, inclusion, intrinsic and extrinsic in mind.  Diversity can be loosely defined as the range of differences between races, ethnicities, ages and numerous other personal traits. Inclusion is the involvement and empowerment between each of them. 

Recognition is perceived differently by different cultures so it’s important to include several options of how managers can actually recognize the employees.  Based on recent survey’s it is important that your employees perceive that the program rules are fair and all inclusive.   Be sure to link employee goals to business goals, give your managers training for the coaching necessary to make sure you are rewarding the correct standout performance for some while also managing convergent performance for others. 

Your program should also include both intrinsic as well as extrinsic motivation. Intrinsic motivation is the behavior driven by positive internal feelings, as opposed to extrinsic motivation, which is driven by external things – praise, pizza, merchandise, gift cards and so on.  Be careful of the debate over which is better, or more motivational, they both have their place and the best results can be found in the strategic mix of both types.  And for organizations dealing with expanding workplace diversity, balancing intrinsic and extrinsic motivation is more important than ever when it comes to inclusion and motivation.

According to Christina Zurek, Solution Manager, ITA Group…

“People naturally gravitate toward what motivates them, whether that’s pizza, competitions, joining a running club or volunteering at a homeless shelter. The choices people make represent who they are, and when businesses help employees make choices they’re proud of, they build businesses they’re proud to stand behind. After all, the ability to be yourself and share your passions is precisely what diversity and inclusion are all about.”

What awards to use?  We’ll leave that up to the legions of award companies you can choose from to decide. Regardless of what you use, make sure to include a choice from a very wide array of gift cards.  They still provide the best value at the best price of any extrinsic award in the industry. And are the most used of any award ever.

For more information on Ultimate Choice Inc.’s products or services or other white papers please contact us at Ultimatechoiceinfo@cox.net