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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