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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