The rewards and recognition industry has moved from simply marking employee milestones to taking an active role in employee engagement.
While the gold watches and silver trays still have a part to play, these days the focus is on “the use of recognition and rewards to drive engagement in the workforce,” said
Jeffrey Fina, chief business development officer at Michael C. Fina, a recognition program provider in New York.
Such programs aren’t just about making employees feel good, though that’s a crucial part of the process. A well-designed program can help propel revenue growth, boost worker productivity and improve employee retention.
“It has a very demonstrable return on investment,” said Michelle Smith, vice president of business development for rewards and recognition services provider O.C. Tanner Co. in Glendale, California. “This investment is not just a good thing to do. It makes good business sense.”
In fact, a 2012 study by the consultancy Aon Hewitt examined the link between corporations’ financial performance and employee engagement and found a 1 percentage point increase in employees who became engaged resulted in a 0.6 percent growth in sales. The “2013 Trends in Global Employee Engagement” report looked at data from 2008 to 2012 from 94 global corporations with almost 9 million employees.
The report found 60 percent of employees worldwide are engaged. In North America, 24 percent are highly engaged, 39 percent are moderately engaged, 20 percent are passive and 17 percent are actively disengaged.
Meanwhile, the “State of the American Workplace” poll by Gallup found in the United States those who are actively disengaged cost companies a whopping $450 billion to $550 billion annually in lost productivity. Those actively disengaged workers also are more likely to steal from their employers, have a negative influence on co-workers, miss work and drive away customers.
Finding ways to reward employees for their achievements has become even more important as organizations slashed benefits during the Great Recession — cutting raises, eliminating 401(k) matches, laying off employees and pushing those who remained to do more with less.
“If there’s been an impact to your benefit program, you absolutely have to be able to do other things to make people want to stay,” said Sara Hill, chief human resources officer at the business services company Ceridian Corp.
A key way to improve engagement is through rewards and recognition programs.
The Aon Hewitt survey found recognition was the fourth-most important driver of engagement globally in 2012, behind issues such as career opportunities and pay. But it’s particularly important for millennials, ranking third globally.
This demand for rewards and recognition has led to a broadening of ways the programs are used, and a broadening of the options available to reward employees, taking into account generational and cultural differences.
Ceridian’s Pulse of Talent Survey from August found that of the more than 1,000 employees surveyed, monetary or nonmonetary compensation for well-done work was the most important driver of engagement for 47 percent of employees, while 42 preferred job recognition.
The 2013 WorldatWork report “Trends in Employee Recognition” surveyed more than 470 of its members and found 88 percent of its organizations had recognition programs in place. Most common were for length of service, above-and-beyond performance, peer-to-peer recognition and programs to motivate specific behavior.
Interestingly, neither peer-to-peer programs nor those to motivate certain behavior were included in WorldatWork’s 2005 survey. This year, more than 40 percent of respondents had these programs in place.
Just as the types of rewards and use of rewards have evolved, so has the industry itself. Many of the major companies involved in rewards and recognition programs have been part of the industry for generations.
Michael C. Fina, for example, was started by Jeffrey Fina’s grandparents in 1935 as a retailer of silverware and giftware. Business customers would come in looking for gifts to mark employee milestones or to give to clients. In the 1980s the family decided to split the company in two, with one arm continuing as a retailer and the other focusing on business-to-business rewards, recognition and incentive programs.
Smith, who started in the business more than three decades ago, recalls when the industry was segmented, with one set of companies focusing on recognition programs, one focusing on incentives and another on promotional products.
Today, the three separate segments have been brought together, and organizations are looking for one vendor to handle everything. “Customers have been driving it and the lines have blended between providers,” she said.
Over the years, organizations have added informal recognition programs into the mix to augment formal ones, Fina said.
It could come in the form of an employee recognizing a fellow employee or a manager recognizing an employee on the spot.
Recognition can come in the form of simple things like certificates and e-cards.
“The manager is so important in this whole engagement equation,” he said.
Because managers aren’t always based in the same location as their employees, peer-to-peer programs “capture many more of their wonderful accomplishments and achievements,” Smith added.
Encouraging employees to recognize one another for exceptional performance or cooperation can enhance teamwork, strengthen bonds between employees and instill pride.
Organizations also are linking rewards and recognition to corporate results, and using them as a means to underscore the organization’s core mission, vision and values, said Anthony Luciano Jr., senior vice president of marketing at the rewards and recognition firm TharpeRobbins Co.
Rewards and recognition are becoming more frequent, Smith said. Rather than simply rewarding someone at the end of the year for hitting a sales goal, a company might make incremental rewards to motivate certain behavior, such as making a certain number of sales calls in a month or setting a certain number of appointments, she said.
That gives employees more opportunities to reach their goals throughout the course of the year, and encourages the best behavior to meet the overall goal, Smith said.
Many organizations are adding a social component to the mix, so peers can respond when someone is recognized. “Recognition, by its nature, is a social activity,” Luciano said.
And it fits with today’s mobile society, as employees often move from job to job or location to location within an organization. By adding a social aspect, current and former co-workers will know when an employee has received recognition, Fina said.
Organizations need to be sure to gather feedback from employees to ensure the programs meet workers’ needs and suit generational and individual differences, Hill said.
That’s particularly important with multiple generations in today’s workforce.
Ceridian’s survey found 64 percent of respondents would like their company to offer nonmonetary rewards. Favorite rewards include personal days off, free food and free event tickets.
Gen Xers tend to prefer financial rewards or work flexibility, Hill said.
But it’s the millennial generation that has helped drive the expansion of rewards and recognition programs. These young workers expect recognition, and expect it more frequently than other generations. “They were raised in a culture where everyone gets a trophy in T-ball,” Smith said.
Rewards programs these days can run the spectrum, including everything from music downloads to merchandise to travel to experiential rewards, such as a spa day or golfing day to donations to charity in an employee’s name.
“There’s such a banquet [of choices]. We had a nice appetizer program before,” Smith said.
Whatever choices are offered have to have value for employees. As older employees return to the workforce, they could be recognized during the onboarding process,
Luciano said, but their interests are likely to be far different than those of a recent college graduate.
And organizations must remember “recognition has a lasting effect,” Luciano said, and might not only affect the employee, but also a family member or friend. The reward someone chooses might be for themselves or for that person’s spouse, children, friend or relative.
Organizations also need to be sensitive to the needs of a multicultural or global workforce, Smith said. So in Asian cultures, the color white can be associated with death, and Latin American cultures tend to be team-oriented, and employees might not want to be honored individually. “It’s a minefield of missteps.”
Before setting up a recognition program for an organization, companies in the industry will talk to organizations about their engagement strategy and how they want the programs to fit into that strategy, Fina said. They’ll find out the business objective behind the program, and what kind of behavior it’s rewarding.
They must be sure it fits the organization’s culture, and be consistent, efficient and appropriate, he said.
Smith said such programs need to align with an organization’s internal and external brand, with the aim of leading to improved customer satisfaction as well as employee satisfaction.
At temporary staffing agency Kelly Services Inc., rewards and recognition programs have shifted over the years, with less top-down recognition and more recognition among peers, said company President and CEO Carl Camden. The programs provide a way for employees to see how they’re regarded by their peers.
Developing strong ties among employees is a way to counteract the shorter job tenure and less loyalty of many employees today. “Companies need to do what they can to strengthen peer-to-peer network loyalty,” Camden said. “That strengthened sense of community and sense of belongingness is critical.”