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New Push for Employee Recognition May Have Broader Implications

Two new surveys point toward executives realizing that the random gift card, or company watch and pin for years of service, do little to motivate behavior.

July 10, 2012

Gift cards and other on-the-spot rewards were a mainstay at California-based Molina Healthcare Inc. for decades, but at the discretion of individual offices around the country. Some managers were religious about the rewards, others less engaged.

Now, Molina considers that piecemeal approach sorely misguided. Like many companies wanting to measure the real effect of their recognition programs, Molina is getting much more strategic about its pats on the back. The Long Beach, California-based company is responding to compelling research on the importance of employee rewards, not just as nice gestures but as powerful tools for driving employee engagement, customer satisfaction and a company's bottom line.

Less than a year ago, Molina launched a companywide recognition plan that more directly ties rewards to specific, strategic goals of the $4.6 billion firm, which provides Medicaid-related health care for low-income families and individuals. Molina's 5,300 employees can offer a Facebook-like shout-out to colleagues through an online company program, and supervisors can reward employees with points toward purchasing goods redeemed from a catalog of 50,000 items.

Employees can cash in the points early for small items, such as movie tickets, or save up for bigger payoffs, such as an iPad or a rafting trip.

Supervisors are encouraged to award their allotted points each month, giving employees a regular reminder of the importance of the company's core values. One company leader gave 45 rewards in one month.

"This is just one thing that we're doing to ensure the core values of the company are not just on a poster on the wall or a button on somebody's shirt, but that they take root systemically and become real for the company," says Gloria Hays, vice president of people strategy for Molina.

Molina's strategy is considered a national model by San Francisco-based employee recognition firm Achievers Inc., which released a study in June on recognition programs.

"Why do employees leave companies?" asks Achievers CEO Razor Suleman. "Some 64 percent cite that they don't get appreciated by their manager."

According to the Achievers report, three key factors drive what employees want from a new job. Salary was the top consideration, followed closely by "interesting work" and by whether employees believe they would be valued and rewarded at the company.

Yet senior leaders are out of touch with how their own employees view recognition, the Achievers study found. While 57 percent of CEOs reported that employees were regularly recognized, just 9 percent of employees strongly agreed that they were regularly recognized.

Still, Suleman, who founded Achievers a decade ago, sees momentum around designing better recognition programs today. Increasingly, he says, more executives understand that the random gift card or company watch and pin for years of service do little to motivate behavior. For one, younger workers often don't stay at companies long enough for such tenure-based awards to make a difference.

"I can tell you for certain that over the last two years ... the world has really changed with executive CEOs and even boards realizing how important it is to engage their employees," Suleman says.

Bersin & Associates, a membership-based HR research and advisory firm in Oakland, California, also released a report in June with findings mirroring the Achievers study. Nearly 70 percent of employees in the Bersin study said they were recognized just once per year, or not at all.

Just 17 percent of the Bersin respondents said their organization's culture supports recognition. Even though companies spend about 1 percent of payroll on recognition programs, many employees don't even know the programs exist, says the report's author, Stacia Sherman Garr, a principal analyst with Bersin.

"Most recognition efforts have been ad hoc. Maybe they recognize sales for coaching their colleagues, or research and development for coming up with ideas," Garr says. "But it's like anything where you have something that's ad hoc and sporadic. You don't have a collective change in behavior across the company."

How can companies do a better job? "You have to focus on your recognition strategies," Garr says. "What's the purpose? What are you trying to achieve and does that align with your culture?"

If done right, recognition programs do a lot more than just make employees feel better about their job. Companies with programs considered "excellent" saw a 31 percent lower voluntary turnover compared to those with poor programs, Garr says.

With its program, Molina Healthcare hopes to see greater retention and a big effect on its culture.

"I think in the long run, we're going to definitely drive engagement and retention through this," says Tiffany Serrantino, a human resources analyst at Molina. "As we go forward, we'll analyze the data. That's why we're selecting a systematic approach with this, so that we can measure and drive what we're trying to achieve."

Meg McSherry Breslin is a writer based in the Chicago area. Comment below or email editors@workforce.com.