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Special Report on Rewards & Incentives Early Engagement, Long Relationship

Employers are trying to build loyalty through recognition that starts from day one. Timeliness and frequency are key.

September 26, 2008
Today’s new hires are leaving employers soon after signing up, representing substantial corporate investment in recruiting and training that just goes down the drain.

Half of U.S. employees ages 20 to 24 have been with their employer for a year or less, according to 2006 numbers from the Bureau of Labor Statistics, the latest available. That number looks great, though, compared with the mere 13 percent who stick around for up to 23 months and the 10 percent who stay for two years. Combine those figures with the Millennials’ (those born after 1980) oft-reported need for constant attention, and the five-year service award is as passé as pleasant air travel.

Early engagement is the new rubric for rewards and recognition programs. Companies are rapidly implementing these initiatives to try to stem turnover among their newest hires. Another goal is to increase the number of employees who receive recognition and rewards so that acknowledging accomplishment comes to be seen as an integral part of company culture.

PepsiAmericas and Nortel are experimenting with early engagement as part of new rewards and recognition programs. It’s too early for Nortel’s initiative to show measurable results, but the first set of numbers are in for PepsiAmericas.

Career-long rewards
    With 50 percent of turnover in 2006 attributed to employees who had been on the job less than a year, PepsiAmericas knew it was time for a change. The global beverage company is the second-largest Pepsi-Cola anchor bottler. It operates in Central and Eastern Europe, the Caribbean and in the central corridor of the U.S.

When the company also realized that just 2 percent of its 13,000 U.S. employees had received performance rewards the previous year, it was obvious that the change needed was a new rewards and recognition program.

"Employers used to view a new hire as someone who came in and was told what to do and collected a paycheck," says David Sturt, executive vice president for marketing and business development at 68-year-old rewards and recognition company O.C. Tanner. "Now, people need to see the big picture. They want to be part of something bigger than themselves. The No. 1 reason people leave an organization is that they don’t feel valued and their contributions don’t matter."

For PepsiAmericas’ new program to be strategically valuable, it had to be effective both for existing employees and for new hires. The company turned to O.C. Tanner, which "has great products and presentation materials that make [rewards] more of an event," says David Tipton, Pepsi­Americas’ manager of organization capability.

A big reason PepsiAmericas’ previous rewards and recognition program was ineffective was that managers didn’t understand the importance of acknowledging employees’ achievements.

To combat that, "We did tons of face-to-face training," Tipton says. "We educated managers on recognition—what it is and how it’s best delivered. We started from the beginning with what recognition is and why it’s important."

PepsiAmericas spent five months training 1,100 managers on recognition. That puts it among the 19 percent of companies that provide such training, according to a 2008 WorldatWork survey, "Trends in Employee Recognition."

The importance of managerial training can’t be underestimated. "If managers don’t understand why, they won’t buy in," Sturt says. To help address that lack of understanding, O.C. Tanner has introduced a 90-minute training module for managers that attempts to put them in the new employee’s shoes. "It tries to give managers an idea of what a new hire feels and how important it is to provide recognition," Sturt says.


"If a person thinks, 'Oh, I just got
the same thing everyone in my group got,' it can make the recipient
unhappy and cynical."
—Caela Farren, MasteryWorks

Besides training, PepsiAmericas’ other big challenge was moving to the Internet for the new program’s tool. "The Net recognition tool was a challenge because the industry is very traditional," Tipton says. "It’s still based on pen and paper."

But an Internet-based tool appealed to Millennials, and that helped the company make the shift.

Early rewards in the new program include a key chain on an employee’s first day to "hand people the keys to our business," Tipton says, and a charm-like ornament at 90 days that says, "Thirst for more." The ornament complements the key chain and can be attached to it just like a key. One-, two- and three-year service awards also were instituted.

"Our more seasoned employees wanted to see the service rewards continue, and they have been," Tipton says. After the three-year mark, service awards are given at five years and every five years thereafter. PepsiAmericas also added a retirement reward, so the program can follow employees through their careers.

Implemented in April 2007, the new rewards and recognition program appears to be working. A regular employee survey that asks employees what they think of the recognition program showed an 11 percent improvement from April to fall 2007, and turnover dropped by 17 percent in the U.S.

"Sustainability is important," Tipton says. "The new program solved the problems of 2006, but it can also solve the new problems we’ll have in 2010 because it’s scalable and Net-based. It can be adapted to change."

Recognition every day
New hires at telecommunications equipment maker Nortel get introduced to the company’s rewards and recognition program right away. The 5-month-old program is provided by Globoforce, which specializes in global recognition.

"We expose new hires to the Excellence at Nortel rec­ognition program during a two-day orientation workshop," says Robert Schmitter, corporate programs owner for rewards and recognition. "That includes an explanation of the program, how to use the tool and how to recognize colleagues."

Early exposure to a rewards and recognition program, as well as training in it, can help new hires engage with their employer from the start.

"It helps immediately assimilate them into the new culture," Globoforce CEO Eric Mosley says. "[It shows them] that we recognize great behavior. The earlier you do it, the earlier they get engaged."

Excellence at Nortel replaced the previous ad-hoc cash recognition system, which Schmitter says was inconsistent and difficult to monitor and measure. The old program was also slow, taking four to six weeks for cash rewards to show up in employees’ paychecks.

That didn’t exactly translate into immediate recognition. Furthermore, employees often didn’t notice the extra money, so they’d spend it on ordinary household bills.

"The goal of rewards is to remind the employee of the moment of recognition for doing something meaningful," Schmitter says.

The new program, based on gift certificates that can be handed out at any time, focuses on "informal and repeated recognition," Schmitter says. "Globoforce advises smaller awards for many recipients versus larger ones for a smaller number of recipients."

Nortel also encourages frequent thank-you e-mails acknowledging achievements and individual contributions to the company.

"Ten years ago, maybe only 10 percent of a workforce got awards on a yearly basis," Mosley says. "That didn’t help new employees get engaged. With early rewards and recognition, it’s part of working life from the very beginning—if it’s strategic with high penetration."

With the new gift certificates, Nortel employees in more than 50 nations can choose from travel, sporting events, charitable donations or merchandise from networks of merchants that Globoforce has established in each country. Each network has 10 to 50 merchants.

"An employee can have thousands of options," Schmitter says.

Introduction to the program at orientation isn’t the only time new hires experience Excellence at Nortel.

Schmitter says that this fall, new employees will receive e-cards two to four weeks after they start at the company "to enforce that they’ve made a good choice of employers.

"We send them a card to say, ‘Welcome, we know you’re here, we value you,’ and we want to give them exposure to the recognition tool and a recognition experience," he says.

Under the company’s structured evaluation process, Nortel managers meet individually with all of their employees several times during the year to discuss projects and accomplishments.

"These are good times for additional rewards," Schmitter says. Managers and peers can also acknowledge employees and nominate them for rewards at any time.

"We don’t want recognition to seem forced or scheduled, so we want to encourage it on a day-to-day basis," Schmitter says. "Ideally, employees are getting frequent rewards at work."

Nortel hopes the new program will reduce attrition among its newest employees—those with no more than five years of service. These are the employees most apt to leave.

"This is our attempt to engage those employees and keep them," he says.

Workforce Management, September 22, 2008, p. 27-31 -- Subscribe Now!