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Rewards Get Results

May 21, 2002
Related Topics: Recognition, Featured Article, Compensation, Benefits

There are two things that people want more than sex and money: recognition andpraise. The observation is attributed to Mary Kay Ash, founder of Mary KayCosmetics. But it could have been made by scores of HR professionals who areastute students of human nature.

High-performance companies, of course, have always understood the importanceof offering awards and incentives that recognize, validate, and valueoutstanding work. They help keep employees motivated and productive, and areeffective methods of reinforcing company expectations and goals.

Non-cash awards and incentives -- ranging from a Post-it that says, "GoodJob," to a set of golf clubs or a vacation package -- can be not onlycost-effective, but also valuable tools that help raise morale, increaseproductivity, and improve quality, safety standards, and customer service.

At a time of economic deficits, frozen wages, and wrenching layoffs,lavishing employees with cash awards and stock options for excellence is aluxury that few companies can afford. Given this reality, one of the most urgentquestions facing HR in every sector is this: How do you maintain and improveworker morale while reining in costs?

At Intuit, the Silicon Valley maker of Quicken and TurboTax, Jim Grenierdirects the Total Rewards and HR Shared Services program. He attributes thecompany’s recent placement as number 45 among Fortune’s Best Companies toWork For to a corporate culture that has always focused on employee recognition.

"Non-cash awards give employees solid, lasting reinforcement."

Like many other large companies, Intuit spends 1.5 percent of its basepayroll on various forms of awards and incentives. With more than 6,000employees, that is about $3.5 to $4 million a year. Because the company has 10major U.S. sites and three small locations in Canada, the program hasn’talways been centralized. Several months ago, it pulled the best ideas togetherto build a single incentives program that has several components.

One is a Thanks Program, which comes with a variety of small non-cash awardssuch as gift certificates to restaurants or movie tickets, and written notes ofthanks. Each local site establishes its own criteria. At one site, for example,an award might be given to an employee who goes above and beyond her regularduties to help another employee. Another might offer a special incentive to anemployee who participates in a community-service project such as mentoring at apublic school.

The firm also bestows technical achievement and "bright ideas" awards foreveryday activities such as process improvements and eliminating bureaucracy.Others, such as the On-The-Town award, are given for contributing to outstandingbusiness results and can come with as much as $1,000 in merchandise or cash --or more -- depending on the magnitude of the achievement.

At Intuit, it’s up to managers to decide how to extend awards, but they areprovided with background information about the company’s philosophy andimplementation policies. The firm has developed a Web site that helpssupervisors effectively use awards and incentives. Awards aren’t given fordoing expected work. They are designated for people who perform well beyondexpectations. The company is currently developing a spot on the Web site toshowcase employee achievements.

"Public recognition is an important component of the award," Greniersays. "Awards affect more than one employee. The manager has to be able tosay, ‘Here’s why we recognize this person.’ We link the award to ourbusiness objectives. We focus the recognition around performance criteria andconsistency in program execution. We make sure management understands.

"Awards must be customized," he adds. "We had a manager once who gaveaway tickets to a Star Trek movie. Most people could have cared less. Itbackfired. We have a Web-based awards and incentives service now, and all amanager has to do is decide a category and pick a level of merchandise. Theemployee picks something from the category, and doesn’t know what it cost. It’squick, easy, and effective."

How does the company measure the success of the award and incentives program?"One, we look at awards to see what the correlation is to performance levels,"Grenier says. "Two, we rank people according to five performance levels. Bydefinition, the lowest-ranking employees should get the minimal recognition.Three, we conduct an employee survey."

Responses to the survey are rated on a five-point scale: Strongly Agree,Agree, Neutral, Disagree, Strongly Disagree. Questions include:

  • My total compensation package is fair and competitive.
  • My pay is tied to my performance.
  • I am rewarded and recognized when I do a great job.

Brendan Keegan, president and CEO of Bravanta, Inc., an incentive business inSan Francisco, says that many companies -- especially software clients inSilicon Valley -- are seeing their tenured employees resign. The employeescommonly cite lack of appreciation as a top reason for getting another job.

The company provides Web-based awards and recognition solutions to leadingcompanies such as Intuit, Gateway, and Charles Schwab. Bravanta also hasdeveloped a custom incentives program for its own employees based on how thecompany did against six goals: (1) winning culture in teams, (2) revenue growth,(3) profitability, (4) valued client partnerships, (5) market-leading solutions,and (6) excellence.

Every month, employees who meet and surpass goals receive points. Progress isposted on the company’s Web site and outside the president’s office for allemployees to see. Employees can redeem points for a variety of items, includingCD players, golf jackets, and flat-screen TVs.

Other awards are given to employees who achieve a significant goal ormilestone, and are presented by managers. Recently, for example, Bravanta’sCFO gave a dinner certificate to an employee in accounts receivable who hadachieved a goal of reducing the amount of time it takes for customers andclients to pay their bills. The award was announced to the whole company so thateveryone would know about the employee’s contributions.

"Non-cash awards give employees solid, lasting reinforcement," Keegansays. "People remember what they got when they’re given a non-cash award,and they remember what they did to get it. The idea is to help people understandwhat actions warrant rewards and why, so that employees know how to improvetheir performance."

Hazards of safety awards
Harvard professor and author Rosabeth Moss Kanter addresses the subject ofmotivating a high-talent workforce in her new book Evolve: Succeeding in theDigital Culture of Tomorrow. She says that incentives should be given for broadgoals, and should have clear measures. "Otherwise, it’s like factorypiecework. It’s important that the incentives that do exist support the goalsemployees are expected to achieve -- not that managers should walk around withrolls of dollar bills to hand out every time someone does the right thing."

In the often-hazardous manufacturing industry, safety awards and incentivesprograms have long been mired in controversy and dysfunction. OSHA advisorycommittees have reported strong concern that safety contests and incentiveprograms cause employees to hide injuries because they fear spoiling safetyrecords, letting their coworkers down, and not receiving awards.

Chris Henderson, manager of safety and the environment for the 7,000employees who work for the Jennie-O Foods Turkey Store, headquartered inWillmar, Minnesota, says the safety agency’s concerns are valid. Seven yearsago, the firm -- the largest turkey company in the world -- began a uniquesafety-incentives program that isn’t based on numbers of accidents, as suchprograms typically are. Rather, it shifted the ownership of safety from thesupervisor to the employee.

Every worker is given detailed "safety audits" on dozens of categoriessuch as the placement of electrical wire or the condition of the work floor, andis randomly interviewed at various times throughout the year about safetyguidelines. The person is given a score for answers to safety questions. If aperson’s score is, say, 40, she might be given an incentive award when herscore jumps to 70 in six months.

When the goal has been achieved, the worker might receive a free dinner, andperhaps $20 in coupons to local stores, and various amounts of turkey meat. Theworker who is in charge of a team receives double the incentives.

"Our workers are not highly skilled, turnover is fairly high in thisindustry, and the work can be quite hazardous. We farm, process -- everything,"Henderson says. "We give incentives without focusing on accidents, and itworks because the ownership is in the hands of the people.

There are diehards who balk at awards and incentives as the ruination of the work ethic.

"And it works because it’s based on safety performance that is measured.We have random audits. New people come in and know we’re serious about safety.If someone working with a knife isn’t using steel-mesh protection, the otheremployees say, ‘Hey, go get your [protection] stuff.’

"Obviously, the program more than pays for itself," he adds. "Itimpacts the bottom line significantly because much less money is spent onworkers’ comp and reduced or lost time because of injuries. And, it makes theworkplace nicer."

Involving employees
While no one agrees on the principles, definitions, or guidelines upon whichto base safety awards and incentive programs, Henderson says everybody who worksin the safety area does agree that good performance should be recognized andrewarded.

"Absolutely," echoes Marvin Menesini, the safety and health team leaderfor the Nevada Power Company. He says the utility traditionally has had anawards and incentives program based on an employee’s lost-time accidenthistory. Different departments have had different standards for earning awardsand for the amount of the incentives, and the program hasn’t been as good ashe’d like it to be.

He is currently trying to develop a more consistent plan. Points programs canwork fine, he says. "But they should be based on participation. The programshould be pro-active. Workers should be involved before there are accidents.They should get points if there are no accidents, but they shouldn’t losepoints if they are in an accident -- so they can be safe. It takes more effortto administer that kind of program, but it promotes employee involvement.

"With passive systems, there’s no gain in safety, and there is a possibleloss in reporting," Menesini adds. "The best program should actually improvesafety. It is a continuous effort, because our business and new technology isconstantly changing. Our industry is changing daily, phenomenally. People in the utility business don’tknow which way is up. We can’t be static. We have to keep safety dynamic."

When it backfires
For all the talk about the impact of technology and the corresponding need tocreate more personal and human workplaces, there are diehards who balk at awardsand incentives as the ruination of the work ethic. People get paid to work hard,they argue. End of story. Plus, there’s a real risk of alienating employeeswho don’t get awards.

They have a point. When an award smacks of favoritism or becomes apersonality contest rather than clear recognition of top performance thatdemonstrably enriches the company, it’s obviously a morale-buster.

"It can be the cruelest of jokes," says Bill Rothenbach, vice presidentand service director for human capital strategies for the Syndicated ResearchGroup in Baltimore. "If five people win a trip to the Caribbean and the other9,995 employees don’t... Well, that’s not so good. And when one or more ofthe five are perceived as unworthy, the entire credibility of the award issuspect. Employees are thinking, ‘Is that what the company rewards?’

"Companies like KFC have a variety of awards. They give pictures andplaques. The program is always changing. It’s dynamic. Service awards basedsolely on length of service -- simply for having survived -- are static. Anaward is only as good as the people who are selected.

"There are two words that sum up awards and incentives -- whether they arecash or non-cash," Rothenbach adds. "Value creation. A program must have aperformance component or it is meaningless."

Workforce, April 2002, pp. 42-48 -- Subscribe Now!


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