Rewarding and recognising performance is especially important in a downturn. Craig Donaldson speaks with experts about this and how HR can assist in the process
The economic downturn has impacted on companies
and their approach to reward and recognition in a
variety of ways. Some companies have actually
increased their spend and efforts to reward and recognise
staff in a bid to boost performance, some have kept their
investment in such programs steady, while others have
rationalised their spend as part of cost-cutting programs
across the entire organisation.
Alan Heyward, general manager of Accumulate, says that
most companies have maintained their commitment to rewards
and recognition, despite others cutting back. “Still, compa
nies realise that recognition, maybe less so reward, is an inte
gral part of business. Despite economic conditions, companies
still realise that they need to commit to this,” he says.
Naomi Simson, CEO of RedBalloon, also says that
recognition plays an important role in an economic down
turn. “There are people who have missed out on bonuses
or who are missing out on pay rises as a result of a pay
freezes, but one thing companies can do is to continue to
recognise their people,” she says.
“The authenticity of how an acknowledgement is made
is really, really important – much more so than an award
that someone gets just because they’ve spent so many years
with a company.”
Sue Jackson, executive chairman of Solterbeck, says that
improving discretionary performance is important in an eco
nomic downturn – a particularly good time to make a strate
gic investment in performance improvement. “When
employees perform better, the company performs better,” she
says. “While there has been some affect on non-sales gener
ating areas, companies are still recognising that the people gen
erating income need to be motivated. Those sorts of programs
haven’t been affected either on the incentive or rewards side.”
Return on investment
Return on investment in reward and recognition programs
is being scrutinised more closely in the downturn, accord
ing to Heyward. “Companies are looking more closely at
the level of return, which also needs to be more tangible
than it has been in the past,” he says.
“Most companies have a clear understanding the reward
and recognition program they have in place and what they
want out of it. Companies don’t run them just because it’s
good to look after employees.”
Jackson says that the ROI on an incentive program is
obvious: low fixed cost element and a high variable cost ele
ment, so that when people generate revenue, such programs
pay for themselves because people are hitting their targets.
“It doesn’t really matter what the budget is, however, with
a smaller budget you have to be more clever about how
you put the elements of the program together,” she says.
Boosting discretionary effort is vital in tough times, and
companies need to think about the “loyalty mirror”,
according to Simson. “The more the workforce is engaged,
the higher the customer loyalty, and this
absolutely goes to profit and the bottom
line. Gallup has given us the figures.
Engaged employees deliver 27 per cent
higher profit, 50 per cent higher sales and
50 per cent higher customer loyalty. So it’s
just a commercial decision,” she says.
Reward and recognition trends
Only a third of Australian companies cur
rently have any formal recognition program
at all, according to Simson, however, she
predicts this will increase to 75 per cent
over the coming years. “Gen Y will be back
in charge by the end of the year and we
want to make sure that organisations are
operating in this century and not in the last
century,” she says. “Recognition will
become more important and people will
not hang around if they’re not noticed and
if they’re not recognised.”
There will also be a growing emphasis
on an enterprise-wide approach to per
formance improvement, Jackson says. “The
best-practice clients are looking at per
formance improvement from the top down,
so they have an approach that is company-
wide with a strong umbrella strategy.”
In addition to more broad-based pro
grams, Heyward says the trend towards
non-cash rewards will continue. Cash-based
incentives and commissions are expected as
part of compensation and entitlement, he
says, and often “cash gets spent very quickly
and the link between their performance and
the reward is forgotten quickly”.
HR’s role in reward and recognition
HR is in a prime position to help make the most of any reward and recognition programs, according to Naomi Simson, CEO of RedBalloon. "Now, more than ever, leadership teams are wanting increased discretionary effort. And the only way to get that is if people feel engaged with the organisation," she says.
"To get engagement you've got to go through the three basic steps. Firstly, do people have all the performance development tools, the KPIs and other processes that people need - that's the HR role. Secondly, are people emotionally connected to the organisation? And, thirdly, are they connected to the brand?"
Alan Heyward, general manager of Accumulate, says the key role for HR is in championing an initiative to the executive team to help them understand how reward and recognition can contribute to a broader strategy. "HR has to put it in the context of the business. Obviously there is a cost to such programs, and, if these come into question, HR's role is in helping the business understand the non-financial benefits."
HR has grown to play an increasingly important role in incentivising a workforce, according to Sue Jackson, executive chairman of Solterbeck. "HR is playing a key role in the culture of an organisation. Maybe five or ten years ago, our audience used to be sales and marketing managers, but now we're working with a lot of HR managers."
Elements of successful reward and recognition
Reward behaviour as well as performance, because behaviours such as exhibiting company values or excelling in customer service contribute to outcomes
Everyone should have access to the reward and recognition program - not just high achievers or sales professionals
Increase frequency of rewards and recognition to reinforce positive performance and behaviour
Secure strong executive support, so a company's leaders own and drive the program, and not just HR
Source: Alan Heyward, general manager, Accumulate