Continuing recognition in recession

by 08 Jul 2009

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