It has long been recognised that rewards programs can play an important role in encouraging performance on the job. Human Resources looks at some of the latest trends in the rewards and incentives market and examines how companies can get the most bang for their buck
As the margins of competitive advantage narrow in all areas of business, organisations are increasingly turning towards their people for sustainable business performance. There are many factors at play when it comes to high-performing, engaged and happy workers, such as organisational culture, the quality of an employee’s immediate manager and appropriate job fit.
As human beings, recognition and reward is a natural factor in encouraging continued good performance on the job. Many companies recognise this and reward their employees in a variety of ways. However, there are a number of trends in the ways in which companies reward employees of late. Naomi Simpson, founder and owner of RedBalloon Days, says there is more of a push towards non-traditional types of rewards.
“The 21st century workforce has new reasons to reward, more opportunities for peers to formally recognise each other for contribution and a greater shift to people wanting to work for the culture rather than the money,” she says.
A bigger issue is that people are really questioning the purpose of what they do, Simpson says, and what they do needs to align to their own personal values for them to be satisfied and engaged with their employer. People are looking for organisations that are not ‘just’ for profit, and she says such organisations will be successful because they honour and celebrate their employees and treat them as individuals to be invested in. “They will attract the best people, have the most engaged people and ultimately be the most profitable. It might be inconvenient but happy people do make happy profits.”
Experiences are the most effective way to inspire and reward your staff, according to Simpson, because they are more memorable and personal than other types of incentive. “Cash bonuses just go straight to the credit card payments and are quickly forgotten. Memories of a hot-air balloon ride, romantic getaway or sailing trip will be shared and treasured for years,” she says.
Nathan Kitchner, general manager of Power2Motivate, also says the most significant recent trend in the areas of corporate gifts and rewards has been a move away from cash bonuses. “Cash was once king, with employees being rewarded with commissions and bonuses, and clients being provided with ‘cash-back offers’. Over time the impact of cash as a motivation and reward program has depreciated, mainly because cash is highly justifiable. Everyone can do with a bit more cash and more often than not it is spent on paying the bills – not a positive and tangible reminder of a job well-done,” he says.
As a result, more companies are turning to non-cash rewards to motivate and incentivise their employees and clients, Kitchner says. For example, a non-cash reward in the form of bonus points that can be redeemed for a range of luxury prizes is an ongoing reminder to the employee that they have done a job well, and that they are appreciated, he says. “Every time the employee looks at their big-screen television, their iPod or the photos from their holiday – all paid for through their rewards program – it reminds the employee of what they did at work to achieve those items which would have otherwise required them to save up their hard-earned wages.”
Companies are also taking a more thorough approach to rewards programs, according to Kitchner. Rewards go beyond the Christmas bonus, he says, and are now linked to very clear performance indicators that provide a reward based upon achievement of stretch goals and demonstration of appropriate workplace behaviours.
Another trend in this space is an increasing tendency to reward more often and incrementally. “Gone are the days of the once-a-year bonus. Employees are more likely to receive rewards on a weekly or monthly basis as a way of continually reinforcing good behaviours and higher productivity achievements. This is partly attributed to the emergence of generation Y as an important part of the modern workforce – this generation grew up playing Nintendo and are therefore used to getting rewarded and recognised for good performance on a more ongoing basis than annually,” he says.
Reasons for rewards
Companies put gift and reward programs in place for a variety of reasons, ranging from goodwill and benevolence through to rewards for hard performance. There are a number of other factors in the employment market that are affecting companies in such decisions. With 4 per cent unemployment and a growing economy, Kitchner says organisations are realising that they need to offer rewards and incentives to help attract and retain the best employees.
An effective rewards system can also contribute to an improvement in employee engagement. While strong engagement is a combination of a number of factors, recognising employees for a job well-done can have a significant effect. “Employee engagement is the key to a profitable business. In our society there is a lot of emphasis on what elements bring in new employees, such as salary and pension packages; however, we too often forget how to keep employees happy and satisfied once they have worked in the company for a substantial amount of time,” says Simpson.
What employers really need to do is advocate incentives and rewards to show that the hard work of employees never goes unrecognised or unappreciated, she says. “The bonuses don’t have to be large or extravagant, but should be appealing and demonstrate the company truly cares about its staff.”
Kitchner echoes Simpson’s comments and says that rewards programs not only act as an incentive but also provide tangibility and clarity around the achievement of key performance goals. “The most important thing to remember about rewards programs is that they do not have to be a high-cost investment – they are as accessible to small business operators as they are part of the corporate culture,” he says.
Making the most of a program
As with any other investment, companies need a positive return, and reward and recognition programs are no different. There are many ways to test whether such initiatives are working, according to Simpson and Kitchner. Measurable factors include productivity, staff turnover, employee focus groups, profitability and revenue, feedback from exit interviews, reasons for new employees’ joining, satisfaction and engagement surveys as well as actual participation in the rewards and incentive system.
But in order for such programs to be successful, there are a number of steps companies need to take, according to Simpson. “We believe the greatest barrier to implementing a successful reward and recognition program today is failing to dedicate the appropriate resource to run it. It’s not enough to bring on some fancy new piece of technology and assume people will use it. They need to be reminded daily, weekly, monthly that a program exists and the values it exists to promote,” she says.
“Companies should use their communications resources to recognise and celebrate their people. Internal blogs can also be used for people to share the images and stories from their reward experience and help keep everyone engaged in the program. Anyone can tick a box that says they have a reward and recognition program, but only those that live it and breathe it can tick the box of having a successful reward and recognition program.”
Kitchner also points out the importance of communication in running such programs. “You need to communicate on a regular basis with your employees, this will keep them aligned with company goals, apprised of the targets required and how they can be rewarded for consistent and excellent work.”
Lastly, securing support and buy-in at every level of an organisation is essential for the success of such programs. “If everyone is not behind the system (especially the managers) you will have a difficult time achieving the results that may be possible,”Kitchner says.
Measuring the benefits of benefits
A recent survey of more than 100 senior HR executives and other managers, found that the most common business outcomes organisations are seeking to achieve with their reward programs are improvements in performance on factors such as sales, customer service and key business KPIs generally (such as financial results). The survey, which was commissioned by Accumulate and conducted by the Andrews Group, also found that organisations are also seeking to improve their attraction, engagement and retention levels.
In terms of assessing and reporting on the business impact of reward and recognition programs, the top five measures used by respondents were found to be: employee engagement (44 per cent); employee satisfaction (43 per cent); values alignment (30 per cent); productivity (28 per cent); and staff retention (28 per cent). The survey found that 77 per cent of respondents reported that their programs are demonstrating a moderate-to-strong business impact, as assessed through the measures above.