These are challenging days for employee rewards. With base pay increase averages continuing to hover at 3 percent or even less, employers are looking for additional ways to engage employees and reward exceptional effort and performance. Enter employee recognition programs, which provide noncash rewards to deserving employees. “Base pay increases have been relatively small, so these programs are a way to go above and beyond that to recognize achievement,” said Ilene Siscovick, a partner with HR consultancy Mercer in New York City.
Noncash rewards are not necessarily new. What is new is the extent to which these programs are being integrated into operations to improve performance. This is especially true since the 2008-09 recession and its aftermath. “One of the things that drives the use of noncash rewards is often economics,” said Cathleen Snyder, director of client relations with Strategic HR Inc. in Cincinnati. “During the recession, companies still wanted to recognize employees, but they had to get more creative to find other ways to accomplish that.”
Now that the economy has improved, employers continue to use these programs as a way to differentiate themselves and to engage their employees without increasing rewards budgets significantly.
Planning Noncash Rewards with Care
Simply having a noncash rewards or recognition program does not automatically mean that the program will be effective. If the plan and its rewards are not meaningful to and valued by employees, it is likely to fizzle out due to lack of interest. Instead, the program and its rewards should have top-down support, clear criteria and eligibility for nominations, and rewards that are both innovative and relevant to employees. “For any rewards program to be successful, employees have to see the value of it,” Snyder said. “If the employees don’t see the value of the program, it serves no purpose and will not meet its goals.”
It also helps to tie the program closely to the organization’s values, as was shown in a June 2015 report on a survey of more than 800 employers by the Society for Human Resource Management (SHRM) and consultancy Globoforce. The findings show that tying the rewards program to the organization’s values leads to more-effective outcomes and that:
• 80 percent of respondents have some form of noncash employee recognition or rewards program.
• Among the 58 percent that have linked these programs to the organization’s values, 78 percent rate the program as good or excellent.
• Among organizations with no clear tie between the recognition program and the organization’s values, only 41 percent rate the program as good or excellent.
Rewards programs strongly tied to organizational values reaped greater benefits in:
• Stronger employee engagement (cited as a result by 90 percent of respondents with values-based programs vs. only 67 percent of those without).
• Increased employee happiness (86 percent vs. 70 percent).
• Added humanity in the workplace (85 percent vs. 70 percent).
• Improved employee relationships (84 percent vs. 66 percent).
• Instilled and reinforced organization values (88 percent vs. 42 percent).
Creating an Effective Program
The strength of noncash rewards programs is that there is plenty of room for customization. Indeed, customizing these programs to individual organizational needs is essential. But it is important to keep the ultimate goal in mind when developing the program. “The whole point is to give employees positive and sincere feedback from managers or peers,” Siscovick said.
There are several elements of successful noncash rewards programs. By designing a program with these elements in mind, employers are more likely to end up with a program that is both effective and valued by employees.
Before developing a program, it is important to identify its goals and what the company wants to accomplish. These can be as diverse as organizations themselves and can include engaging and motivating employees, increasing sales, focusing employee efforts on achieving one specific objective, and so on. Whatever the goals, they should be clearly articulated, and the program should be evaluated against the achievement of those goals. The program’s goals will also help to determine who is eligible for these rewards and the criteria for making the awards.
Management support for noncash rewards occurs on several levels. On one level, senior executives can be on board with the program and willing to emphasize and promote its importance. On another level, senior managers can be involved in the presentation or execution of the reward. This can be as simple as handing the reward to the employee or it can involve participating in the reward itself if, say, an employee is rewarded with the chance to have lunch with one or more senior executives to discuss career goals.
Front-line managers and supervisors are also critically important to promoting and explaining the program and its importance to employees, as well as to evaluating and choosing reward recipients.
One of the best ways to generate enthusiasm for noncash rewards is to allow employees to make peer-to-peer nominations for rewards. The SHRM/Globoforce survey found that 74 percent of surveyed employers allow anyone to nominate candidates for these rewards, with larger employers (more than 2,500 workers) most likely to offer open nominations. “You can develop these programs, but they won’t have any impact if people don’t utilize them,” Siscovick said.
Flexibility and choice are good guidelines when it comes to choosing rewards to offer. “This is not necessarily one-size-fits-all,” Snyder said. “It is important to provide some latitude to let managers and supervisors decide what recognition to provide so that they can tailor it to what employees value.” Employers can provide some structure and parameters for what is an appropriate reward but leave the final choice up to those working most closely with the reward recipient.
“It is important to recognize effort in a way that is meaningful to the employee and shows that you are listening,” Snyder said. For example, if the employee talks about a favorite restaurant, offering a gift card to that specific place has more meaning than a more generic reward. “It’s more than just the value of the actual gift card,” she said. “The increased value comes from the fact that you pay attention.”
Finally, keeping these programs fresh is crucial. While excitement is critical, employers don’t necessarily want to create a sense of entitlement around these awards.
The rewards should be well-earned and somewhat unexpected to be effective. In addition, an unchanging program will quickly get stale and be ignored. And there is nothing motivating about a noncash rewards program that no one cares about.
To avoid this, Siscovick recommends that employers review the program at least annually and make any necessary changes to available rewards, award criteria and even the program’s goals. The key is to keep it as dynamic as the organization and its employees.
SHRM Reprint Compliments| By Joanne Sammer 9/9/2015 |Joanne Sammer is a New Jersey-based business and financial writer.