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Simple acts of recognition can have incredible benefits at little cost when used appropriately in conjunction with tangible rewards. That much we know. Yet many organizations still get it wrong. Human Capital busts three myths that have grown up around reward & recognition in the workplace.

Myth #1
Reward & recognition programs need to be costly, and include extravagant rewards

It's a myth that reward and recognition programs need to be costly, and it's also a misnomer that the more extravagant the reward, the better the result in terms of engagement and retention, says Richard Breatnach, managing director and event producer, Workshop Events.

The key, Breatnach adds, is to predetermine and prequalify the ROI of a reward initiative or program. This is essential to justify any costs and to achieve the best results.

"If a reward program is put in place based on a predetermined ROI calculation, and the ways in which to measure success are apparent, the potential financial benefits can be built into the cost," he suggests.

For instance, when utilising reward & recognition to boost morale in a sales team, to raise performance and enhance sales, the financial outcome will ideally cover the cost of the adopted initiative.

There are also ways to create events and activities which seem extravagant but are not in terms of cost, but Breatnach warns that avoiding reward & recognition programs altogether due to cost can have very negative effects on staff.

"If your organization throws an annual Christmas party, and one year decides the budget can't be spared so the party is called off altogether, staff are bound to be disgruntled," he says. "There are ways around putting on an event or activity on a reduced budget. Staff will appreciate the effort and understand the financial constraints."

Indeed, some service providers have dedicated themselves to destroying the myth that reward programs need to be expensive. Ben Thompson, CEO of The EI Group, says he established Power2Motivate (a division of The EI Group) because he could not find a reward & recognition program that cost less than $50,000 to set up. Power2Motivate has no management fees and no set up fees. It offers over 30,000 individual rewards which range in value from around $10 to many thousands of dollars.

It also provides clients with the opportunity to measure their ROI at a granular level. For example, businesses can view and report, at a business unit level, which peer groups and managers have been recognising exceptional performance, what that performance was and the extent to which each employee is engaged in the program.

"Behaviour is a function of its consequences," says Thompson. "When people feel that their efforts are recognised and appreciated through positive reinforcement, their behaviours change and they become more engaged. Extravagant rewards are not the key to engagement, recognition is. Matching social recognition with a tangible reward just increases the utility of positive reinforcement in the longer term."

Myth #2
The only ROI that matters is financial

This is perhaps the biggest myth. As with almost any HR initiative, when it comes to ROI of reward & recognition programs it's necessary to look beyond financial return.

Ava Lawler, who as global consultancy director for PR consultancy Text 100 is responsible for the global HR program at the company, says it is near impossible to isolate the exact ROI for reward & recognition programs versus the impact of other HR programs and management behaviour overall. "Employee engagement and retention are the ultimate reasons for instigating these programs but the behaviour of individuals is influenced by multiple forces and most organizations will take a multi-disciplinary approach to impacting on behaviour change," she says.

However, that's not to say some measure of financial performance is impossible to gauge. Thompson notes there are several criteria for measuring financial ROI on reward and recognition.

The first is the percentage of the total reward and recognition spend that is ultimately received by the employees. The higher the set up costs, management fee and cost of rewards, the lower the value received by employees. Similarly, programs that use gift cards and vouchers as rewards may experience non redemption or expiry (breakage) of up to 40%.

Some service providers keep breakage to a minimum by refunding unredeemed points when users leave a program. For example, nearly 100% of Power2Motivate's standard rewards are available at or below the recommended retail price. "This means every dollar spent on reward and recognition goes to the employees - not to a consultant, gift card merchant or software vendor," Thompson says.

The second criteria is the specific target metrics particular to each business - for example recruitment costs, training costs, on time production, sales, referrals, customer satisfaction, ideas or innovation. "What is relevant in a call centre is not necessarily relevant for an airline - but a clear set of benchmarking KPIs and objectives should be established up front to enable ROI assessment across the reward and recognition program," Thompson explains.

However, the key is not necessarily how much money is spent, but instead what message is to be conveyed. It's essential to understand the message an organization wishes to convey to staff through an event or program, and the results to be achieved, so success can be measured.

Thompson urges caution, however. He's noticed that while clients will often connect reward & recognition to the demonstrated behaviour of their business' core values - which often appear on the company website, brochure and mouse mat - but there is no recognition of the fact that employees try to live and breathe these values in their day to day interaction with peers and customers. "Once core values are converted into actual examples of behaviour then, where appropriate, these behaviours can be recognised and rewarded," he suggests.

And of course, the same performance measures can't always be applied for every program, as the ROI may be measured by more subjective means, such as increased loyalty, lower staff turnover, improved morale, enhanced relationships, teambuilding, etc.

"ROI for people programs ultimately comes down to measuring the impact on business success," says Lawler. "Tracking employee retention statistics, employee satisfaction and measuring the cost of employment and talent acquisition are all important measures for stacking up the value of your HR program. However, the ultimate test is having a clear view on the motivation for your employees not only staying with the company, but for giving it their best shot while they are on the job."

Lawler cautions that tracking the participation rates in these programs can help understand if people are interested in them, but they may not necessarily provide a good sense on whether they are impacting on people's behaviour. "Specific questions within employee satisfaction surveys and exit interviews that ask specifically about the impact of a program will be the best way to determine the specific impact of the activity," she suggests.

Myth #3
Reward is far more important than recognition in terms of engagement and retention

Not so, says Lawler. "In my experience recognition is best served warm. Regular recognition that is sincere, credible and timely is going to go a lot further in building a trusted relationship with team members than any carefully coordinated and calculated recognition program that lacks sincerity and warmth," she says.

Breatnach adds that recognition is a crucial component, in that the recipient of the reward needs to feel acknowledged and valued. "If staff are rewarded without understanding the reason why, the effect of the recognition component will be lost. Understanding the message the organisation wishes to convey to staff through the program is a pivotal part of determining the ROI," he says.

Power2Motivate helps each client design their frequency of recognition and value of rewards but almost all programs include 'Thank You' recognition that has no tangible reward value, Thompson adds.

"The golden thread is that employers want their employees to know that the place where they spend the bulk of their waking hours recognises and appreciates their effort," he says.

Indeed, research from RedBalloon* proves not only the importance of recognition but the vital role that managers play in delivering it. It found 52% of employees say not receiving recognition would contribute to them leaving a company and that recognition means the most when it comes from their manager. However, 62% of managers are rated as 'Poor' or just 'Satisfactory' at delivering specific and timely praise, and one in five employees do not receive any praise at all, or at best it only happens once per year.

Matt Geraghty, head of corporate at RedBalloon, says "the first step in the process is to educate managers on the role that recognition can play and how much of a positive and productive impact it can have on their people. The next step is then to make sure that individual managers have the tools to be able to provide recognition in a timely, consistent and personal manner."

RedBalloon has just launched the Big RED (Recognise Every Day) Toolkit. Each Toolkit contains everything managers need to deliver everyday praise with a mix of practical educational advice, ideas, thank you and recognition plus instant rewards. 

The Toolkit includes:

  • Recognise Every Day Guidebook - Comprehensive recognition theory, best practice and great advice
  • Know Your People Workbook - Two thirds of employees are convinced their managers do not know what motivates them to be productive. The workbook includes templates and forms so the manager can store important personal information about their employees to know what motivates their people in order to give meaningful rewards. Information such as birthdays, anniversaries to hobbies and how they like their coffee.
  • Reward Coupon Booklet - For instant rewards like a Time Out, Coffee, Lunch or blank coupons for the manager's discretion.

*Source: *RedBalloon's Reward and Recognition Survey involving more than 3, 000 employees in Australia and New Zealand

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