Getting the most out of valuable recognition dollars
Long-time service awards. Peer recognition. Thanks for a job well done. You’ve got money for a recognition program, but where and how are you going to spend it?
It’s an important decision, because there is no doubt about the value of recognition and the significant impact it can have on employee performance. There are a wide variety of programs out there to choose from, which is good since each company is different and each solution is unique.
The most important step is to determine exactly what the organization wants to accomplish with its recognition program. The marketplace is full of data heralding challenging times ahead for HR. The looming mass exodus of baby boomers from the workforce and the labour shortage to follow, falling productivity and an increasingly disengaged workforce are just a few. Whichever issue is keeping the executives up at night is the answer for the “where to spend” question.
Once that question has been answered, the organization needs to probe even deeper. Do the challenges involve the entire workforce or just certain departments, business units or geographical locations? Can the root cause of the issue be traced to attracting and retaining the right talent or does it manifest as a lack of alignment between what employees should be doing and what is actually occurring? Is there opportunity for improvement in both areas? The answers to these questions will help zero in on the types of programs to invest in.
Even organizations that are sitting pretty, and not facing any recruiting or retention problems, can’t afford to avoid taking some action. Because it’s not likely they’ll be in that situation for long. Linda Duxbury, a professor at Carleton University in Ottawa who specializes in workplace issues, said: “For the last 25 years the labour force in Canada has grown by roughly 226,000 a year. That number is now rapidly declining, and by 2010 only 42,000 new workers will be entering the workforce each year. Within the next decade, for every two people who are retiring there will be fewer than one person to take their place. How a company manages its workforce will be critical to its business success, something the best employers in Canada have already figured out. They know that soon the strongest businesses will be the ones with the most engaged and stable workforces.”
Duxbury makes a compelling case for initiating action quickly and broadly across the workplace. A service award program is a great place to start — all employees are included and it’s a straightforward program to get up and running quickly.
Tracking tenure
Celebrating employee service milestones demonstrates that the company values the worker’s tenure and it should help both retain and attract best-in-class talent despite a challenging labour market.
Best practices suggest investing $35 to $55 per year of service for such awards, which are typically given for every five years of service. Using a figure of $45 per year, an employee with five years of service would receive a gift valued at $225 while a long-term worker celebrating 20 years would get a gift worth $900.
Take a look at turnover rates to see if the organization has been especially vulnerable to resignations at specified year levels. For example, if a company is experiencing high turnover with employees from one to three years’ service, a well-timed service award on those anniversaries could further reduce the risk of turnover.
A modest “welcome to the company” gift is a powerful way to express corporate appreciation during those highly impressionable first days on the job.
Performance recognition programs
If the challenges facing the organization are isolated within certain work groups, or if HR finds itself wondering why people don’t do what they’re supposed to do, a performance recognition program might be the answer.
The flexibility of such programs make them a powerful tool in clearly defining, communicating and rewarding individual and team results, behaviours and activities that are needed to advance corporate goals. HR can call it “on-the-spot” or “above and beyond” or any other moniker. It can be completely discretionary, mandated or a combination of both. HR can apply it across the organization or to targeted departments for specific goals, such as reducing workplace accidents or improving customer service scores.
Once an organization decides on the participants and the goals, it should plan to spend $160 to $540 per person per year, or about two-and-a-half to three per cent of payroll, on the program.
Quality, not quantity
The ideal situation would be to create a multi-program recognition budget from the ground up, using the guidelines provided for each program.
But if the organization already has an established budget that can’t be altered and doesn’t match these recommendations, the organization can allocate the bulk of the money to the program that addresses the most pressing problem. Doing so will garner the greatest return on investment.
Success in that high-profile area will likely do wonders for the corporate bottom line and may even convince senior management to open the coffers and give HR additional money to expand other recognition programs. Choosing program quality over quantity and staying focused on rewarding what is most important to the company will help make the program successful.
The table on page 28 outlines how a recognition budget should be broken down in terms of the percentage of money spent on awards, administration, communication and measurement for self-administered programs, outsourced paper-based programs and outsourced web-based programs.
Most company-administered plans do not track and measure program results. Companies that run their own programs and don’t track and measure results should break from that tradition. Measurement is critical to evaluating program success, improving the program over time and making informed business decisions based on facts rather than supposition.
Michelle Smith is the executive vice-president of the Incentive Marketing Association and is on the board of the Forum for People Performance Management and Measurement at Northwestern University in Chicago. She is also vice-president of business development for recognition firm O.C. Tanner in Glendale, Calif.
Where the dollars go
A typical recognition budget
Average per cent of budget allocated to program components in typical recognition programs.
It’s an important decision, because there is no doubt about the value of recognition and the significant impact it can have on employee performance. There are a wide variety of programs out there to choose from, which is good since each company is different and each solution is unique.
The most important step is to determine exactly what the organization wants to accomplish with its recognition program. The marketplace is full of data heralding challenging times ahead for HR. The looming mass exodus of baby boomers from the workforce and the labour shortage to follow, falling productivity and an increasingly disengaged workforce are just a few. Whichever issue is keeping the executives up at night is the answer for the “where to spend” question.
Once that question has been answered, the organization needs to probe even deeper. Do the challenges involve the entire workforce or just certain departments, business units or geographical locations? Can the root cause of the issue be traced to attracting and retaining the right talent or does it manifest as a lack of alignment between what employees should be doing and what is actually occurring? Is there opportunity for improvement in both areas? The answers to these questions will help zero in on the types of programs to invest in.
Even organizations that are sitting pretty, and not facing any recruiting or retention problems, can’t afford to avoid taking some action. Because it’s not likely they’ll be in that situation for long. Linda Duxbury, a professor at Carleton University in Ottawa who specializes in workplace issues, said: “For the last 25 years the labour force in Canada has grown by roughly 226,000 a year. That number is now rapidly declining, and by 2010 only 42,000 new workers will be entering the workforce each year. Within the next decade, for every two people who are retiring there will be fewer than one person to take their place. How a company manages its workforce will be critical to its business success, something the best employers in Canada have already figured out. They know that soon the strongest businesses will be the ones with the most engaged and stable workforces.”
Duxbury makes a compelling case for initiating action quickly and broadly across the workplace. A service award program is a great place to start — all employees are included and it’s a straightforward program to get up and running quickly.
Tracking tenure
Celebrating employee service milestones demonstrates that the company values the worker’s tenure and it should help both retain and attract best-in-class talent despite a challenging labour market.
Best practices suggest investing $35 to $55 per year of service for such awards, which are typically given for every five years of service. Using a figure of $45 per year, an employee with five years of service would receive a gift valued at $225 while a long-term worker celebrating 20 years would get a gift worth $900.
Take a look at turnover rates to see if the organization has been especially vulnerable to resignations at specified year levels. For example, if a company is experiencing high turnover with employees from one to three years’ service, a well-timed service award on those anniversaries could further reduce the risk of turnover.
A modest “welcome to the company” gift is a powerful way to express corporate appreciation during those highly impressionable first days on the job.
Performance recognition programs
If the challenges facing the organization are isolated within certain work groups, or if HR finds itself wondering why people don’t do what they’re supposed to do, a performance recognition program might be the answer.
The flexibility of such programs make them a powerful tool in clearly defining, communicating and rewarding individual and team results, behaviours and activities that are needed to advance corporate goals. HR can call it “on-the-spot” or “above and beyond” or any other moniker. It can be completely discretionary, mandated or a combination of both. HR can apply it across the organization or to targeted departments for specific goals, such as reducing workplace accidents or improving customer service scores.
Once an organization decides on the participants and the goals, it should plan to spend $160 to $540 per person per year, or about two-and-a-half to three per cent of payroll, on the program.
Quality, not quantity
The ideal situation would be to create a multi-program recognition budget from the ground up, using the guidelines provided for each program.
But if the organization already has an established budget that can’t be altered and doesn’t match these recommendations, the organization can allocate the bulk of the money to the program that addresses the most pressing problem. Doing so will garner the greatest return on investment.
Success in that high-profile area will likely do wonders for the corporate bottom line and may even convince senior management to open the coffers and give HR additional money to expand other recognition programs. Choosing program quality over quantity and staying focused on rewarding what is most important to the company will help make the program successful.
The table on page 28 outlines how a recognition budget should be broken down in terms of the percentage of money spent on awards, administration, communication and measurement for self-administered programs, outsourced paper-based programs and outsourced web-based programs.
Most company-administered plans do not track and measure program results. Companies that run their own programs and don’t track and measure results should break from that tradition. Measurement is critical to evaluating program success, improving the program over time and making informed business decisions based on facts rather than supposition.
Michelle Smith is the executive vice-president of the Incentive Marketing Association and is on the board of the Forum for People Performance Management and Measurement at Northwestern University in Chicago. She is also vice-president of business development for recognition firm O.C. Tanner in Glendale, Calif.
Where the dollars go
A typical recognition budget
Average per cent of budget allocated to program components in typical recognition programs.
| Program component | Company self-administered | Outsourced paper-based program | Outsourced web-based program |
| Awards | 60% | 55-60% | 65-70% |
| Administration | 25% | 20% | 10-15% |
| Communication | 15% | 15% | 15% |
| Measurement | 0% | 5-10% | 5% |
