Article (December-2016)


How crucial it is for organizations?

Shilpa Kabra Maheshwari

Designation : -   Vice President & Head (Human Resources)

Organization : -  National Engineering Industries Limited, Jaipur


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Employee recognition isn't rocket science - it is an obvious thing to do. Despite the unquestioned benefits arising from employee recognition, one of the mysteries of the workplace is that recognition invariably is done badly, if done at all. Managers need reinforcing and coaching. Employee recognition remains an undervalued management technique.

What Objectives an effective R&R program seek to fulfil?
A winning system should recognize and reward two types of employee activity-performance and behavior. Performance is the easiest to address because of the direct link between the initial goals you set for your employees and the final outcomes that result. Rewarding specific behaviors that made a difference to your company is more challenging than rewarding performance, but you can overcome that obstacle by asking, "What am I compensating my employees for?" and "What are the behaviors I want to reward?" For example, are you compensating employees for coming up with new ideas on how to complete their work more efficiently and effectively? In other words, are you compensating someone for innovation? There's obviously a big difference between the two. The first step, of course, is to identify the behaviors that are important to your company. Those activities might include enhancing customer relationships, fine-tuning critical processes or helping employees expand their managerial skills.

All effective programs of rewards and recognition seek to fulfill three objectives: 1. They positively reinforce and sustain desirable actions and behaviours among employees, which in turn lead to sustained excellence in performance. 2. They help to retain best talent that the organization requires for its growth and continued success. 3. They help the organization to attract best/suitable talent from the talent market, whether it is raw talent out of the best educational/professional institutions or talent pool of outstanding experienced professionals.

Cost-benefit analysis of employee recognition:
The cost of a recognition system is quite small and the benefits are large when implemented effectively like increased individual productivity, greater employee satisfaction and enjoyment of work - more time spent focusing on the job and less time complaining, higher loyalty and satisfaction scores from customers, teamwork between employees is enhanced, lowers employee turnover etc. Measuring the direct impact on profitability is difficult because it is only one of many factors influencing employees in every workplace. However, case studies make a persuasive case that bottom line benefits have been achieved through recognition schemes. The Walt Disney World Resort established an employee recognition program that resulted in a 15% increase in staff satisfaction with their day-to-day recognition by their immediate supervisors. These results correlated highly with high guest-satisfaction scores, which showed a strong intent to return, and therefore directly flowed to increased profitability.

Likewise, Sears, Roebuck & Co. found for every 5% increase in employee attitude scores, they saw a 1-3% increase in customer satisfaction and a 0.5% increase in revenue. On the other hand, the cost of extremely negative or 'actively disengaged' workers comprises about 10% of the US Gross Domestic Product annually, including workplace injury, illness, employee turnover, absences and fraud. 

How  employee recognition can be given?
Traditionally, employee recognition has not been a core public relations activity, but you can be a catalyst in your organization. You can spontaneously praise people - this is highly effective. To many employees, receiving sincere thanks is more important than receiving something tangible. Employees enjoy recognition through personal, written, electronic and public praise from those they respect at work, given in a timely, specific and sincere way. This day-to-day recognition is the most important type of recognition. Day-to-day recognition brings the benefit of immediate and powerful reinforcement of desired behavior and sets an example to other employees of desired behavior that aligns with organizational objectives. At NEI, people acknowledge and recognize the special help extended to get the work done or the special effort by an individual through 'Thank You' Card which in turn encourages mutual support, collaboration and team spirit.Such gestures give individuals and teams at all levels the opportunity to recognize good work by other employees and teams, and it also gives the opportunity for them to be recognized on the spot for their own good work. Even if you aren't a manager, you can be alert for opportunities to recognize others and take the initiative to do something. 

Reward V/S Recognition
Although these terms are often used interchangeably, reward and recognition systems should be considered separately. Employee reward systems refer to programs set up by a company to reward performance and motivate employees on individual and/or group levels. They are normally considered separate from salary but may be monetary in nature or otherwise have a cost to the company. While previously considered the domain of large companies, small businesses have also begun employing them as a tool to lure top employees in a competitive job market as well as to increase employee performance.

As noted, although employee recognition programs are often combined with reward programs they retain a different purpose altogether. They are intended to provide a psychological-rewards a financial-benefit. Although many elements of designing and maintaining reward and recognition systems are the same, it is useful to keep this difference in mind, especially for small business owners interested in motivating staffs while keeping costs low.

What to include in our definition of rewards and recognition?
Rewards and recognition is a wide concept and is increasingly being re-defined to include not just traditional ways of thanking and compensating employees, but also newer areas like physical, and emotional well-being of people ("Total Rewards"). Some of the areas included under Rewards & Recognition are: 1. Assured compensation/ salary 2. Special or annual increases in assured compensation/salary 3. Increases in compensation and benefits on account of promotions/grade change/position enhancement 4. Performance based variable pay/ incentive/ bonus, etc., that may be monthly, quarterly, half yearly, annual or even long term 5. Performance based retention rewards 6. Rewards in cash/kind for specific actions/behaviours/efforts and contribution/results 7. Public and sometimes even personal recognition/ appreciation for desirable actions/behaviours/efforts and contribution/ results 8. Wide range of benefits & perquisites (particularly the ones which are beyond those statutorily mandated) 9. Long term wealth sharing mechanisms such as stock grant, restricted stock units grant, phantom stock grant, stock options grant, discounted stock purchase scheme, etc.

NEI Employee Recognition Scheme's objective is to recognize employees (individually and in teams) for outstanding contributions towards the goals & objectives of NEI and encourage them for putting discretionary efforts in areas such as collaboration, leadership, process control (system adherence), productivity, quality of work, customer service, innovative thinking, cost effectiveness etc. Company's reward & recognition policy is drafted around these competencies. Employees and managers are encouraged to spot such excellence among their team members and nominate the deserving employees for such recognition programs. NEI provides liberty to its people to self nominate for these categories which are finally evaluated by the R&R jury. In a way this R&R policy helps NEI to propagate these competencies and in turn people start exhibiting these competencies in their day today affairs. What more can you expect out of it.  Transparency and communication play an important role in the effectiveness of the rewards and recognition system. Rewards and recognition motivate employees for results only if they are perceived to be fair. It is found that the perception of unfairness associated with Rewards and Recognition discourages employees. 

To be transparent, organisations need to ensure constant and comprehensive communication around rewards and recognition. Use of intranet and e-mail for communication related to rewards and recognition is a common practice. Best workplaces differentiate themselves by using additional methods like posters, teasers and newsletters for the same. Extensive information about Rewards and Recognition is provided during the induction process in these organisations. The best workplaces also conduct periodic training/education sessions to equip managers and employees to use various rewards and recognition methods effectively. Companies make effective use of Display Boards and Workstation Decorations to share information about recognition in a creative way. To create the kind of buzz and excitement that these rewards and recognition deserve and to attract the attention of employees, organisations come up with creative names and brand these rewards and recognitions programs through their constant communications. 

Measuring effectiveness:
Measuring effectiveness of the initiatives and programs is the key to ensuring that an organisation gets right outcomes for the money and efforts that it invests on the process of recognizing and rewarding employees. Informal feedback from employees and employee surveys are the most common methods used by organisations to measure the effectiveness of rewards and recognition programs. The usage of different methods to recognize also provides an important input to organisations on how effective/useful the employees are finding these methods. In addition to measuring progress of employee performance towards corporate goals, well-defined performance measurement systems help to gauge employee reception, understanding and buy-in for reward systems. This critical feedback can help managers make adjustments necessary to drive improvements and avoid unforeseen undesirable behaviours and actions that negatively impact corporate goals and the organization's culture. Feedback taken from employees through various other channels also helps understand the effectiveness of the rewards and recognition programs. Employees have the opportunity to share their feedback through forums like HR Open Houses, skip level meetings, etc. Fall in percentage of attrition is considered to be another significant input that speaks about the overall culture of the organisation of which appreciation and recognition are an essential part. Some organisations have seen a decrease in turnover of employees from identified high performance category post the implementation of rewards in the category, which clearly exhibits the effectiveness of system. 

Way forward
Often many organizations have the some kind of robust and effective practices. Their question is: "Why don't our employees rate our organization as a best workplace?" It is important that we address it here as well. First of all, the similarities are deceptive because they are similar at a superficial level. The differences come in when we examine the "details" of what they do. The differences don't end there. They become more manifest as we examine why they do what they do, and how they do it. The great companies don't implement these practices in a transactional manner. They are not "copying someone else" because the idea seems appealing. They design what suits their purpose and circumstances. The entire organization, beginning with the top leaders, share a deep conviction based on their values and beliefs that this is the right thing to do. This ideological or philosophical underpinning provides them impetus to implement their people practices in a heartfelt manner and over an extended period of time, seeking feedback and trying to improve the practices and the impact of what they do. This conviction also imbues what and how they do it. Great companies believe that their people practices and organizational culture should be animated by a sense of fairness and equity represented by distributive justice, procedural justice and interactional justice (whether they say this in these words or not!).

Now that you know what it should include, it's time to review your strategic reward system. Does it address compensation, benefits, recognition and appreciation? Is it aligned with your remaining business strategies? Is it driving the right behaviors for your company, as well as your performance goals? If it needs fixing, don't wait. It can mean the difference between your business' success and failure.