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A lot of employee research highlights the importance of “recognition” in enhancing employee engagement and reinforcing the right behaviours that benefit the company as well as the employees. Often, I find companies taking a slightly ad-hoc approach to recognition and often such programs end up not being targeted, frequent and in the true sense, rewarding.

To better understand what makes for a robust recognition program, I did a short interview with Derek Irvine of Globoforce. Derek is Globoforce’s Vice President for Client Strategy & Consulting and is one of the leading voices on employee engagement, strategic recognition, talent management and business performance.

Q. There is something you call “Strategic Recognition”. Could you share with me what Strategic Recognition is all about and how it benefits organisations?

Derek: Strategic recognition means integrating employee recognition with a company’s core values and strategic goals. This helps employees understand the behavioural norms you have identified as necessary for achieving the desired business outcome—and strategic recognition does this for every employee in your company, regardless of where they live and work. The benefits of strategic recognition can be categorised in three ways:

1) Increased alignment with the company values and strategic objectives to ensure employees are recognised and rewarded only when they achieve desired targets by behaving in ways the company has deemed appropriate to success.

2) Increased employee engagement because employees intimately understand how their daily efforts contribute to achieving the bigger picture, resulting in increased productivity and performance. Our clients regularly realise double-digit increases in employee engagement in less than a year.

3) Increased retention of employees by ensuring employees know their value to the organisation and also building stronger bonds between employees, colleagues and managers.

Q. Human Resources professionals often draw out recognition programs for their organisations. What are some of the missing ingredients in such programs based on your experiences? What are the key elements to consider while designing such programs?

Derek: In some organisations, the first hurdle to clear is helping those responsible for designing their organisation’s recognition program to understand that recognition is not a Years of Service or Long Service award program. At least, employee recognition is not just Years of Service. In the same vein, employee recognition is not just sales or customer service incentive initiatives.

The first step is therefore broadening the understanding of employee recognition to anything and everything you as an organisation, manager or even peer do to acknowledge, praise and appreciate the hard work, success and achievements of colleagues. Once that understanding is in place, we can move into the key elements to consider when designing a truly strategic recognition program. We call these key elements the Five Tenets of Strategic Recognition:

1. A Clear Global Strategy for a consolidated recognition program flexible enough to allow for peer recognition, spot recognition, milestone anniversary recognition, etc., while creating visibility and auditability into the recognition budget spend across the globe for improved governance.

2. Executive Sponsorship with Defined Goals to signal senior management support and establish a management methodology including clear targets for success and meaningful measurement and reporting functionality linked with company strategic objectives.

3. Aligned with Company Values to ensure all recognised activities are associated with a company value, helping employees understand how their direct actions and behaviours impact achievement of company goals and giving managers dashboard insight into the traction of each company value by employee, region, division or department.

4. Opportunity for All to Participate to empower and unite the entire workforce, not just the top performers, behind the company’s strategic objectives and values. Top performing companies ensure 80% of the global workforce will be touched by the recognition program each year, largely through peer-to-peer recognition.

5. Offer the Reward of Choice to reinforce the recognition recipient’s positive association with the company through personally memorable, culturally relevant, locally based rewards.

Q. Is there a measurable ROI on strategic recognition programs?

Derek: Yes. Strategic recognition is proven to increase employee engagement by double digits, improve employee performance and reduce employee turnover. Gallup found in research last fall that employees do not become engaged just because they work for a financially successful organisation. Rather, employees who are engaged drive financial results. And those results are significant. In their 2007-2008 Global Workforce Study, Towers Watson found that companies with high employee engagement vastly outperform low-employee engagement firms in terms of operating income, income growth rate, and earnings per share. In an earlier study, Towers Watson calculated that a 15% improvement in levels of employee engagement correlates with a 2% improvement in operating margin.

In terms of retention, Gallup found organisations with high employee engagement had 37% less employee turnover. Considering the cost of replacing just one employee is 75-150% of that person’s salary, increasing retention alone can have a significant impact on the bottom line.

Aside from the benefits of increasing employee engagement with strategic recognition, the ROI benefits of strategic recognition directly on employee performance and productivity are profound. Especially in today’s world of rapid change, the ability to communicate to employees changing priorities and company strategies in a way that makes sense to employees in their daily work is itself a primary benefit. Quickly re-focussing employees precisely on most critical tasks in a positive way ensures employees remain at their most productive.

Q. In your opinion, are non-monetary forms of rewards & recognition as effective as monetary forms?

Derek: Non-monetary rewards are far more effective than monetary ones. Much research supports the fallacy of “give them more money” as a reward strategy. The most obvious example is the bonus culture that led to egregious behaviours in the financial world and, in many ways, the Great Recession. I argue base compensation in these firms should be much higher, with regular, frequent recognition of achievements and no ridiculously high year-end cash bonus.

Cash is an inappropriate reward mechanism because cash is the currency of compensation – of base pay. To be differentiated in a recipient’s mind, rewards must have a different currency.

These non-monetary rewards can still have economic value to the recipient and do have their place in a strategic program. Non-cash rewards in the form of gift cards to local high-value, lifestyle venues around the world take rewards beyond compensation to trophy award status. Recipients can choose rewards in their local neighborhoods, supporting their local economies and vendors they trust, or they can choose to enjoy rewards anywhere in the world. Options are limitless – shopping, dining, travel, adventures, sporting events, concerts, shows, even charities around the world. Employees who are deserving of recognition are also deserving of memorable rewards with unrestricted choice.

Q. Finally, what are 3 recent books that you enjoyed reading?

Derek: 

1. Delivering Happiness. The Zappos story is great in terms of follow your passion, and have the courage to build the right culture.

2. The Thank You Economy. What he describes as a mega trend for brands and the impact of all things social is going to be enormous for company cultures, and how to actively manage your culture – something I’m passionate about too.

3. Good Boss, Bad Boss. Contemporary management practices are shifting fast, the bad bosses had better catch up quick, or they’ll fall off the cliff before they even notice!

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That’s it for now folks! I thank Derek for making time for this and you could also follow Derek’s blog “Recognize This!”.