Archive for January, 2012

The ROI of Employee Recognition

Recognize This! – Intangible benefits are as important as tangible results in calculating recognition ROI.

I recently had the opportunity to participate in an article in Premium Incentive Products magazine. Excerpts from “Beyond R.O.I.: Incentive & Reward Benefits Surpass Hard Numbers” appear below:

To calculate a simple return on investment, you subtract the program cost from the program benefit and then divide by the program’s cost, “but it is in intangible areas, such as those that emphasize energizing employees toward outstanding performance—or customer service—where human resource and C-suite business leaders still do not realize the number of ROI benefits that can be derived from a rewards (or recognition) plan,” said Derek Irvine, vice president of client strategy and consulting for Globoforce, a company with North American corporate offices in Southborough, Mass.

Those benefits include building and maintaining a strong global corporate culture, increased employee morale and engagement, and finally, the more tangible results in employee productivity and business performance….

It is always easier to measure an increase in sales or numbers in output and productivity,” Irvine, of Globoforce, said. “After all, with a sales incentive program, you are usually rewarding on the basis of product sales or performance against goals.”

But it’s a more difficult task, he said, to measure the psychological aspect of recognition programs, where leaders are reinforcing the right values and attitudes, and the program is feeding psychological income needs and creating an engaged environment.

“This is why we need to focus so strongly on measurement of recognition, and how it impacts the bottom line,” Irvine said. “One obstacle, until recently, was the absence of technology to make this possible. But now, technology is allowing organizations to record and celebrate recognition with the same degree of depth as productivity, sales and revenues.”

Through easy-to-use, software as a service (SaaS)-based programs, company leaders can recognize and engage employees through personalized gift cards and “thank yous” sent directly to the employee’s desktop.

“These timely and consistent recognition rewards are mapped to corporate values and strategic goals,” Irvine continued, “which helps employees understand how their personal and team achievements affect the company’s overall performance and bottom line.”

Employees are then recognized and rewarded when they achieve results the company has deemed appropriate to success, which transforms how a company’s culture is strategically and globally managed.

Strategic recognition done correctly can result in an amazing return on the initial investment. The positive results of increasing employee engagement, improving loyalty and retention, and building culture, while at the same time increasing productivity and business performance, are all top priorities for companies today.

The only time you have a negative effect with an incentive program is when people feel it is discretionary. So, ensure that you have clearly defined rules in an employee program. You need to train managers and the supervisors who are providing the recognition, so that it’s very clear what types of behavior they should recognize.

If people feel that it’s fair and that there is an equal opportunity to earn, they’ll continue to be engaged. And that’s a tremendous ROI.

Is the Balance of Power Shifting to the Employee?

Recognize This! – Even if burnt-out employees aren’t ready to quit, they certainly are not delivering top-level performance any more.

Since the recession began in earnest, employers first took actions to preserve the company – layoffs, salary freezes and the like. For the most part, employees understood and survivors put aside their guilt to take on multiple roles and additional duties for no additional compensation.

Three years later, the economy is improving and employees are at the end of their ropes. They are burned out, stressed out and fed up. According to a recent Forbes article:

“If current economic data is a harbinger of things to come, perhaps corporate America might be a bit more concerned about retention, instead of burning workers to a crisp. Let’s break down the numbers:

  • Unemployment fell for a fourth time in a row to 8.5%, its lowest point in nearly three years.
  • There’s been an uptick in the number of Americans quitting their jobs since the recession began in December of 2007, according to the Labor Department.
  • The BNA Annual Economic Forecast, (BNA tracks and analyzes legal, regulatory and business information) shows the U.S. economy improving, albeit with limited job creation, expected to increase in the second half. Also, modest gains in private sector workers’ hourly compensation.
  • The rate of layoffs is lower than any time before the recession.

“’The rising quit rate may be the first sign that the balance of power is changing in corporate America between the executives and the underlings,’ says Irwin Kellner, Chief Economist for Marketwatch.com.”

It’s true. Employees are at the breaking point and who can be surprised after all the work they have taken on with no relief in sight. I’ve written regularly that employers have taken advantage of employee “survivors” willingness to do the extra work, labeling it “increased productivity.” But that’s a false metric that is simply not sustainable over time.

As I wrote in Compensation Café, this and other news clearly point to employee frustration levels reaching the breaking point for three reasons:

  1. Employees sense more barriers to getting the work done, even as they are asked to do more with less.
  2. Companies sitting on loads of cash and not reinvesting that back into the workforce.
  3. Executive compensation and bonus structures that make no sense – not even to investors.

Be sure to read the Compensation Café post for more on these frustrations and what to do about them:

  1. Knock down the barriers.
  2. Spend the cash and hire people already.
  3. Eliminate ridiculous bonus structures and bring compensation (at all levels) into alignment.

Commentors seemed to think such common sense could never work, sadly. What do you think? Can we bring common sense back to recognition and reward practices?

7 Guidelines for Employee Engagement: Lessons from Stryker

Recognize This! – A desire to increase employee engagement is useless without commitment and follow-through.

Gallup issued a brilliant case study of Stryker, a global medical devices company. Focusing on just one unit in New Jersey, the case study highlights several key tenets of success for an employee engagement or strategic employee recognition program.

1)      Be committed. “Stryker believes that employee engagement is part of its success — the company has been deeply committed to employee engagement, strengths development, and leadership development for years.”

Commitment to increasing engagement requires commitment to creating a workplace environment in which employees choose to engage. And this is not done by one person. It must be seen as a priority by the entire organization as a whole.

2)      Secure executive support. “The first [advantage] was the support of the plant’s leadership, particularly that of John Haller, vice president of global operations for implants at Stryker; the human resources staff; and [Fred] Lorestani, [vice president of North American Implement Operations] himself.”

But it does take clear and highly visible executive support to show employees that actions taken and promises made will be followed through. Without that, many employees won’t feel the initiative is worth their time.

3)      Don’t survey unless you plan to follow up. “They did the survey, but nothing happened afterwards. That’s a problem. Gallup has found that one of the fastest ways to damage morale is to ask employees for their opinions, then ignore their replies.”

Surveying without follow up action on the results only further disengages employees. Would you keep giving your honest opinion if you didn’t think anything would come of it?

4)      Engagement is the responsibility of management and employees alike. “It’s not always top down; you [individual employees] also own and you are responsible for your own engagement.”

5)      Engagement doesn’t come naturally to everyone. You must train managers. “Stryker had been investing in manager development through Gallup’s Great Manager Program for some time, and Krummel-Mihajlovic found it so helpful that she insisted each of the managers on the operations side attend. She also insisted that the executives above them receive Gallup leadership training.”

Don’t assume just because a manager fails at engagement today that they don’t care about the engagement of their employees. Instead, work to train those managers on both the importance of engagement and what specific actions they can take to improve engagement.

6)      Find local champions. “Engagement is individual, and the best advocates for it – and perpetuators of it – are employees. And that voice had to be a loud one.”

This is a key tenet I speak to in my training sessions and Stryker got it right. Krummel-Mihajlovic asked who the outspoken people were and who was the go-to person for help. Never assume this is always a person in a management. It’s just as likely to be the receptionist, line leader or any other person in the organization who cares about their colleagues and getting the job done. Stryker ultimately found 20 champions in this one plant alone.

7)      Choose ambassadors to bring good ideas forward. Ambassadors play a different role. They carry the messages forward up the chain and then across all employees. These must be people who are both respected as well as passionate and excited about moving your engagement and recognition project forward.

Have you undertaken an engagement or recognition initiative in your organization? Did you follow these steps? What others did I miss?

What Scrapping the Annual Performance Review Looks Like in Practice

Recognize This! – Getting rid of the annual performance appraisal is only possible if replaced or supplemented with a program for informal, frequent and timely feedback and recognition from more sources than just the manager.

I’ve written a fair amount about the need scrap the annual performance review process as the sole means of employee feedback and goal setting. At the very least, such a formal, annual process must be supplemented by an informal, frequent recognition and feedback program in which any employee can give specific, detailed recognition feedback to colleagues in the moment.

Few take the step of scrapping the annual review out of fear of what would actually happen in practice. A recent Wall Street Journal article dove into that question, highlighting:

“While most continue to perform the awkward rite of passage [performance review] once or twice a year, a few companies—about 1%—are scrapping the formality altogether, according to the Corporate Executive Board. The thinking is that performance reviews are angst-provoking and even ineffective in actually motivating workers.

“Performance reviews have long received poor grades, even from those who conduct them. Nearly 60% of human-resources executives graded their own performance-management systems a C or below, according to a 2010 survey by Sibson Consulting Inc. and WorldatWork, a professional association. And one academic review of more than 600 employee-feedback studies found that two-thirds of appraisals had zero or even negative effects on employee performance after the feedback was given.”

But you still need a feedback mechanism.

The fear of scrapping the annual review is quite valid if the trade-off is leaving employees in a feedback vacuum. More from the WSJ article:

“In place of reviews, the company [Atlassian Inc.] asked managers and subordinates to discuss performance and goals at pre-existing weekly one-on-one meetings. Feedback now goes both ways.”

That approach certainly makes feedback more timely. Such regular meetings also become an expected part of the routine, thus reducing the fear and anxiety associated with them. Again from the WSJ:

“When feedback is ‘not going to be used to judge you or your fate in the company, you are more likely to be open about where you need to grow and it’s going to be far more effective,’ says Dr. Coget of California Polytechnic State University, San Luis Obispo.”

Josh Bersin, head of Bersin & Associates, said essentially the same thing in a recent webinar (recording available) with my CEO, Eric Mosley:

“One of the problems is the annual performance appraisal gives managers an excuse to not provide ongoing feedback. The most valuable thing you can do to improve performance is to improve the quantity and quality of feedback. With Globoforce’s solution, you create a much more feedback-rich environment to create a much bigger and better culture of continuous performance improvement. Humans are much more open to positive feedback than negative. You need to create a reservoir of goodwill through programs like this that give managers more permission to provide negative feedback that will be heard.”

If you could, would you scrap the annual performance review? What would you do instead to ensure employees get the regular, timely feedback and recognition they need and deserve?

5 Resolutions for Better Employee Recognition & Rewards

Recognize This! – A new year offers a new start. Resolve to rethink “how we’ve always done it.”

1) Help HR pros to stop making assumptions.

We know what we know. In terms of employee recognition programs (particularly, how to design them), we know what we’ve experienced ourselves. And that leads to complacency and a tendency towards “the way we’ve always done it.”

In 2012, it’s time to push these assumptions aside and look anew at what your employees truly want from a recognition program – frequent, timely, meaningful and very personal appreciation and praise of what they do that moves the team/company forward.

2) Kick annual performance reviews to the curb.

The annual review process often becomes an excuse for managers to only give feedback and redirection once a year. There is a role for the annual review, but it must be accompanied by more frequent, personal and timely recognition.

In 2012, commit to revamping the annual review process to give employees the in-the-moment course corrections and praise they need.

(For a good analogy of how annual resolutions stink just as badly as annual performance reviews, check out Fistful of Talent.)

3) Remember employees in India likely won’t enjoy the same recognition as employees in Indiana.

This isn’t just about the rewards – the “stuff” – though global preferences are vastly different by generation, culture and gender. This is also about how employees prefer to be recognized for their efforts – publicly or privately, as a group or individually, and a myriad of other factors.

 2012 is your chance to re-evaluate your global recognition programs to find out how you can best meet the individual needs and desires of all employees, yet maintain one recognition program for better governance and oversite.

(Read this excellent post on how recognition of globally distributed employees can go horribly wrong  from my Compensation Café colleague Chuck Csizmer.)

4) Make recognizing progress and not just results core to the company culture.

A topic of great importance me is how to recognize and encourage employees as they make progress in achieving the big goals. This is especially critical on projects that can take months or years to complete.

Look to Teresa Amabile and Steve Kramer for their good tips on how to “Start the New Year with Progress.”

5) Help HR and Finance find the balance for rewards management.

Towers Watson recently issued research showing Finance plans to take greater responsibility for traditional HR functions, including rewards management. The report cites the primary reason for this as changing healthcare requirements in the US, but the is a tug-of-war that’s been going on for decades.

Ann Bares, author of the Compensation Force blog, gives an excellent run-down of the tension this creates between the two departments (as well as interesting insight into why the focus of HR is so different from Finance).

Regardless, in 2012 HR and Finance need to find a balance to meet the needs of employees for fair compensation as well as rewards that matter.

What are your 2012 resolutions for your organization?