By Derek Irvine
“How should I structure an employee recognition program that will have the kind of impact I’m seeking?”
That has to be one of the most common questions I hear when discussing strategy for a social recognition approach that drives desired culture, engagement, productivity and performance. There are several critical factors for success, which we discuss in depth in Chapter 7 of The Power of Thanks. But two foundational aspects deal with how to invest appropriately in recognition and how to use that investment wisely.
1) Set an Appropriate Budget
Approaching recognition as a strategic initiative that drives core organizational goals requires an investment in your efforts. Think of it this way. An inadequate budget for recognition is like trying to illuminate a stadium with a 30 watt light bulb. Sure you can light up a small area well, but the impact of your efforts won’t be felt very widely or deeply. Appropriately funding recognition is like flipping the master switch to light up the entire arena brighter than a noon-day sun. With the right budget, you can touch every employee, in every corner of your organization with the power of appreciation and praise.
So, what is the right level of budget? WorldatWork’s semi-regular Trends in Employee Recognition reports tell us the average continues to be about 2% of payroll. For many organizations, that figure is quite daunting, but consider it can include bonuses, incentives and more that we wouldn’t strictly include in a true social recognition program budget. Instead, think along the lines of what we discuss in The Power of Thanks: “The average… yearly total award spending of about $250 per employee.” That level of budget investment allows for the free-flow of recognition, reinforcing your core values and strategic objectives in the daily work of every employee.
2) Use Your Budget Wisely with Calibrated Awards
Once you’ve established an appropriate budget, using it wisely lets you get the most return on your recognition investment. Key to this approach is offering multiple differentiated award levels, calibrated to level of effort, contribution, time invested and result achieved. Offering calibrated awards ensures people are recognized and rewarded appropriate to their contribution, avoiding the “equal = fair” trap.
Think about the recent news surrounding Gravity Payments, the company that chose to cut CEO salary to pay all employees a minimum of $70,000 annual salary. When first announced, this story garnered much praise. But now, the story isn’t quite so positive. One employee has left because, as a high-performer he felt slighted that those who do not exceed expectations regularly receive the same remuneration as he does.
Differentiation matters. If you step up to lead a major project that ultimately saves the company significant costs, but are recognized with the same level of award as a person who contributed as part of team to a minor project with less long-lasting impact, you will likely feel slighted and overlooked.
Significantly, differentiated awards also let you recognize far more people throughout the year with lower value awards, spreading your budget more broadly and effectively across the vast majority of employees. Superstars still likely receive more of the higher value awards, while your “Mighty Middle” are also recognized for their contributions that make it possible for the stars to shine.
Is your recognition program appropriately funded? Is the budget available used as wisely as possible to touch the most employees with the power of thanks?
About Derek Irvine
The VP of Client Strategy and Consulting at Globoforce, Derek Irvine is one of the world’s foremost experts on employee recognition and engagement, helping business leaders set a higher vision and ambition for their organizations. As a renowned speaker and co-author of "The Power of Thanks" and "Winning with a Culture of Recognition," he teaches companies how to use recognition to proactively manage company culture. Derek holds a B.Comm and Masters of Business Studies from the Smurfit Graduate Business School at University College Dublin.