We’re talking about recognition and reward today and although many will be aware of the term and generally what’s involved, Andrew can you give us an overview about why it is such an important area for people management and high performance?
Reward and Recognition is the fundamental essence of the employment relationship between employees and their employers. Its about not only paying people, but also recognising their efforts. You can look at it in 3 main areas –
First it is what attracts people in the first place to come and work for you – how are they going to be rewarded and recognised for their efforts for you.
Second its what keeps the employee with you – if they feel that their efforts are adequately rewarded there is a better chance that they will stay with you.
Third, and this is where the real added value of the right reward and recognition strategy comes in to play, its about developing motivation and employee engagement where they will go the extra mile for the employer.
Wrapped around these 3 is the need to be cost effective and financially efficient – and this is where the employer needs to be able to balance the cost of reward and recognition with the impact on the workforce.
Finally the reward and recognition process has to link in with what the business is trying to achieve, so making sure that the goals and objectives are in line with the way people are rewarded. A good example is with a construction company I recently worked with – They had a clear business goal to move away from the traditional building work they did to develop a more diverse product offering. When we looked at the reward side, there were large bonuses being offered to the workforce to do more of the traditional building work. Clearly their reward strategy was actually mitigating against their goals and objectives.
I think there is an assumption by many that this is just financial incentive, but recognition and reward can include more than that can’t it?
Yes some managers feel that financial reward is the sole driver of employee motivation and engagement, but plenty of empirical evidence suggests that this is not the case.
You need to get the financial bit right, so that for instance you are not paying below market rates for the job, but once you get this level right there is no evidence to suggest that paying more will increase employee motivation and engagement.
Non financial reward, such as simply praise or giving people more responsibility and trust are more often the drivers of motivation and engagement.
One of the main examples of this is with bonuses. These are non consolidated payments often linked to results. They may be an effective way of reducing ongoing pay costs, because they do not add to basic pay year on year, but on the whole they do not increase motivation or the willingness to go the extra mile. In fact financial bonuses are often demotivating, for instance because a) they become expected and there is demotivation if they do not appear, b) they can cause competition within the team or organisation and c) the targets set to earn bonuses are often either not realistic or too easy to achieve.
I’ve heard about a concept of Total Reward, can you tell me a little more about this?
Importantly and often not recognised is the fact that the components of reward and recognition include things like training, the job itself, how the employee is managed, communication, involvement, worklife balance, the work environment etc.
A TRS is a way of looking at all the different aspects of how we reward and recognise our employees and it enables us to balance all these aspects.
A TRS divides our reward and recognition elements into 4 main areas: Pay, benefits, employee development and the work environment. And the goal of this type of model is to ensure that all these areas are aligned for employees.
So pay will obviously include basic pay, bonuses, sick pay and any other direct financial items.
Benefits will include financial and non financial reward, such as holidays, Health benefits, pensions and flexi time systems
Employee development includes the job content, performance management, career development, training and development
And the work environment includes leadership and management behaviour, Values and culture, autonomy, worklife balance and the physical environment.
What we do with the TRStrategy is to look at all these components and make sure that they align with each other. If we get this right, then we have a much better chance of developing motivated and engaged employees which is what we need if we are to create high performing organisations.
We tend to find that in the world of reward and recognition if one part of the TRS strategy is inadequate that will invalidate all the rest. So for instance we may have above average pay rates and great training for employees but if the management style in place is not appropriate the chances of developing the motivation and engagement we need will be severely hindered. Likewise if we have fantastic employee benefits but poor job content then we are likely to get people who stay with us, but who do not go the extra mile or provide discretionary effort.
So if an organisation wants to look at what they offer as recognition and reward and ensure it is working as effectively as it can to support performance, where should they start?
They need to have a good and honest look at what their current reward and recognition strategy is and analyse if it is actually working. Does it attract, retain and motivate/engage the workforce to maximum effect. If it doesn’t do all 3 the chances are that they are wasting money and resources. For instance they could find that they have employees who are committed to come to work, because the pay is good, but once at work, the employees could be just doing enough, rather than really going the extra mile for the benefit of the organisation.
They then need to look at each component of their TRS and see if it is effective – for instance:
Are we paying above market median – if so why?
We may have a great benefits package, but does that actually add any value because people don’t use them?
Are we doing what we can to develop stimulating job content, using for example multiskilling and job rotation?
Is our management and leadership right for the sort of organisation we are, for our goals and objectives and to motivate the workforce?
An example was a company who was looking for high levels of innovation from the workforce but whose management style was highly autocratic. This meant the workforce was prevented from being creative themselves and coming up with new ideas.