INCENTIVE AND RECOGNITION SCHEMES
Why impliment an incentive and recognition scheme? In an economic climate of low inflation with significant competition between companies for the recruitment and retention of staff, it is not a financially viable option to continue to award high salary increases, bonuses or increasingly expensive benefits, trying to outdo your competitors.
Companies are now looking for cheaper ways to recruit and retain staff and that is where incentive schemes and recognition schemes enter the arena.
Companies now realise that individuals like to be rewarded in a variety of ways. Everybody is different, some people are not particularly motivated by money, but everybody can be motivated by something other than money.
Author of “1001 ways to Reward Employees”, Bob Nelson, has looked at ways to motivate employees. Here is his top ten list:
- Personally thank employees for doing a good job – one on one – verbally, in writing or both. Do it in a timely manner, often and sincerely.
- Be willing and able to take the time to meet with and listen to employees – as much as they need or want.
- Provide specific feedback about performance of the person, the department and the organisation.
- Strive to create a work environment that is open, trusting and fun. Encourage new ideas and initiative.
- Provide information about how the company makes and loses money, new products, strategies for competing in the marketplace and how the person fits in with the overall plan.
- Involve employees in decisions, especially when those decisions affect them.
- Provide employees with a sense of ownership in their work and the work environment.
- Recognise, reward and promote people based on their performance. Deal with low or marginal performers so they either improve or leave.
- Give people a chance to grow and learn new skills. Show them how you can help them meet their goals within the context of meeting the organisation's goals. Create a partnership with each employee.
- Celebrate successes – of the company, of the department and of the individuals in it. Take time for team and morale building meetings and activities.
Of the incentive and recognition schemes in place in companies to recognise achievement:
- 47% are non-cash schemes e.g. service pins, plaques and certificates
- 38% are non-cash + cash e.g. merchandise + cash
- 15% are cash only schemes
Awards for years of service still rank first in the types of awards employers use.
Lots of managers already successfully use non-financial rewards: they thank and praise employees for a job well done immediately on completion of the task, they know their staff individually so they know which ones like a quiet personal thank you and which ones like public praise, they send staff home in taxis when they’ve worked late, they buy them in pizzas when they are working late and they take them out for a meal at the end of a successful project.
Some managers act like this naturally others would never think about it. The culture of the company has to be such that managers have the authority to do these things, spending company money in this way. If this isn’t part of company culture and policy the only way it would work would be for managers to fund these actions out of his/her own pocket.
The current trend in non-cash incentive schemes is towards much wider use. Non cash incentive schemes are no longer just for sales staff but are expanding into other activities especially customer service and quality. The market of suppliers of non-cash incentives is diversifying to include high street stores, mail order, corporate leisure and travel companies, and marketing and motivation agencies. The range of award products is also expanding:
- Gift vouchers – retail vouchers, generic voucher products, discount vouchers
- Travel – ranging from weekends in UK to exotic holidays
- Leisure - everything from archery to health treatments, and quad-bike riding to windsurfing, theatre trips, tickets for major sporting events and corporate hospitality
- Certificates and trophies
- Merchandise- long service awards, clothing, corporate pens, folders, mugs etc.
There are many companies in the UK offering award products and support services they are able to help design incentive schemes, measure staff performance and administer the HR scheme.
Point – based incentive schemes are becoming more popular with advanced computerised recording and reporting systems available. In this type of scheme employees are awarded points for meeting objectives and the more points they can accrue the better the award they can receive.
If you do implement a non-cash incentive scheme it is important to remember the tax implications and the potential demotivational effect of the extra tax bill.
There is guidance available on the HMRC web site.
Why introduce a Recognition Scheme?
Recognition schemes are increasingly popular with employers as a way of rewarding special efforts and commitment of valued employees. An awards scheme can generate much goodwill for a relatively modest outlay. Companies often regard recognition as a means of both improving performance and of increasing levels of employee satisfaction.
A great benefit of a recognition scheme is that it enables an employer to highlight desired actions and behaviours, holding up as role models those employees who best epitomise them. When deciding who merits an award, it pays to think about the kind of message the choice will send to the rest of the workforce. A successful recognition scheme can help to motivate employees, create a culture of customer service and raise performance company-wide. Increasingly, employees qualify for recognition awards when their actions are seen to embody company values or focus attention on wider corporate goals.
Something to remember
The act of recognition itself and the esteem it gives to employees is often the key aspect of schemes – the prizes just gild the lily. Receiving public acknowledgement for a job well done can be a powerful and lasting statement of an employee’s value to the organisation. This can be reinforced in recognition schemes where peer review panels make decisions on awards; these sometimes carry more weight in the eyes of employees, because colleagues who have first-hand knowledge of the job are the ones bestowing recognition.
Although companies sometimes give cash awards, more often they provide vouchers that can be exchanged for travel, outdoor activities or brand-name goods. Not only does this preserve a degree of employee choice, but the experience involved is also potentially much more memorable than a cash award which can too easily be lost on the pay packet. This is especially true of ‘adventure’ activities such as racing days, hot-air balloon flights or driving a tank – the sorts of things that people would not normally spend their own money on.
Open to all
For employee recognition schemes to be ‘felt fair’, it is important that staff in different roles all have the opportunity to be considered for an award – not just those in higher-profile, customer-facing positions. Line managers need to ensure that this happens in practice. At the same time, employers must consider the optimum number of recognition awards to make. Too many, and the awards risk being devalued and the incentive scheme may lose credibility; too few, and the scheme could even demotivate, because employees may feel they have no realistic chance of getting one. Schemes often strike a balance by having various levels or tiers of award. This enables an employer to reach many employees while reserving awards with more prestige for those who ‘go the extra mile’.
A transparent judging process can also go some way to showing that a recognition scheme is fair. Selection panels made up of managers or staff from across the organisation can help ensure that nominations for higher-level recognition awards are justified in terms of how exceptional nominees are in the context of the entire business rather than just their own department. A particular danger is that awards are simply given in turn, rather than genuinely on merit. Establishing a consensus on award winners helps maintain the integrity of an incentive scheme.