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Workforce: The ROI of Employee Recognition

Feb. 14, 2013
Done right, reward and recognition programs deliver more than soft benefits -- they drive company performance.

If your company's reward and recognition program does not boost corporate performance as much as you would like, it may be your own fault. Try focusing on the behaviors you want, suggests consulting group Bersin by Deloitte.

"Nearly 80% of organizations unfortunately focus on ad-hoc or tenure-based recognition programs that fail to reinforce consistent messages or make a strategic impact," says Bersin's Stacia Sherman Garr, principal analyst, performance management. "Used correctly, employee recognition is an important talent management tool."

See Also: Manufacturing Workforce Management Best Practices

Seco Tools, for example, incorporates several reward programs as part of a comprehensive package of human resources initiatives. Driving performance is a significant component of those programs, says Dan Sikora.

"If you truly believe that engagement drives motivation, then people are more productive." -- Dan Sikora

"We are an EBIT-driven company," says Sikora, director of operations and human resources for the Troy, Mich.-based provider of metal-cutting solutions for the manufacturing industry.

Examples of Seco Tools' programs include small rewards given in recognition of performance that goes "above and beyond" daily job duties, with the recipients nominated by managers. "It is used sparingly for exceptional performance," Sikora says.

Another program, LIFE (Little Improvements from Everyone) promotes innovation, not simply in product development but across the organization. Work groups or individuals submit LIFE ideas via a structured process. The performance-driven keys to the program are this: The improvement idea must be tied to money savings or revenue generation, and the idea must be implemented, not merely generated, to be rewarded. Those whose ideas are implemented participate in a quarterly drawing, with the winner of the drawing receiving a gift card and recognition at the quarterly all-employee meeting. The quarterly award winners and their spouses also join senior executives for an annual dinner.

"We recognize when they are at work, they are away from home. We're showing we appreciate their contribution," Sikora says.

A third program delivers career development opportunities to participants while promoting company performance. Individuals chosen for the talent program are presented with a project to pursue during an approximately eight-month period. Importantly, the projects are not theoretical; they are actual problems faced by the company and ones which senior executives are having difficulty resolving. 

The results have been excellent with regard to improving company performance. "Every proposal has turned into an implementation, and the program engages and motivates," Sikora says.

For participants in the program, the reward is the opportunity for career growth -- a factor Sikora says is of growing importance to new recruits.

While participants in the talent program are not guaranteed a job promotion or pay raise, Sikora says what they do gain is greater opportunity to interact with senior executives, a work challenge outside of their everyday duties that expands their skills, and greater recognition from the company as promotion-worthy candidates when job opportunities arise.

Rocket Booster to Career Development

"It is a rocket-booster to career development," Sikora explains.

The company tracks the ROI of its HR programs in multiple ways, including with such typical metrics as employee turnover and new hire stay rates. For programs like LIFE, Seco Tools tracks the costs avoided or reduced for each implementation.

"Another financial one I keep a close eye on is productivity. Reason being, if you truly believe that engagement drives motivation, then people are more productive," Sikora says, while acknowledging that external factors also influence this metric. Nevertheless, "I believe it has enough of an influence that I track it and use it as an indicator of success."

For companies trying to improve or implement their own reward and recognition programs, Bersin & Associates offers these suggestions:

  • Set the tone for recognition with senior leaders and clear goals.
  • Develop clear recognition criteria.
  • Use technology; it boosts performance. Bersin by Deloitte suggests IT aids performance because it makes recognition more accessible to employees, can adapt to changing business needs and enables more frequent recognition.
  • Make recognition a multifront offensive.
  • Provide recognition that employees value.

"It is all about execution," adds Seco Tools' Sikora. Managers must support the programs and not simply see it as something to "check off" as done. Citing the LIFE program, he notes that every person who generates an idea receives a response. "It dies unless you have the discipline to provide feedback."

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