Recognition in a Dowturn

Rewarding and recognizing performance is especially important in a downturn.

The economic downturn has impacted on companies and their approach to reward and recognition in a variety of ways. Some companies have actually increased their spend and efforts to reward and recognize staff in a bid to boost performance, some have kept their investment in such programs steady, while others have rationalized their spend as part of cost-cutting programs across the entire organization.

Most companies have maintained their commitment to rewards and recognition, despite others cutting back. Still, companies realize that recognition, maybe less so reward, is an integral part of business. Despite economic conditions, companies still realize that they need to invest in their teams.

Recognition plays an important role in an economic down turn. There are people who have missed out on bonuses or who are missing out on pay rises as a result of a pay freezes, but one thing companies can do is to continue to recognize their people. The authenticity of how an acknowledgement is made is really, really important – much more so than an award that someone gets just because they’ve spent so many years with a company.

Improving discretionary performance is important in an economic downturn – a particularly good time to make a strategic investment in performance improvement. When employees perform better, the company performs better and while there has been some affect on non-sales generating areas, companies are still recognizing that the people generating income need to be motivated. Those sorts of programs haven’t been affected either on the incentive or rewards side.

Return on investment

Return on investment in reward and recognition programs is being scrutinized more closely in the downturn. Companies are looking more closely at the level of return, which also needs to be more tangible than it has been in the past. Most companies, now more than ever, have a clear understanding the reward and recognition program they have in place and what they want out of it. Companies don’t run them just because it’s good to look after employees.

The ROI on an incentive program is obvious: low fixed cost element and a high variable cost element, so that when people generate revenue, such programs pay for themselves because people are hitting their targets. It doesn’t really matter what the budget is, however, with a smaller budget you have to be more clever about how you put the elements of the program together.

Boosting discretionary effort is vital in tough times, and companies need to think about the “loyalty mirror. The more the workforce is engaged, the higher the customer loyalty, and this absolutely goes to profit and the bottom line. Gallup has given us the figures. Engaged employees deliver 27 per cent higher profit, 50 per cent higher sales and 50 per cent higher customer loyalty. So it’s just a commercial decision,” she says.


Human Resources’ role in reward and recognition

HR is in a prime position to help make the most of any reward and recognition programs. Now, more than ever, leadership teams want increased discretionary effort. And the only way to get that is if people feel engaged with the organization.

To get engagement you've got to go through the three basic steps. Firstly, do people have all the performance development tools hat people need - that's the HR role. Secondly, are people emotionally connected to the organization? And, thirdly, are they connected to the brand?

Te key role for HR is in championing an initiative to the executive team to help them understand how reward and recognition can contribute to a broader strategy. HR has to put it in the context of the business. Obviously there is a cost to such programs, and, if these come into question, HR's role is in helping the business understand the non-financial benefits.


Elements of successful reward and recognition

Reward behaviour as well as performance, because behaviours such as exhibiting company values or excelling in customer service contribute to outcomes.
Everyone should have access to the reward and recognition program - not just high achievers or sales professionals.
Increase frequency of rewards and recognition to reinforce positive performance and behaviour.

Secure strong executive support, so a company's leaders own and drive the program.

[Source: Human Resource Leader, 8 July 2009]