Recognition to the Rescue

Employee engagement and staff recruitment were among the top concerns discussed by CEOs and business leaders in 2012, according to the CEO Institute. On the other side of the table, from managers to administrative assistants, company culture is a significant motivator and contributor to engagement, performance and loyalty.

Just as leaders are looking to create the kind of positivity-dominated workforce that attracts top talent and keeps them happy, employees are seeking opportunities that allow them to contribute to that type of culture. As this has become an organizational focus, talent managers’ jobs have shifted, driving them to assume the role of cultural energizers. Human resources, the one department that touches everyone within the organization, is being asked to help organizations make culture a differentiator.

According to the 2012 SHRM/Globoforce Employee Recognition Survey, employee recognition programs that reward ongoing performance and behaviors can make all the difference.

In an economy that saw a median pay raise of just 2.8 percent in 2012, and is expected to hover at 3 percent in 2013, according to compensation and benefits association WorldatWork’s 2012-2013 Salary Budget Survey, recognition programs can do much to increase employee engagement and retention. The SHRM/Globoforce Survey found that organizations with strategic recognition programs in place reported 23.4 percent less employee turnover on average than those without such programs (Figure 1).

As a result, designing and leveraging a recognition program is now at the forefront of many critical HR programs. Leaders are looking to proactively manage culture and ultimately impact the bottom line through improved employee retention and performance.

With these challenges in mind, many HR leaders are questioning how to create or update a recognition program to ensure it is effective at moving the needle on these metrics. Equally important is how well the program reflects and reinforces larger corporate goals and impacts an organization’s bottom line — both key factors in building the business case for the C-suite.

Make Recognition Strategic and Measurable
The SHRM/Globoforce survey found when recognition awards are tied to corporate values, companies experience 29 percent lower employee frustration levels and lower turnover, and employees feel 22 percent better able to help achieve organizational objectives.

Enablement is an important factor in engagement and culture management, and when employees feel more enabled to achieve goals, they are also more engaged and less likely to jump ship. This is tightly tied into recognition, and it is being explored by analyst firms Hay Group and Towers Watson, with the latter finding in its report “The Power of Three” that companies with sustainably high engagement — which requires enablement and energy — have nearly three times higher operating margins than those with low engagement.

When providing employees with an environment that reinforces values and enables performance tied to the bottom line, HR is speaking the same language as the CFO, CEO and other C-suite executives, making the case for recognition.

However, even organizations with everyday recognition will not achieve business results if the recognition is not tied to corporate values and goals. At organizations with strategic recognition, 79 percent of employees have a clear understanding of organizational objectives, compared to 63 percent at those without recognition (Figure 2). They also feel more capable of achieving these objectives.

In an effort to make recognition strategic, organizations must go beyond general appreciation to link each recognition moment back to a specific objective or core value. It helps clarify, in the employees’ minds, the must-win battles and the type of performance employers value.

Organizations must ingrain values and goal orientation into each employee’s daily workflow through continuous recognition that reinforces aligned behaviors. This increases consistency and reach, helping bolster culture and shape behavior at every level of the organization as well as the ability to measure recognition’s impact on employee performance.

Integrate Recognition Into Talent Management
The budget allocation for a rewards and recognition program is a common question many organizations have, and the answer isn’t simple. It plays into the overall HR budget, payroll and size of an organization, but the investment corresponds with the result.

Cash is not the currency of employee recognition, and it generally leads to entitlement rather than motivation. However, putting monetary commitment behind the goals can help achieve outstanding results when done strategically. Too often, people assume that pizza parties or an annual year-of-service gift can achieve the same results.

In the SHRM/Globoforce fall 2012 survey, when organizations that allocated less than 1 percent of payroll to recognition were compared with those that invested 1 percent or more, differences emerged in engagement levels, retention and employee ties to company values.

Companies spending 1 percent or more of payroll on rewards saw an 85 percent positive impact on engagement, and 61 percent indicated that employee recognition programs helped with retention, compared with 74 percent and 42 percent, respectively, of organizations spending less than 1 percent of payroll. Further, 59 percent of companies that spent more than 1 percent of payroll on rewards saw better financial results, compared to 33 percent of organizations reporting positive financial results due to recognition.

To yield tangible value and extend the financial investment in employee rewards and recognition, making the program synonymous with corporate values and objectives is critical. Taking these values off of the mouse pad or a plaque on the wall is one of the more difficult challenges in culture management, but it is achievable and justifiable.

Metrics from the SHRM/Globoforce fall 2012 survey indicate that recognition programs directly tied to organization core values are more effective. The real-world, real-time modeling of desired behaviors reinforces company goals, making a larger impact on engagement and performance. Further, the data from this sort of recognition leads to a deeper understanding of a company’s talent performance — opening doors for better management and measurement.

At organizations with values-based recognition programs, 72 percent reported employees are rewarded according to job performance and 37 percent reported high percentages (71 percent or better) of workers with high engagement levels, compared to 55 percent and 25 percent, respectively, for companies without strategic recognition programs.

Further, programs that tie recognition to values contributed to a solution for the challenge of performance appraisals, with 62 percent of respondents reporting accurate reviews (Figure 3).

Recognition is highlighting that many performance appraisal systems are outdated, inflexible and too infrequent to effectively manage performance. With recognition, and its accompanying crowdsourced data, corporate values and objectives are brought to life each day rather than limited to a once-a-year review or a forgotten list, which helps HR to better manage and measure culture and talent.

From Recognition Program to Culture
Many HR leaders and organizations are talking the talk when it comes to recognition, but are they walking the walk? Culture cannot be managed through upper management alone. Giving all employees the empowerment and ability to recognize and reward their colleagues for living company values is the difference between a recognition program and a culture of recognition.

In the SHRM/Globoforce survey, metric after metric showed that companies with peer-to-peer recognition perform better. This can be attributed to its ability to widen the input circle beyond a single viewpoint — the manager — to a group of inspired co-workers across the entire organization, increasing the volume and velocity of recognition. This energizes the entire workforce to create a culture of recognition.

The impacts on financial results in companies with peer-to-peer recognition were greater, and HR managers felt the workforce was more likely to feel highly engaged and be better attuned to company values. Companies that promoted peer-to-peer recognition experienced across-the-board improvements in business metrics. Peer-to-peer recognition was 35 percent more likely to help with retention, 36 percent more likely to have a positive impact on financial results and 28 percent more likely to reinforce corporate values (Figure 4).

A peer-to-peer recognition program gives all employees, managers and business leaders skin in the game and a stake in the overall talent management and performance of their companies — communicating trust and value in the entire workforce.

In the SHRM/Globoforce survey, the top challenges HR faces are succession planning, employee engagement and culture management — all of which have a critical connection to business results and can be driven through employee recognition.

With the growing pressures to drive stronger employee performance, identifying and engaging the top talent that already exists within an organization can have a critical impact on the bottom line. Organizations can use strategic recognition to impact employee satisfaction and gain insight into the strengths of their employee base to better inform HR leaders and enhance overall talent management practices.

Recognition is an integrated element of HR, tying into retention and attrition, maintaining a positive corporate culture and identifying individuals for succession planning, performance appraisals and more. Organizations and HR leaders must make sure this piece of the puzzle is in place as they look to drive business and financial goals forward and move the needle on metrics that matter.

Derek Irvine is vice president of client strategy and consulting service for Globoforce, a global social recognition program company. He can be reached at editor@talentmgt.com.