Strategic Rewards Systems

Performance and Recognition

Performance and Recognition

What is performance and recognition
Performance Performance is the alignment of organizational, team and individual efforts toward the achievement of business goals and organizational success. It includes establishing expectations, skill demonstration, assessment, feedback and continuous improvement. Recognition Acknowledges or gives special attention to employee actions, efforts, behavior or performance. It meets an intrinsic psychological need for appreciation of ones efforts and can support business strategy by reinforcing certain behaviors (e.g., extraordinary accomplishments) that contribute to organizational success. Whether formal or informal, recognition programs acknowledge employee contributions immediately after the fact, usually without predetermined goals or performance levels that the employee is expected to achieve. Awards can be cash or noncash (e.g., verbal recognition, trophies, certificates, plaques, dinners, tickets, etc.)

Rewards and Recognition, these days, is a familiar concept and is being used by most organizations as a tool for employee motivation. Understanding what motivates an employee has always been a key challenge for managers, but considering the importance of it for an organizations success, one has to continuously attempt to understand it better. With human capital gaining prominence over financial capital in the recent times, it becomes all the more important. Today, the competitive advantage of a business is determined by its people. Hence, the use of Rewards and Recognition is becoming more and more critical. Rewards and Recognition are many a times considered synonyms: however they are greatly different. Recognition mostly refers to non monetary ways of saying thank you and can take the form of thank you notes, pins, plaques, award ceremonies, company products, gift vouchers, employee photograph in the company newsletter or on the wall of fame , to name just a few. There are unlimited ways to say thank you for doing the right thing and they are not necessarily expensive. They cater to the psychological need of the employees of being appreciated and have high intrinsic value. Rewarding aims at strategically designing ways to compensate employees for their efforts and contribution towards the organisation. It motivates by fulfilling employees desire for monetary gain. This allows employees to receive a share in the financial gains made by the organization through their contribution.

Importance of Rewards and Recognition

The purpose of rewarding and recognizing, as we all understand, is to tell employees that their contributions are valuable to the organization. It matters to employees because they feel validated, important and respected. Studies show that there is a statistically significant relationship between reward and recognition and motivation and satisfaction respectively. Studies have revealed the following statements to be among the key differentiators between the best workplaces and other workplaces. They are: People here are paid fairly for the work they do; We have special and unique benefits; and I feel I receive a fair share of profits.

Studies by other researchers have also revealed that if rewards or recognition offered to employees were to be altered, there would be a corresponding change in work motivation and satisfaction. Oosthuizen (2001) has stated that it is a critical function of managers to motivate the employees successfully and influence their behavior to achieve greater organizational efficiency. Flynn (1998) has argued that rewards and recognition programs maintain high spirits among employees boosts their morale and creates a linkage between performance and motivation of the employees. A 2005 Watson Wyatt Worldwide study has found that companies with an effective recognition program realized a median return to shareholders that is nearly double that of companies without such programs. A study conducted by the Society for Incentive and Travel Executives has found that properly constructed rewards and incentive programs can boost employee performance by up to 44%. Another study has estimated that employees who are extremely negative or actively disengaged cost the U.S. economy between $250 and $300 billion every year, simply in lost productivity. Rath and Clifton have found that 9 out of 10 people report being more productive when they are around positive people, who are more inclined to appreciate and recognize. According to Andrew (2004), commitment of all employees is based on rewards and recognition. Lawler (2003) has stated that prosperity and survival of organizations is determined by how their human resources are treated. Most organizations studied have shown to have made significant progress by implementing a well-balanced rewards and recognition program for employees. Deeprose (1994) has stated that the motivation of employees and their productivity can be enhanced through providing them effective recognition, which ultimately results in improved performance of organizations. According to Broad (2007), tangible incentives are effective in increasing performance for tasks not done before, to encourage thinking smarter, and to support both quality and quantity of goals to be achieved. Incentives, rewards and recognition are the prime factors that impact employee motivation. Motivation also has a direct effect on the innovation in an organization. This presupposes that organizations provide recognition not only for achievements but also for efforts. Objectives that an effective rewards and recognition program seek to fulfill

All effective programs of rewards and recognition seek to fulfill three objectives:

1. Positively reinforce and sustain desirable actions and behaviors among employees, which in turn lead to sustained excellence in performance. 2. Help to retain best talent that the organization requires for its growth and continued success. 3. Help the organization to attract best/suitable talent from the talent market, whether it is raw talent out of the best educational/professional institutions or talent pool of outstanding experienced professionals. Characteristics of the most positively perceived rewards and recognition programs

1. Distributive Justice: The proportion in which financial resources and gains/profits of the organization are distributed between various stakeholders such as promoters/owners/investors/ shareholders, managers and employees at different levels in the organization, belonging to different divisions/functions/locations, etc, define distributive justice. If some stakeholders are disproportionately rewarded (in the eyes of the other stakeholders), then the effectiveness of the rewards program can suffer. Another aspect of distributive justice, as well as procedural justice, is that differentiation in rewards and recognition reflects true and significant differentiation in performance and contribution. 2. Procedural Justice: Answers to the following questions indicate whether requisite procedural justice exists, the absence of which hurt the effectiveness of the programs - For what actions/ behaviors/efforts and results/contribution/performance are rewards and recognition provided? Are only results rewarded and recognized, or do they apply to sustained efforts as well? How fairly, transparently and correctly are efforts and results measured? Does everyone get sufficient opportunities to perform and to be recognized and rewarded? How does the organization ensure that results achieved through wrong behaviors and non-performing people dont get rewarded or recognized due to favoritism, nepotism and organizational politics? 3. Interactional Justice: This is about the human element of fairness and justice which forms the capstone of effective rewards and recognition programs. Do the recipients of rewards and recognition (and even those who dont receive rewards at any point in time) feel the sense of being appreciated and thanked genuinely from the bottom of the heart by those who are in a position to reward and recognize?

Types of Recognition and Rewards

Praise/recognition from supervisors -Praise and recognition from supervisors is consistently found to be among the most important motivators. Employees want to be recognized and feel their contributions are noticed and valued. It is important that supervisors recognize the value and importance of sincerely thanking employees verbally and/or in writing for their specific contributions. Challenging work assignments - Challenging/new work assignments are another mechanism available to supervisors to reward good performance. Such assignments can provide employees

opportunities to develop new skills, expand their knowledge, and/or increase their visibility within the organization. They also send an important message that employees contributions are recognized and valued. In considering such assignments, supervisors should consult employees about the types of assignments that would be most valued, and they should also assess whether workloads will need to be redistributed to ensure employees have adequate time to devote to new tasks. Professional growth and development opportunities- Supervisors may provide employees opportunities to participate in educational programs or other activities that will expand their skills/knowledge (Job Related Training: (Internal) and (External)). Employees benefit by developing new skills, and the institution benefits from the additional expertise individuals bring to the job. Nelson notes a recent survey found that 87% of responding workers viewed special training as a positive incentive, and it appeared most meaningful to employees with postgraduate education. Paid Leave - Supervisors may award employees up to 32 hours of paid leave annually in recognition of meritorious performance Progression through the salary range - Employees may receive salary increases to recognize the attainment of new and/or the enhancement of existing skills/competencies or for assuming increased responsibilities within the scope of the current position. The salary increase represents a progression through the salary range approved for the position. Merit increases - allows supervisors to give employees an annual merit increase to recognize consistently meritorious performance or successful completion of a project that had a significant impact on a department or the university. The reward may be in any amount up to 5% of the employee's current base salary, subject to the availability of funds. Budgetary information regarding fiscal year merit increases are issued annually as part of the budget process as soon as the institution's fiscal position can be determined. To be eligible for a merit increase, employees must have been employed for at least six continuous months and at least six months must have elapsed since the employee's last salary increase, promotion, salary increase due to progression in the salary range, demotion or transfer from another department.

Lump Sum Merit- A lump sum merit is a one-time award, not added to base pay that can be
awarded to an individual for meritorious job performance. Meritorious job performance is defined as either consistently high level of job performance over a sustained period of time; or successful completion of an assigned project that had a significant positive impact on the department or the university.

An employee cannot be guaranteed in advance a payment of a lump sum merit for achieving performance targets. A lump sum merit may be paid from any fund source. Payment from a grant fund will be up to each individual granting agency. An important part of base pay management is the maintenance/monitoring of an employee's base pay salary and progression through the salary range. HR strongly encourages managers to award the regular merit increase as an additive to base pay if the employee's current pay is below salary range midpoint and the permanent funding is available.

Promotions and lateral moves - Promotions and lateral moves may be long term rewards that
recognize employees professional growth, expertise, and capacity to contribute to the institution in new roles. Promotions are typically associated with an increase in salary, and the increase may be any amount up to 5% of an employees current salary. For employees with base salaries under $25,000, the increase may be any amount up to $1,250. The new salary also must be within the salary range approved for the position, and employees are subject to a 90-day probationary period following a promotion/lateral move to a new department. Administrative salary supplements - Employees who assume new/additional responsibilities on an interim basis may receive administrative salary supplements that are paid in addition to the base salary. The supplement is discontinued when the employee is no longer responsible for the additional responsibilities. Informal rewards - When warranted, supervisors may choose to give employees informal rewards for specific accomplishments/contributions. State law and institutional policy, allow expenditures of up to $50 of state funds and $100 of non-state funds per employee for informal non-cash rewards that demonstrate the supervisors/institutions appreciation. Supervisors can be creative in identifying informal rewards that will be appreciated by the particular individual being recognized, but, in selecting and purchasing rewards, supervisors must be sensitive to the institutions responsibility to be good stewards of public funds.