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Human Resource Management – Reward & Recognition (Feb 14)

Suggestions of having ‘turned the corner’ and recent disputes at the Liebherr plant in Killarney, Co Kerry and a staff picket over pay at UCC has renewed the focus on the concepts of reward and recognition.

The concepts of reward and recognition are often blurred because of the large overlap that exists between them. Definitions of reward have historically focused on the concept of pay or bonus payment in return for work done. In line with this, Employee achievement of desired outcomes has become a way in which to obtain the reward, typically monetary, on offer. In contrast, the notion of recognition can simply refer to specific praise or acknowledgement of work done.

Reward

In line with the philosophy of a ‘Total Reward’ approach to Employee compensation, organisations are increasingly looking to consider Employee reward in this broader context. Those with effective reward strategies in place are better positioned to strike a balance between extrinsic and intrinsic reward and meet the psychological contract in place with their Employees. An acceptance by the organisation that non-financial rewards can play an important part in attracting and retaining Employees, recognises that individuals require more for their efforts than monetary reward alone.

Organisations are also increasingly become aware of the need to have an understanding of existing pay and benefit trends so that they can make knowledgeable and informed decisions on maximising their Employee spend. While benchmarking exercises have historically focused on pay only, the ability to benchmark the total reward package, including base salary, bonuses and other benefits in their entirety, rather than in isolation, has become critical to many organisations. Given the ongoing pressures on cost in most workplaces, it has become increasingly important to understand the competitiveness of the complete reward package, not just base salary. Given this, organisations are increasingly making concerted efforts to focus on maximising the return on their investment to Employee pay and reward. With organisations under pressure to utilise their benefits programs in order to maximise meaningful competitive advantage, being able to benchmark organisational levels of pay and benefits against others is crucial.

While Employee pay and benefits are important, research has consistently demonstrated that non-financial rewards can be considered as just as vital by Employees. While financial rewards are important as a means of providing monetary recognition of effort or contribution, numerous studies have concluded that for those with ‘satisfactory’ salaries, non-financial rewards are more effective than additional salary payments in supporting long-term Employee engagement.

Elements of a Total Rewards Approach to Reward


Designing a successful Total Reward and recognition strategy is a balancing act that needs to consider three perspectives including those of the:

  • Organisation
  • Employee, and
  • Cost management.
Not only should organisations be aware of and consider the different preferences of Employee groups but thought should also be given in order to understand the relationship between the value of the reward to the Employee and its contribution towards the wider organisational goals and strategy.  

The key components of an effective Total Rewards strategy can include various programs, practices and elements which collectively define and enforce an organisation's strategy to attract, motivate and retain Employees. Key elements can include:

  • Compensation
  • Benefits
  • Work-Life
  • Performance and Recognition
  • Development and Career Opportunities. 

Recognition

There are a whole host of alternative motivators that can act to positively influence Employee behaviour and enhance motivation. One method of achieving this objective, as part of an overall approach to Employee reward is to positively recognise Employees for desired behaviour and performance.

Effective Employee recognition is a central part of the employment relationship. Organisations which understand the importance of recognising, validating and valuing high performance standards keep Employees motivated and represent an effective method of reinforcing organisational expectations and goals. This is especially so in times when pay increase budgets are low or even suspended, promotions are less likely and overall levels of Employee engagement may be low.

A simple ‘thank you’ can go a long way when paired with properly designed rewards and recognition programmes. Research studies have shown a high correlation between recognition and increasing Employee levels of motivation. If that were not enough, a significant percentage of Employees indicate they would leave their current Employer for another organisation that clearly recognises individual or collective effort and contributions.

Forms of Recognition

The size, scope and formality of recognition schemes can vary. Effective recognition programmes can be both formal and informal in nature, ranging from informal programs which incorporate a simple ‘thank you’ to more formal programs; such as Spot Awards to recognised those that have performed ‘above and beyond’ their role.

Organisations which people love to work for recognise their Employees and not only tell them that they are doing a great job, but show their appreciation through tangible incentives, recognition and rewards. Insight as to what forms of recognition are valued by Employers can be gathered from Employer engagement surveys or focus groups.

Formal recognition program may require a small amount of planning and administration. Such schemes typically include a nomination and selection process in order to identify and acknowledge achievement and performance. While such recognition is non-monetary in nature, they may have a monetary value associated with it. 

Informal acknowledgement operates on a more day-to-day, discretionary and individual basis. Managers play an important role in noticing and acknowledging desired performance and behaviours. In its most basic form, informal recognition can be a simple “thank you” to an Employer for a job well done.
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