Mindstretches® // Can't buy me love

Reward and Recognition
Group Discussion


6 November, 2002 (to see the slides click on the slide number)

The views expressed here are the personal views of the participants, and are not necessarily the views of their organisations.

The following people were present at the first fe3 mindstretch®:-

KD
Thanks for coming today everyone. This is the first of a number of discussions we hope to hold over the next few months. Today is about recognising contribution - as opposed rewards.

As you can see from the comments from this slide    people have different views about money and its value….and I have to say that research is equally inconclusive. To my mind, this comes from differing views about three elements:

I’ve chosen three studies from possibly hundreds that have looked at what drives motivation and performance    and the results vary considerably. There are lots of reasons that they differ, some methodological, some because the definitions vary, but rather than get in to that, here is (roughly) what they said:

The meta analysis of Guzzo and colleagues showed (perhaps not surprisingly) that financial AND non-financial incentives can increase performance. Their conclusion is that the power of the incentive depends heavily on the circumstances and methods of applying the intervention.

The Pritchard study in 1988 looked at 5 units from an air base. First they measured the outputs of the groups, then added feedback on their performance, then goal setting and finally incentives for performance. What they found was that feedback and goal setting produced more significant increases in performance than the incentives.

Finally, slightly more up to date, Marsden and French did a study of Performance Related Pay in the public sector in 1998, looking at 2 government departments, 2 NHS Trust hospitals and primary and secondary head teachers. Amongst a range of findings, the most significant one was that while PRP had improved goal setting, it had also damaged the relationship with staff. This was due to a number of causes, the key one being the perceived inequity of the system – that managers were using it to reward favourites

GS
Are these all UK studies?

KD
No, the Guzzo is international, the Pritchard is US.

GS
So there are similar messages from both sides of the Atlantic

KD
It’s pretty plain that pay is just one part of the mix in motivating individuals, although it’s not always been considered that way. This is a view of the development of reward policy from the 1950’s.    Gary goes into more detail about this in his book, so I won’t repeat it all here, but suffice to say, environmental and social change has made employers consider a more complex reward strategy to balance between cost control and recruitment and retention. Gary is going to bring you up to date on more recent developments.

GS
The late 1990’s saw the beginning of a more strategic approach to reward strategy.   Employers realised if they changed the fundamentals of the job for life contract, they needed a new psychological contract if they were to keep the right people.

The key is to understand and then meet employees’ expectations.

Since about 1998, companies have been thinking more and more about their employer brand which helps to set those expectations – for example, Sainsbury’s consider it so important they actually employ a Head of Employer Branding, who is attached to the HR function.

The strategic approach is about the move from seeing employees as the cost of doing business to valuable assets.   

So if we are agreed that employers today need to think about the non-salary aspects of reward and that we want people to behave in line with our brand values, what are the choices? This slide lists the most popular ones that I know of.   

KD
The point about feedback and goal setting on this slide is supported by much of the academic literature in terms of its motivating potential….

I think some of my experience has made me cynical – the saying that our people our greatest assets still does not ring true. I think this might be the case until individuals are actually part of the bottom line.

FE
I agree – I’ve worked in organisations where there was a great deal of talk from the top about openness and two-way communication and how important it was. When I talked to staff at bottom of the ladder they said it didn’t mean anything, and they were very cynical about how much it would improve their work.

This was particularly true when it came to setting goals, people were not very committed, but felt it had to be done. In the appraisal process, staff were awarded grades on the basis of how well or otherwise they had achieved their goals – a grade ‘3’ indicated satisfactory performance and was the expected level for all employees. A grade ‘4’ signified poor performance and ‘2’ and ‘1’ signified performance over and above expectation. These grades in turn determined the salary increase for the next year.

In an attempt to ensure comparability of grades between departments a moderation meeting took place between members of the senior management team to agree grade descriptors and confirm grades awarded. This led to senior managers becoming very territorial and promoting the interests of their own team. In fact, sometimes, it must have seemed to the staff that it depended on whose team you were in whether you could ever access the higher grades.

The process wasn’t motivating and decisions were felt to be arbitrary, even if the process was very structured and documented.

GS
Well, one of the problems here is that it is much easier to measure the effectiveness of processes than their outcomes. Processes happen more or less continuously, but outcomes happen less often. For example, it’s hard to measure the amount of customer satisfaction delivered by the efforts of an individual employee. While customer feedback is very motivating, people do not get rewarded on the number of letters sent in by happy customers.

Another issue is that employers might be tempted to think that non-salary items must be cheap – and these things are not! For example, the concept of total reward might include the size of the office, being able to specify the type of PC you prefer, or office furniture – NONE of which are cheap!

FE
I think it’s important to monitor how a recognition scheme is working for you – otherwise you can’t tell if you’re wasting money. Employers don’t necessarily ask employees what’s beneficial to them. In my current role, I’m looking at a competitor’s package of benefits for supply teachers. Its basic rates are not especially high, but supply teachers can opt for vouchers for contribution towards their mortgage, rent, healthcare or childcare as loyalty incentives.

GS
Yes, flexible schemes work better. Employers should find out what employees want rather than what the employer thinks they want

KD
There’s a key message coming through on motivation and reward here. Reward isn’t worth anything unless you know what benefit it is to the employee.

GS
And in fact, some research shows that most people would rather have rewards evenly shared.

So - if you were going to look at introducing a recognition scheme, here are some things you might want to think about.    Recognition can be anything from a simple “thank you”, to holidays in the Bahamas – particularly for sales people. But it’s important to make sure that the things you offer as recognition are appropriate to the individuals.

One way of aligning rewards and individuals is to think of the individuals in terms of different personality types and link rewards to those different characteristics. It’s a broad view, but might help you consider that a public presentation might be torture for someone who spends most of his time locked up in a lab.

I have an example here, too. In a company I worked in, line managers were given thank you card, which could be personalised to say what the employee was being recognised for – and they loved them! It meant that these highly technical people could show their appreciation to colleagues for the work and yet not have to make a huge public display – which would have embarrassed all concerned….

FE
I think there’s a crying need for novelty in terms of the “thank you”. The same thing each time devalues it and it starts to become mechanical.

KD
Yes – ANOTHER bunch of flowers! ….shall we try to address some of the questions we’ve identified? What’s the difference between reward and recognition? I’ll start, shall I?

I think that reward encompasses a number of things. It’s likely to be more private and is about the relationship between the individual and the organisation. Recognition is likely to be more public, and is more about the relationship with a manager rather than with the organisation as a whole.

FE
I think reward is what you get for doing what you are asked. Recognition is about you as an individual and how you do something.

RK
Yes, I think reward is a private arrangement, a contractual deal between you and the organisation. Recognition is something more public, more outward. As a way of saying “well done”, it can take many forms. Personally, I use recognition as a message to others.

GS
My view is that recognition is part of reward. It does not include reward. Reward does include recognition.

I also think that recognition can take a much more public form among the same group of workers – for example, for a scientist, the greatest recognition is by peers – and as such it can go beyond the employee’s organisation. I don’t think it’s likely that reward will go outside the organisation.

FE
And recognition might be more of a surprise; reward is what you expect.

RK
Perhaps recognition could appeal to the expressives of the world; might reward appeal to those more result/target driven individuals?

GS
It might.

In addition, rewards might not be individualised, but recognition definitely is. In my experience it’s easier to recognise teams than reward them. As Fiona said, reward is to meet expectations (you have done as you have been asked to) and as such this relationship helps to build trust by delivering what is expected. Can we say therefore that reward does not encourage employees to do something different?

RK
I’m not sure about that - bonuses can drive behaviour.

KD
Might it be true to say that I have some control over my reward, but less over what I receive as recognition?

FE
That’s true, but if employers have more control over recognition, they have more responsibility. Recognition needs to be right. If organisations get it wrong – that is, you recognise the wrong people – the consequences can be serious, both for your scheme and for the organisation. It’s easier to disguise mistakes in reward, particularly because it’s private. In addition, reward is reasonably consistent, whereas the benchmarks for recognition change more often as employees internalise the behaviour they have been recognised for.

RK
Do we think that reward tends to be something tangible and that recognition could be intangible?

KD
Well, we think that recognition could also give tangible benefits – meals out, for example. So – what’s the list?

Reward
Recognition
Private
Probably more public

About the relationship with the organisation

About the relationship with the manager
May be multi-faceted
Likely to be single entity
Contractual
Non-contractual
Reward for WHAT’S done
Reward for HOW it’s done
Inside the organisation
May go outside the organisation
Includes recognition
Does not include reward – is part of it
Expected
May be a surpriseShould be individualised
May not be individualised
Internally benchmarked
Externally benchmarked
About behaviour
About skills

 

KD
I think that equity is relevant – and very important – to both. In addition, I think you need to have awareness about the context for both. Reward needs to pull together packages that are attractive – and that means keeping an eye on the marketplace. In its turn, recognition requires that you keep an eye on what employees in terms of what they value as an individual.

My view is that you might start to hit differences when you think about the implementation of both – I think recognition requires a different set of skills, perhaps more interpersonal than managing a process.

RK
Yes, it’s easy to train a manager to pull together a reward package, when the structure is in place. Recognition needs much more judgment, which is certainly less easy in terms of training!

KD
Absolutely, as reward is about what you do, and recognition is about how you do it, recognition relies more heavily on elements which are much more subjective.

GS
And support for reward schemes can be fairly solid as they are externally referenced, including the market rate; recognition does not have to be.

FE
I think that both elements can operate on three levels:

Universal, by which I mean there is a general expectation that if you go out to work, you’ll get paid and maybe there’s also an expectation that you’ll be thanked for doing extra work.

At the level of the company culture, where the company sets expectations about both its reward AND its recognition practices. So we’d be looking at what is the norm within the company.

And finally, at the level of the individual, it’s about the individual reward package, which has been negotiated with the company and recognition, which the line manager takes time to individualise.

Organisations need to think how a scheme interacts with all three levels and what’s appropriate considering the context.

What’s our own experience of recognition schemes?

KD
At a PR agency I worked at years ago, we had a scheme that looked at developing the values of the company, which were imagination, innovation, improvement and irreverence. We called it the 4i’s Award. It was very simple, just the presentation of a bottle of champagne at the company monthly staff meeting. You were nominated by anyone in the company and your nomination was approved by senior management. That I can remember it at all after all this time speaks volumes about how prestigious I thought it was to win a 4i’s award, although not everyone in the company felt like this.

FE
Sounds good. At my current company, we have devised a scheme to recognise excellence in sales performance, whereby our consultants have specific weekly targets which if they exceed, entitles them to a raffle ticket – doesn’t sound very exciting, does it? However, at the end of the scheme these tickets are entered into a draw, and if your ticket is drawn, you’re given a car key. If the key fits – you win a car. Of course our organisation isn’t just about sales, so we thought long and hard about how to involve our other key people like finance, IT and admin. Working with the managers in those functional areas, we set out specific targets that would lead to them being able to get raffle tickets.

That was quite a challenge as it’s harder to measure output for someone who’s scanning documents, for example.

Obviously this wouldn’t work for everyone, but in our organisation, most people are 25 or under, so it really appealed to them.

GS
That’s a great scheme and it demonstrates that recognition schemes have to be much more culturally relevant in general use and need to be inclusive to really work well. It also illustrates that for recognition schemes, the measures don’t have to be completely comparable but the outcome (and access to it) is the same.

KD
So, looking at the next question – Should recognition schemes be measured? Should “thanks” simply be part of good management practice?

RK
It’s got to be part of good management practice, simply as a general principle. But in addition, if you came to me and tried to tell me I should do this sort of thing, I’d want to know what I’d get from it – especially, as we’ve already said, these sort of schemes aren’t cheap.

KD
Yes, and if you don’t get them right, as we’ve said, it can cause damage. If you don’t measure their effectiveness, you could be wasting your money AND they could be useless.

FE
Ok, so how should we measure recognition schemes? I think we need to measure their effectiveness in terms of both clients and employees. That is, measurable improvements in customer satisfaction and – more difficult – employee motivation.

KD
My view is that reward is an indication of the value of the employee to the business and as such probably is a measure in itself. When we look at recognition you would be looking at softer side of the business, like the values of the organisation – which are more subjective and more difficult to measure.

GS
Just a second – I’ve got an idea….Maybe we could look at this in terms of what might be the kind of employee behaviour – and ultimately, company culture – that different emphasis on reward and recognition might produce?

Diagram

FE
I think we should make clear that high reward does not necessarily mean monetary value – just that the company puts a lot of emphasis on reward as an incentive. The purpose of the high emphasis on reward I think is necessary because in some jobs, it’s not easy to see the universal value of your work. For example, the futures traders who are putting into a lot of effort into bidding for something which might not even have been grown yet. It’s all a bit unreal. Yet if you have a high reward, it somehow becomes more tangible and you can see how someone can value it.

RK
Yes, another example might be the high salaries associated with consultancy – particularly as it’s the organisation that takes the success, not the consultancy or the consultant who might have been instrumental in designing the work.

GS
This is partly dependent on why you are in business or what sector you are in. Large consultancy firms that offer things like SAP implementation often need not worry about client retention, since they only intend to do one large project per client. However, they do need to worry about staff retention. Getting enough staff with the right skills is difficult and time-consuming. Retaining them is the key to growth; losing them is therefore very expensive.

KD
Before we go to lunch, can we just have a look at the last question – How might they be measured? What would you expect to find?

GS
To measure any scheme, you’d have to also measure a set of inputs and outputs. The inputs might be spend, time and the opinions of the employees before experiencing the scheme. The outputs might be a whole range of measures, depending on what the scheme was supposed to recognise.

FE
Yes, obviously, if you were looking at a scheme to retain people, you’d want to know if their general level of satisfaction was any higher and look at your retention rates, possibly through exit interviews.

GS
And you might also measure things like absence of accidents and customer satisfaction.
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