Publication: Human Capital Magazine
Date: February 2009

Excerpt:

Adrian Finlayson, CEO of R&R experts Accumulate, says that not only are non-cash benefits catching on, but they will also dominate the R&R and incentive market for the next 5–10 years. Cash has lost favour because people started seeing it as an expected part of their salary package. Secondly, they spend it quickly and it loses any association with the behaviours that drove it as a form of reward. Non-cash benefits, on the other hand, tend to require people to save for them with points earned, and it becomes aspirational – they want the newest and greatest iPod or flatscreen TV, or something else that is concrete. “They associate earning that reward with the behaviours that helped make the organisation successful. That’s ultimately what we’re trying to do – get the constant reminder and reinforcement of behaviours with reward,” says Finlayson.

Reward vs recognition

Rewards and recognition are often rolled up as one and thrown together for the HR department to manage. In reality, the two are quite different. Rewards are usually something given in return for something somebody has done and are usually based on a demonstration of desired behaviour. The allocation of a reward is directly related to achieving a prescribed outcome. A rewards program should be created to encourage a specific behaviour that can be measured, tracked and audited – this way, positive behaviour is reinforced. Recognition, meanwhile, is given or awarded as a token of acknowledgement or gratitude. This is usually ad hoc and often without the recipients knowing ahead of time. The difficulty with recognition is that it can be subjective and often these awards and citations are rushed or insincere, squandering the positive benefits of having a recognition program. People will respond to the promise of reward & recognition in different ways: some are driven by the actual financial or product reward; others will respond favourably to a simple pat on the back or non-monetary recognition such as an e-card or quick e-mail that has been through the correct channels and seen by the right people. “Sometimes that recognition is just as important, and appreciated just as much, as if it had a financial reward tagged on to it,” says Finlayson. Where is R&R justified and how much should it cost financially? It is largely subjective. “It’s not necessarily the financial outcomes but the behaviours,” Finlayson says. “One behaviour in an organisation might be worth a tremendous amount but be very difficult to quantify. For example, if an organisation is trying to drive a new set of values and principles through the organisation, one of which is integrity, one person may have displayed a huge amount of integrity and really driven the values of the organisation but does that mean that person should receive a A$500 reward? It’s hard to tell and that’s up to the executive team to determine what financial reward should be associated with what behaviours. “People often make the mistake of trying to directly link a financial reward with a financial outcome and that shouldn’t be the case. Instead, you should link a range of rewards to a range of behaviours, and then create a platform of tools that allow the employer to recognise people for those behaviours with the appropriate reward, in real time.”

Who gets what?

One crucial aspect of R&R is deciding who deserves it. Is it best to concentrate on the top performers or spread the net wider to the vast majority of adequate/good performers? Finlayson says concentrating on both aspects is the best way for employers to incentivise their workforce. Far from being never-ending generators of self-motivation, the top 10–20% of workers do in fact have an ongoing need for recognition. “The top performers will always be the top performers in the organisation – it’s the nature of the individual. But they’ll put less and less value back into an organisation if they don’t get recognition for their efforts. If you look at the DNA make-up of top performers – and this is true even outside the business environment – people extend themselves and push themselves largely for recognition. It’s a gross generalization and it doesn’t apply to everyone but in the broad pool most will do it for recognition – whether that’s financial recognition or recognition by peers or seniors or industry experts,” he says. Without the tools to be recognised and the actual recognition in real time, Finlayson says that top performers will become despondent and will either move into other roles within the organization or seek recognition through other means, which may in itself be disruptive and inconsistent with desired behaviours.

Finlayson says it is also important not to ignore the middle 60% of employees. “Purely from an organisational benefit perspective you’re going to get more benefit from improving the 60% mid tier than motivating the top 10–20%. The mid 60%, by virtue of the sheer weight of numbers, plus the fact that they have quite some distance to step up, means an organisation will benefit a great deal. Ideally, what organisations need to consider are what tools and solutions they can use to meet both of those objectives.”