Performance-oriented companies seek to mobilize all employees and stakeholders, notably dealers and distributors, toward clear business objectives measured by sales, profits, customer satisfaction, and productivity. For these organizations, employee recognition is a vital part of continually communicating and reinforcing ever-changing goals.
Perhaps the best example of this strategy is Mary Kay Cosmetics, which goes to great lengths to recognize the individuals who help achieve the company’s goals. For such organizations, recognition goes far beyond the traditional role of service awards.
Although the two often seem interchangeable, recognition should not be confused with incentives. Recognition involves all the techniques that draw attention to employees who perform. Incentive programs generally use selective techniques to induce people to achieve a specific objective, such as increasing sales. Recognition can be spontaneous, even to the extent that there is no formal announcement that the organization has a recognition program. Incentives are designed to act as carrots, and they’re publicized well in advance to whip up enthusiasm for winning a tangible reward.
In contrast to service-award programs, which by their very nature entail holding ceremonies on a regular basis, performance recognition should be a surprise. That way, people are left to concentrate on doing their best instead of becoming unduly focused on the reward itself.
Once a sleepy domain, employee recognition has entered a new era as corporations begin to assess the impact of downsizing on long-term productivity, profits, and the quality of products and services.
Traditionally, recognition meant service awards. In recognition of their years spent with a company, people received an escalating series of awards along with a mention in the employee newsletter. If they stayed until retirement, many walked away with a gold watch. Sometimes, companies broadened these programs to include recognition for other actions, such as exemplary customer service, but mostly they were confined to rewarding tenure.
Today, it’s awkward for most big companies to focus attention on tenure. Employees in a downsized company are likely to mock a program that rewards someone for having “survived” 20 years. An ambitious service-awards program during a period of downsizing only draws more attention to an unpleasant situation. No wonder that traditional service awards suppliers have seen their old-line business decline.
HUMAN RESOURCES AT RISK
While many organizations are reluctant to pay too much attention to traditional service awards, it’s apparent that something has to be done to restore morale in organizations racked by downsizing. Mounting evidence suggests that downsizing has adverse effects on a company’s ability to harness human resources to meet competitive challenges.
A recent study by Deborah Dougherty of Montreal’s McGill University and Edward Bowman of the University of Pennsylvania’s Wharton School, concludes that, by destroying the informal human links that facilitate the practice of putting bold ideas to work, downsized firms risk losing the ability to innovate. In another study, Mitchell & Co., a Massachusetts consultancy, concludes that, while downsized companies enjoy a brief surge in profitability, they fall behind their competitors after three years.
Clearly, rabid cost-cutting through downsizing exacts a toll on employee performance, which seems ironic since raising productivity is often the pretext for downsizing. Human beings are the most complex and delicate of all company resources, and, as companies begin to rethink the relationship between downsizing and long-term profitability, the role of employee recognition is bound to grow.
IMPACT ON MARKETING
Despite reams of research suggesting a strong correlation between employee commitment and customer satisfaction, many organizations tend to overlook this equation in their strategic planning. For, even though both research and common sense strongly suggest that happy, committed employees work more productively and provide better service, corporations have difficulty relating this to profits. So far, the financial analysts have found it easier to calculate the cost savings of layoffs.
According to research conducted by Harvard professor Leonard Schlesinger Jr., there is a clear connection between employee satisfaction, customer service, and profits. He calls this link the “service profit chain,” in which employee satisfaction leads to good service which, in turn, leads to customer satisfaction resulting in increased profits.
A number of companies have quantified the effect of customer loyalty on sustainable profits. Indeed, it is a time-honored precept of marketing that repeat customers offer the best return on the marketing investment. But companies rarely examine each link in the chain, so they are likely to overlook the relationship between employee satisfaction and profitability.
Schlesinger, however, cites Taco Bell as a welcome exception. Through internal research, the fast food chain found that “20 percent of the stores with the lowest turnover rates enjoy double the sales and 55 percent higher profits than the 20 percent of stores with the highest employee turnover rates.” In other words, happy employees lead to happier customers. And, if you think that rule applies only to fast food, think again.
Two major studies in recent years support the conclusions of Schlesinger and his colleagues. Columbia University’s Graduate School of Business examined the human resources policies of 495 businesses and correlated the data against the companies’ financial performance. The results were excerpted by Daniel J.B. Miller, David Lewin, and Edward Lawler III in Alan Binder’s Paying for Productivity (The Brookings Institution, 308 pp., $29.95) and also examined by Casey Ichniowski in a study called “Human Resource Management Systems and the Performance of U.S. Manufacturing Businesses” (National Bureau of Economic Research working paper 3449). Both writings concluded that firms with merit-based pay systems, flexible job classifications, good communications systems, and a commitment to employee training enjoyed greater productivity and profits than those that didn’t.
A study of Fortune 1,000 companies (“Employee Involvement and Firm Performance,” presented by authors David I. Levine, Edward Lawler, Susan A. Mohrman, and Gerald F. Ledford, Jr. at a 1995 conference on What Works at Work) examined the value of employee involvement through such management practices as power sharing, technical and social training, and the free flow of information throughout a company. The conclusions generally supported the relationship between high employee involvement and higher productivity and profits.
While smaller businesses generally take employee commitment more seriously than giant corporations, there are notable exceptions in the ranks of large companies, such as Federal Express, Starbucks Coffee, and Chick Fil A. In general, though, executives at smaller companies tend to be close to the action and are thus in a position to see the impact of employee commitment more clearly than their counterparts at mega-corporations.
FACTORS GOVERNING EMPLOYEE COMMITMENT
What makes some employees committed and others indifferent? Research suggests that there is no quick fix. The organization must be geared from the top down to value employees in practice as well as press release. Pay is obviously an important element, but so are company-wide communication, a commitment to training, flexibility, positive feedback, and tangible recognition. In general, employees should feel strongly connected to the organization and valued. Key elements of employee satisfaction are:
Sense of purpose. People work best when working toward tangible goals or when building something whose outcome they can see. This requires management to have clear vision of what is being built and be able to communicate it through middle management to the rank and file.
A sense of being compensated fairly. Employees do not necessarily need to feel rich, but they want to feel they are compensated along the lines of other people doing similar work.
A feeling of appreciation. People who work hard for somebody want to feel appreciated or recognized for their work. The manager who believes that people need no recognition and should be content simply to have their jobs will not get the most out of his or her employees.
A feeling of participation. Contrary to the belief of some managers, most employees want to have a say in the way their jobs are done. They believe, often correctly, that management overlooks numerous ways to improve quality and efficiency.
Inspired middle management. Tapping employee commitment requires a shift from a dictatorial management style to one of coaching, encouragement, and empowerment. This is not an easy transition for some managers who have worked for years to become the boss. A corporation’s best motives can be thwarted by middle management enamored with power.
Top-management commitment. Unless the CEO and senior executives believe that employee commitment is as important as product development, finance, and marketing, there is no way that the full power of commitment can be tapped. If companies use recognition cynically, employees will quickly catch on. In most cases, it’s better for autocratic companies to avoid recognition strategies that leave them open to accusations of hypocrisy.
ELEMENTS OF TRADITIONAL RECOGNITION PROGRAMS
Despite reams of research suggesting a strong correlation between employee commitment and customer satisfaction, many organizations tend to overlook this equation in their strategic planning. For, even though both research and common sense strongly suggest that happy, committed employees work more productively and provide better service, corporations have difficulty relating this to profits. So far, the financial analysts have found it easier to calculate the cost savings of layoffs. It is appropriate for organizations to recognize and reward employees for tenure, if that’s an integral part of the corporate culture. Traditional recognition programs allocate a set sum for each year of an employee’s tenure which is used to buy them increasingly more valuable awards for each service milestone. Award options typically include pins and jewelry, clocks and watches, and gift items, such as statuettes, vases, bowls, and even dinnerware. Traditionally, these programs emphasized continuity, so that all employees who reached a certain milestone received roughly the same item.
Today, things aren’t so cut and dried. To the dismay of old-line recognition suppliers, which have always emphasized the trophy value of an award, many organizations give employees greater flexibility in choosing their awards. Some even award gift certificates, consumer products, or travel awards.
There is little point in conducting service-awards programs unless you sincerely value service. That’s why a genuine expression of gratitude by management is at least as important as the awards themselves. Companies that are serious about recognition mark major milestones at company meetings or at special powwows with top executives. Almost all publicize the milestones in the corporate newsletter.
STEPS TO IMPLEMENTING RECOGNITION PROGRAMS
Today’s emphasis on performance in business has created a new application for recognition programs focusing on performance.
Harvard professor Alfie Kohn, in his book, The Case Against Incentives (Houghton Mifflin), argues forcefully against trotting out the usual array of incentives. He suggests that they can create an atmosphere of destructive competition within a company, because they focus on the wrong agenda: winning instead of working better.
Understanding the basics of recognition can help companies address some of the problems raised by Kohn and enable organizations to keep the emphasis on steady improvement in employee performance.
Here’s how to introduce a recognition program to your organization:
Determine your objectives. Just what are you trying to accomplish? Reward tenure? Performance? Objectives should relate to one another, and there should be no more than three.
Analyze the demographics. Who are these people working for us? How do they recognize one another in their own cultures? What do people have in common?
Determine the statement you want to make. What should recognition say about your organization and it’s goals? How lavish do you want to appear?
Develop a communications strategy. How will people know about this? Should it be through a newsletter? a mailing? a brochure? in the employee welcome kit? How will you remind them of it throughout the year?
Develop an awards strategy. Recognition programs without gifts ring hollow after a while, but lavishness usually is not essential. Sincerity is. That means selecting a gift that reflects the kind of care that you appreciate when someone gives you a birthday present. It’s the thought that counts. Keep in mind the company’s culture, the nature of the audience, the need for at-home trophy value, the age and pace of the organization, and its prospects for growth.
Involve employees. Before doing anything, set up a committee of employees to obtain recommendations from the people who actually will be affected by the recognition effort. Bring in an outside expert, if necessary. If performance, rather than tenure, is your objective, make sure the committee gets involved in setting the goals, establishing the means of measuring performance, and reporting any organizational obstacles to improvement that may have escaped management’s attention.
Develop a meaningful presentation strategy. If you are serious about recognizing people, do it right. Amaze recipients with the way you recognize them in front of their peers. Many companies hold annual awards banquets or meetings in which people receive their awards and thanks from a top executive.
Rethink recognition on a regular basis. One of the primary goals of a service-awards program is to emphasize that there really is a future for people in today’s corporations. As such, the program can be tinkered with from year to year, but generally it’s expected to stay within the bounds of tradition. Recognition for performance, however, changes regularly, along with goals, market conditions, and financial results. A recognition program that operates on autopilot will have little impact