If you read nothing else, read this…
- Badly thought-out recognition and incentive schemes may improve one performance measure, but damage another.
- A recognition or incentive scheme cannot be used in isolation.
- Schemes are most effective when aligned with corporate values.
In his article One more time. How do you motivate employees? , first published in the 1960s and again in the Harvard Business Review in 1987, Herzberg outlined his motivation hygiene theory, which states that so-called ‘hygiene’ factors such as pay do not motivate , but if the rate at which someone gets paid is unreasonably low, it will act as a demotivator. What actually motivates people is factors such as recognition, responsibility, promotion and the nature of the work itself, he argued.
Recognition is a key motivator
Employers that are planning to invest in incentive and recognition schemes will be pleased to know that recognition is a key motivator and not just a ‘nice and fluffy’. But Stephen Bevan, director of the Centre for Workforce Effectiveness at The Work Foundation, warns organisations that do not take the full range of motivators into account to brace themselves for failure.
“Reward strategies designed to motivate and retain people are almost always bound to be unsuccessful,” he says. “This is because what motivates most people is doing an interesting job, having autonomy, having some control and discretion over what you do , as well as having a sense of use and a voice.”
The worst-case scenario, says Bevan, is for a motivation scheme to improve one performance measure but damage another. For example, a financial services organisation might use a motivation scheme to incentivise staff to sell more, but may later be hit by an increase in the number of loans that default. “You have to be careful what you wish for,” he adds.
Employers should also be aware that employees who take part in a motivation scheme might just be playing the ’transaction game’ and are not necessarily engaged and loyal or deliver high-quality customer service or products. “It could even incentivise perverse behaviour,” says Bevan.
Integrating financial and non-financial elements
But Stuart Hyland, business leader, reward solutions consulting at Hay Group, says a recognition scheme can “add significant value” to an organisation if it is well thought out and executed, integrating financial and non-financial elements.
Hyland says employers are increasingly using wider performance metrics in recognition schemes, which can be fronted by a dashboard-style system that gives employees an overview of their individual performance, the performance of their team or division, and the performance of the business. This performance can be measured against a number of agreed financial and non-financial objectives. The latter could include risk and compliance, collaboration and teamwork.
Hyland says this diversity ensures that outcomes have a sustained benefit to the business. “We don’t want to over-reward in the short term for something that dies or wilts on the vine next year,” he adds.
Chris Charman, director of talent and reward at Towers Watson, says: “There has also been much greater awareness, particularly during the banking crisis, that really driving people towards quite focused and narrow outcomes can be damaging.”
Allow employees to track targets
Kuljit Kaur, head of business development at P&MM, says systems that allow employees and line managers to track progress against different targets can also be a good way to motivate teams. It can be motivational for individuals to see how their performance stacks up against others in their team and contributes towards a collective goal.
“We want to make sure that everyone is playing their part in that target and no one is dragging anyone down,” she says. “Using targeted communications, line managers can encourage the low performers.”
When it comes to driving the performance of individual employees, it is important to show clearly how the goal can be met in a manageable way, says Kaur.
An obvious way of rewarding an employee for their hard work might be to give them a bonus. Duncan Brown, a principal at Aon Hewitt, says this form of reward has become more popular at all levels of organisations.
“More employers are participating in bonus schemes ,” he says. “Whatever the criticisms have been in financial services, organisations are putting more people into bonuses, not just their sales staff.”
Motivational power of cash rewards
However, commentators such as Cary Cooper, professor of organisational psychology and health at Lancaster University, are sceptical about the motivational power of cash rewards. “What motivates people is having good colleagues, having interesting work, being valued by your line manager , your boss and your organisation,” he says.
This chimes with research conducted by the Institute of Leadership and Management in October 2013. Of 1,000 workers surveyed for its report Beyond the Bonus: Driving employee performance , only 13% agreed that a bonus would affect their motivation. The top motivator was job enjoyment, cited by 59% of respondents.
Some recognition schemes are focused on non-cash rewards, which are acclaimed for being memorable, meaningful and personal. At its most basic, a recognition scheme may consist of a manager acknowledging and thanking an individual in a team meeting or sending a thank-you card.
Francis Goss, commercial director, employee solutions at Grass Roots, says the importance of such inexpensive measures should not be underestimated. “It creates a culture in which people believe that what they are doing is being seen and noticed,” he says.
Peer-to-peer recognition scheme
Other inexpensive gestures could include letting an employee go home an hour early, have an extra day’s leave or even use a certain parking space outside the office, says Goss. The next step up in terms of budget and sophistication is a peer-to-peer recognition scheme (see case study below), in which individuals are put forward for awards (normally vouchers or prepaid cards) by colleagues and line managers.
At the higher end of the recognition spectrum are awards for employee or team of the year or quarter. Rewards could include a weekend away in Paris, being wined and dined by the board, or having lunch on a barge. Hyland says: “Experience-led rewards will live in the memory a lot longer and far outweigh a splash of money into the bank account.”
Whatever form a recognition or incentive scheme takes, it will have maximum effect if it is linked with the organisation’s values, says Goss. This not only makes it clear to staff what kind of behaviour reaps rewards, it also ensures that an organisation’s recognition strategy is closely aligned with its ethos and objectives.
Messages from the organisation’s leaders
Nick Tatchell, director of employee research at Towers Watson, says a recognition strategy should also reflect messages from the organisation’s leaders. Top executives may preach about how important it is to address customer satisfaction, but this may not translate into what employees are rewarded for, for example speed and bottom-line sales.
“It is evident that when there is a misalignment between the message [the words of leaders] and the actions of leaders, as expressed in incentive schemes, this does not create engagement or the right kind or behaviour,” says Tatchell.
In fact, how employees perceive their leaders has been found to have a significant impact on engagement (see box).
Recognition and motivation schemes have their place, as long as they are designed to draw out behaviours that sustain business performance in both the long and short term.
Case study: The University of Reading
The University of Reading operates a three-tiered recognition scheme that offers both cash and non-cash rewards while being aligned with the organisation’s values.
An online recognition portal, introduced in 2012, enables managers to nominate employees for awards with values ranging from £25 to £100. These can be redeemed for vouchers from various retailers.
When nominating an employee, a manager has to specify what behaviours the individual has displayed and how these relate to the university’s values, which include working together and professionalism.
Exceptional achievements are recognised with cash bonuses. Heads of schools make nominations for these awards, which are signed off by faculty heads. Typically, the bonuses range between £500 and £1,000, and have been awarded to staff that have worked hard to manage the university’s clearing process, taken part in graduation ceremonies or been active in widening participation in higher education.
Staff who demonstrate continued excellent performance can apply for a pay rise, which could see them move up one, two or more pay increments. Typically, each increment represents a 3% increase.
Claire Eckett, HR manager, reward and benefits, at the University of Reading, says: “This process has been devolved down to faculty level rather than being managed centrally. This has encouraged managers to take greater ownership and responsibility for it.”
Global top drivers of sustainable engagement
- Leadership
- Goals and objectives
- Workload and work/life balance
- Image
- Empowerment
- 24% - proportion of employees who are disengaged
- 23% - proportion of employees who are highly engaged in organisations where they perceive their managers (but not their leaders) to be effective.
- 35% - proportion of employees who are highly engaged in organisations where they perceive leaders (but not managers) to be effective.
Source: Towers Watson’s 2014 Global Workforce Study , conducted between April and May 2014. Sample: More than 32,000 full-time staff working in large and mid-size organisations.
Do motivation plans and recognition schemes really drive staff productivity?
This is a deceptively straightforward question with an unhelpful answer: it depends. The devil is really in the detail: what are motivation plans and recognition schemes and how do they relate to productivity?
Crudely, we can divide plans and schemes into those that offer financial rewards to drive productivity and those that involve some form of non-financial recognition.
The offer of a payment in return for individual contribution works best where there is a simple relationship between effort and reward. The line of sight is clear: if I do X, I will receive Y. Such schemes depend for their success on the unambiguous achievement of the goal. The measurement of results is straightforward: the reward being of value to the individual and commensurate with the effort to achieve the goal.
Some jobs lend themselves to this sort of arrangement, but schemes fail where objectives are complex and their attainment a matter of debate. Also, if the employee derives satisfaction from the content of the job more than the employment terms and conditions, then financial reward will also struggle to succeed (or at least at the level of the money likely to be offered).
Non-financial recognition tries to get at the intrinsic elements of work: satisfaction with the work, pride in the organisational purpose, and so on. Through simple forms of acknowledgement (from thank-yous to flowers), it can reinforce positive feelings towards job and employer. Again, schemes can be more complicated in assessing contribution and in the reward offered, for example the collection of points based on desirable behaviours.
However, whatever the type of programme, it can be vulnerable to gaming, where employees manipulate the rules to their advantage, certainly when the reward is attractive. Yet the longer the scheme is in place, the weaker its motivational powers. It will get taken for granted, especially if payouts are the norm rather than the exception.
So to be motivational, schemes need to be carefully designed to fit the type of work and type of employee. This might mean different schemes for different groups. This is an approach organisations might be reluctant to embrace, but in reward, one size rarely fits all.
Peter Reilly is principal associate at the Institute for Employment Studies
