Strategic Recognition and Incentive Systems - Organizations are beginning to think strategically about incentive and recognition programs.
Written by Bob Saunders
Article appears in September 2006 , Marketing Times
The new incentive process is based on new technology, organizational demographics and the increasing importance of intangible assets such as branding, relationships, engagement and knowledge.
Incentive and recognition programs are shifting and the pendulum is more of a strategic approach towards culture, behavior and measurement with a focus on a return on investment. Using technology, Customer Relation Management [CRM’s] can give us leading indicators on all data and form the metrics to make decisions. Understanding these metrics gives us specific information on the marketplace, the client and how to tailor towards your demographics. This real time information now changes the landscape on incentive programs and shifts from one goal, increased sales, to an umbrella approach that encompasses the entire organization in various initiatives, a process called Strategic Recognition Systems.
Incentive programs exist throughout an organization to enhance the culture and drive employee behaviors towards a demonstrated return [ie: customer satisfaction, enhanced client loyalty, streamlined processes or increased revenue]. Every employee plays a role and every employee should benefit from the recognition and incentive processes. Take aim at the heart of your sales force. The group that makes up the major portion of your sales force is the middle 70%. The results and revenue increases are dependent on whether this group, as well as the entire workforce, can be motivated and trained to improve.
“The Forum for People Performance Management and Measurement’s current research states that properly constructed incentive programs can increase performance by as much as 44%.”
Their key findings in the report were incentive programs increase performance by as much as 44%. When engaged participants were recognized for “thinking smarter,” performance increased by 26%. Long-term programs out performed short-term programs by more than 20% [long term defined as more than one year].
“Sometimes what counts can’t be counted and what can be counted doesn’t count.” - Albert Einstein
Culture, Behaviors, Measurements
Elevating Culture is non-measurable on paper but is the heart of any organization. The culture involves the vision level and expectations of the organization and the engagement of management and the employees. Elevate the sales focus throughout the entire organization through constant communications of the company’s vision and managers engagement to elevate the employee’s morale. Communication of achievement throughout all levels of the organization is critical and must be endorsed by senior management.
Behaviors involve the day-to-day actions taken to improve personal and team performance. Establish goals and measurements focusing on the correct habits, education, and team synergy. Training and increased product knowledge is the improvement phase while increased number of calls and completed applications create and fulfill the action towards an engagement of increased sales leads and elevation of customer service. Behaviors must be recognized upon the completion of their good deeds to have them multiply.
Measurement, or Return on Investment [ROI], is the ultimate test in measuring the success or failure of a performance incentive strategy. This return on investment is stated as a ratio measuring the incremental increase in benefit divided by the amount invested to secure the increase. Measurements can indicate account retention, sales volume increase, cross selling in existing accounts and increased profit from increased profitability within the organization. On the operational side: manufacturing, support and client care should all celebrate in the success whether it’s on a daily, quarterly or an annual basis. What gets measured gets done and what gets celebrated gets done well.
Design Process of an Effective Incentive Program
Reward, Reinforce, Recognize, Motivate
Phase one: Brand Equity
The branding of the incentive program should clarify the business needs and identify the needs and the requirements through initial marketing. This will set the platform for success and will create the excitement to excel. This is an internal “Branding” of the organization’s vision, creativity and commitment. For example, FEDEX makes the “Purple Promise” - a branding of above and beyond service. Ingersoll Rand shows “Inspiring Progress” - staying one step ahead and encouraging others to do the same. By “turning the phrase into action,” every employee has the opportunity to build the brand, states Catherine Osthemeir, Director of Brand Management for Ingersoll Rand.
Phase Two: Incentive Performance Program
Cash vs. Tangible Awards
Cash - Wirthlin Worldwide Research studies demonstrated 47% of employees that received cash either paid bills or do not remember how they spent their incentive. Only 9% spent the monetary incentive on personal use. Cash can be viewed as an entitlement with little emotional involvement and does not provide lasting satisfaction.
Tangible awards - World at Work [formerly American Compensation Association] found that non-cash awards achieve three times the return on investment compared to cash. Tangible awards are extrinsic and intrinsic motivators and provide a strong emotional appeal to recipient’s personal wants and needs, having the family involved in the selection multiplies that emotional value. Tangible awards are merchandise classified as Lifestyle [electronics], Traditional [crystal-clocks] and Personal [watches and jewelry]. A point base program [similar to frequent flyer miles] are very popular, designed to reward employees for excellence everyday and are universally accepted [ie: on the spot awards].
Phase Three- Honor Clubs
Honor Clubs recognizes benchmarks of achievement that acknowledge cumulative success and provide an incentive for future triumphs. This is a symbolic award that holds strong intrinsic value that cannot be measured. It is the reason that financially–independent athletes with great careers continue to play. They want to earn the most prestigious symbol in athletics (the gold medal or the championship ring). In business this would be the Chairman’s award. Have levels to recognize your salesperson, a career path of recognition from rookie of the year to retirement and aim to have 30% of your sales force recognized. The best performers per level can be part of an advisory council to support the vision of the organization. A symbol of achievement serves as an encouragement for others to follow. A well thought out symbolic recognition program pays for itself in employee loyalty and retention.
Most of us have spent our professional career putting band-aids on incentive and recognition programs and not embracing an approach of communication, measurement, training and reinforcement. While employees bask in the glory of recognition, it is the organization that reaps the true benefits. Richard Bolton author of “The Value Code” states “Celebration makes the spirit of the organization visible.” If we are going to improve corporate culture in the long term, we need to address the issues and solve the problems in a systematical process.