The Total Package Including recognition within the compensation toolkit

The core goals of total rewards packages are an intertwined quartet. Mercer research shows the current rankings, with retaining talent taking the lead, attracting talent and engaging talent almost tied, and reward-ing employees bringing up the rear.1

Specific compensation objectives echo those of total rewards. According to the latest survey results from PayScale, regardless of size or industry, for the third consecutive year companies reported “retaining top employees” (63 percent) as their top compensation objective. With “attracting new talent,” a close second.2

And in the talent-driven economy, these goals are echoed by senior business leaders. According to Bersin by Deloitte 78 percent of business leaders rate retention and engagement as urgent or important.3

The goals are clear, and talent competition is fierce, so what can be done to achieve these essential human resource goals?

KEY OBJECTIVES OF TOTAL REWARDS PROGRAMS

Source: Mercer’s Total Rewards Survey, May 2014

Retaining talent Attracting talent Engaging/motivating employees

Rewarding employees

76%84%85%88%

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1. Mercer. “Companies Try to Align Total Rewards with Business Strategies.” September 8 2014. Web.2. Low, Tim; Nicole Marsano, et al. “2015 Compensation Best Practices Report.” PayScale. 2015.3. Bersin, Josh. “It’s Time To Rethink The ‘Employee Engagement’ Issue.” Forbes. April 10 2014. Web.

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“Show me the money”

Employee demands are hard to ignore. Hearing that exiting employees are citing pay as their top reason for leaving4 adds fuel to the fire of employers scrambling to please the talent they’re fighting for.

Thinking inside the box, increasing pay is the first lever to use. But the costs of pay increases and the diminishing returns of said increases create a vicious cycle, always costing the company more money, and employees always expecting more money. And, taking a step back, asking exiting employees what they want may be akin to the Henry Ford adage: If I’d asked people what they wanted, they would have said a faster horse.

Merit pay, short-term incentives, and pay for performance

Most organizations are not dramatically hiking base pay – rather, their initial reaction within the compensation toolkit to talent pressure is merit-based and short-term incentives, as well as pay-for-performance models. These are valuable responses to the need to be competitive while maintaining focus on what matters to the business. But stepping outside of the pay arena offers a largely untouched playing field (with much cheaper tickets).

Compensation vs. Recognition

“Webster defines compensation as “that which is given or received as an equivalent for services, debt, want, loss, suffering, etc.” Clearly, compensation is linked to security and safety, since no one feels completely safe unless they’re sufficiently compensated to meet their needs.

Recognition, on the other hand, is defined as “acknowledgment and approval, gratitude, etc.” Recognition appeals to the higher levels of Maslow’s hierarchy of needs, especially social and self-esteem needs.

Even though the distinction between compensation and recognition is clear in theory, most companies get them confused in practice. This occurs because most organizations develop incentive and perfor-mance strategies without determining whether they want to compensate employees or recognize them.”5

Source: Enterprise Engagement Alliance

43% of employers report having a bigger bonus budget for 20156

4. Low, Tim; Nicole Marsano, et al. “2015 Compensation Best Practices Report.” PayScale. 2015.5. Enterprise Engagement Alliance. “Recognition vs. Compensation.” Web. 6. Low, Tim; Nicole Marsano, et al. “2015 Compensation Best Practices Report.” PayScale. 2015.

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The new world of work –and recognition

Millennials have changed the way companies operate. Structures are flatter, decision-making is more democratic, and open, regular feedback and recognition are integral parts of the employment deal.

Without knowing it, Millennials have hit on the secret for business success. Employee recognition, it turns out, is the key factor driving employee engagement7, thus powerfully impacting retention8, and influ-encing culture and the attractiveness of a company as a place to work.

Let’s talk intangibles

So why is recognition still getting the cold shoulder in compensation strategy? Talking intangibles leads to tough questions – How can we know it’s making any impact? – but these fears are unfounded, as borne out by all of the research quantifying the incredible value employee

It’s true that numerous studies over the last several decades have suggested that non-monetary rewards and recognition can be much more effective motivators than compensation. It’s not that money doesn’t matter. It’s just that money tends to be a “deficiency need.” If employees feel that they are significantly underpaid—that their pay does not reflect their contributions to the organization—their motivation is likely to suffer. But when it comes to encouraging employees to pour discretionary effort into their work and deliver superior performance, the chance to make a difference and be recognized for it is likely to provide a much stronger incentive. And that means that in thinking about the impact of rewards on engagement, organizations are well advised to take a total rewards perspective – focusing on both tangible and intangible elements.

- Mark Royal, Hay Group9

7. Harvard Business Review. “The Impact of Employee Engagement on Performance.” HBR. 2013. Corporate leadership council8. Corporate Leadership Council. “Driving Performance and Retention Through Employee Engagement: A Quantitative Analysis of Effective Engagement

Strategies.” Corporate Executive Board. 2004.9. Royal, Mark. “The role of rewards in building employee engagement.” Hay Group. Web. 20 March 2014.

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recognition offers the business. (Bersin by Deloitte found, for example, that for organizations where recognition occurs, employee engagement, productivity and customer service are about 14 percent better than for companies without recognition happening.10) And compensation professionals are realizing the potential to differentiate compensation packages while at the same time drive employee engagement and retention by introducing a broader mix of total rewards that embraces intangible rewards.11

Bringing employee recognition and rewards to life within total rewards

Many organizations run employee recognition programs of one kind or another. Most often these are managed in-house – a combination of HR coordinated initiatives and manager-level discretionary reward or ‘team building’ budgets. In other cases companies have a few programs, perhaps supported by 3rd-party vendors, but the programs are depart-mental or regional, disconnected, and don’t track back to the overarching goals of the business.

Leveraging recognition to drive employee engagement and retention across the organization starts with a social recognition and rewards platform.

Making base pay and short term incentive (STI) programs more effective with recognition

Compensation programs are incredibly important. Adding a recognition and rewards platform not only drives employee engagement and retention, it can also augment and enhance existing programs. According to Towers Watson, three things can improve the effectiveness of base pay and STI programs:12

1. Right infrastructure2. Differentiate reward programs based on performance3. Equip managers to have reward and performance conversations

Consider the right infrastructure to include a recognition platform. Then differentiated programs and performance rewards (non-cash) can all be managed within the platform. And the platform enables managers with visibility into team performance, recognition and rewards tools, as well as a defined avenue to directly build connection and trust with their teams.

Recognition Professionals International (RPI) recommends allocating on average 3% of employee salaries to rewards as a best practice.

A recognition solution provider can help you make this process automated, taking the guesswork out of budget-ing recognition. And the best providers can implement a successful solution for 1% of employee salary, or less.13

10. Garr, Stacia Sherman. “The State of Employee Recognition in 2012.” Bersin by Deloitte. June 2012.11. Miller, Stephen. “SHRM Highlights Top ‘Total Rewards’ Trends for 2014.” SHRM. January 29 2014. Web.12. Towers Watson. Infographic: “Base Pay and Short-Term Incentive Programs.” Towers Watson. September 2014. Web.13. WorldatWork. “Trends in Employee Recognition.” WorldatWork and ITA Group. June 2013.

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How it works: The 5 facets of best-in-class social recognition and rewards platforms

1. Bring everything together

At the core of the value of a social recognition and rewards platform is the consolidation of all recognition initiatives to one unified solution. Manual processes and tracking are completely automated, saving HR time, money, and effort. At the same time consolidating spend from diverse programs enables budgetary synergies and increased employee value across all programs. And usage and spend are tracked and visible to program owners to see and control where money is going and be able to strategically allocate budget.

Part and parcel with the financial value of consolidating recognition efforts to one platform is that a unified employee recognition program brand builds the employer brand, differentiating the organization in the talent market.

2. The right kind of recognition

A recognition platform enables recognition to continuously align with the company’s values and business goals, even as they change over time. To drive key strategic behaviors, recognition must be frequent. A recognition platform that combines free everyday recognition with a variety of more formal recognition options enables all kinds of recognition to flourish, reflecting the full spectrum of day-to-day work for employees, and accomplishments large and small. When every employee can recognize shared successes in the moment, the foundation for a culture of recognition is established.

Many recognition platforms limit recognition access or slow down the process with layers of approval. This is due to vendor business models that rely on high monetary value awards. The best providers offer intuitive, engaging, platforms with ongoing adoption and usage rates above 80 percent. This usage is driven by 360 degree access to giving frequent non-monetary recognition, creating grassroots momentum for recognition that permeates the entire organization, rather than relying on top-down approval-based awards that are disconnected in time and context from the moment of inspiration.

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3. Get the ball rolling

Rolling out a recognition program should be easy. Part of what makes it easy is introducing intuitive software that requires little to no training to use. And cloud-based recognition platforms have repeated the roll-out process for hundreds of organizations and established best practices as well as predictable delivery times. Look for providers with consistent implementation times and high implementation satisfaction ratings.

Keeping the momentum is the other half of the story. Best-in-class platforms offer in-platform push communication tools for administrators to use. This offers a direct communication channel that reaches every employee, in a context that they pay attention to because it is meaningful to them. Combine communication tools with tailored expertise and innovation from a dedicated services team and see the program thrive year after year.

Be sure. Be secure.

In our social, global, 24/7 world, company data represents the body of knowledge that defines an organization’s competitive advantage. When choosing a vendor, ensure that your data is secure anywhere in the world, following internationally accepted best practices.

Security certifications to consider:

ISO/IEC 27001 is the only internationally accepted security standard for software providers, requiring an annual three-stage audit that ensures vendors and suppliers follow best practices in information protection. With this certification, clients can be assured that data is exchanged safely and that risks are anticipated and prevented, using the highest third-party standards.

CSA STAR (Cloud Security Alliance, Security, Trust, & Assurance Registry) certification assesses the day-to-day security controls of cloud service providers and ensures that companies follow best-in-class transparency and assurance practices in the cloud. Ensure any vendor has achieved the highest possible rating (GOLD) for all aspects of their infrastructure.

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4. Make it seamless

The average large company already manages seven HR systems14 - integrating recognition program data with existing systems is a prerequisite. Reporting on program activity, and in particular using the data for benefits reporting and performance evaluations, needs to be seamless.

With a social recognition and rewards platform, getting the right information on employee rewards to payroll on their schedule can be an entirely automated process. So too, can any desired data set be pulled into existing systems and processes, such as performance evaluation.

5. One size does not fit all

It might sound obvious but it’s all too easy to overlook: to use recognition as a business alignment and engagement lever, a recognition program must match the organization, down to the details.

Social recognition and rewards platforms are flexible and configurable to map to the way you do business. Not to mention that the program as a whole must showcase the look and feel of your employer brand.

With this kind of platform each component of the recognition program is designed to match the values and business objectives it’s addressing, and access to each component along with workflows are tailored to the business rules for the organization. Applying a one-size-fits-all software solution to drive the unique culture of an organization may seem easy, but the value of the solution is negligible.

The results are in

Recognition done right can do much more than check the box on an employee survey. Results like increasing highly engaged employees by 22 percent,15 or retention by 31 percent,16 demonstrate the profound impact a best-in-class recognition program can have on compensation and total rewards goals.

With increasing pressure to differentiate compensation packages to compete in the talent-driven economy, as well as the high costs of increasing base pay – even when tied to performance – utilizing a social recognition and rewards platform to support compensation goals offers a low-cost, high-return, solution. In short, you can’t afford not to.

14. Bersin, Josh. “HR and Talent Software Vendors Get Into.... Data Management.” September 23 2013. Web.15. Aberdeen Group. “Rewards and Recognition: Achievers Clients Achieving More.” Research Brief. September 2011.16. Garr, Stacia Sherman. “The State of Employee Recognition in 2012.” Bersin by Deloitte. June 2012.

Learn how your company can change the way the world works at www.achievers.com

Achievers delivers an Employee Success Platform™ that enables social recognition, which dramatically increases

employee engagement and drives business success.