Compensation and Pay for Performance

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Chapter 10: Pay-for-Performance: Incentive Rewards: 10.4e Incentive Awards and Recognition Book Title: Managing Human Resources Printed By: Cedric Turner ([email protected]) © 2016 Cengage Learning, Cengage Learning

10.4e Incentive Awards and Recognition

Incentive awards and employee recognition are an important part of an employer’s pay-for- performance compensation strategy. In 2011, a study by the American Psychological Association found that 43 percent of employees feel they receive inadequate nonmonetary awards and recognition for their contributions at work. In fact, almost a third (32 percent) of employees indicated that they intended to seek employment elsewhere within the next year.

Many companies recognized this trend and have put considerable effort into ramping up their awards and recognition programs. Over 40 percent of companies showed an increase in their incentive awards and recognitions for 2011. For example, Nordstrom offers a Pacesetters award and an All-Star award for service. Pacesetter is the title given to the top 10 percent of salespeople whose net sales meet or exceed an annual sales goal for their department. The individuals are recognized in company meetings and receive a cash prize, Nordstrom stock, and a higher merchandise discount for the year. One sales All-Star is recognized each month, and one customer service All-Star is recognized each quarter. The award is presented at the company recognition meeting. The families of the employees are invited. Winners receive a higher merchandise discount of 33 percent (up from 20 percent), a cash award of $100, special business cards, and displayed photos of the employees.

Awards are used to recognize productivity gains, special contributions or achievements, and service to the organization. Popular noncash incentive awards include merchandise, personalized gifts, theater or sports tickets, vacations, dining out, gift certificates or gift cards, and personalized clothing. Tangible awards presented with the right message and style can make employees feel appreciated while at the same time underscoring a company value.

Research clearly shows that noncash incentive awards are most effective as motivators when the award is combined with a meaningful employee recognition program. Tyler Gentry, employee recognition specialist, notes this about the importance of noncash incentive awards, “Recognition and rewards aren’t so much about recognizing someone for going ‘above and beyond’ and giving gifts as they are about letting employees know that they are valued and appreciated. Recognition is a conduit that shows employees that the company appreciates their efforts, their unique gifts, and their contributions.” Employers should take care to tie awards to performance and deliver awards in a timely, sincere, and specific way. Generally, the more public the recognition, the more powerful the effect.

Nonmonetary rewards let employees know they are valued, which is why more and more companies are using incentives like these to recognize high performance.

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Importantly, noncash incentive awards should support business goals and objectives. Greg Boswell, managing director of client solutions at O. C. Tanner, notes, “Employers are now thinking of awards and employee recognition more strategically with programs closely aligned to their business goals.” For example, if quality improvement is a business goal, then recognition needs to be tied to those behaviors that further the achievement of quality. Additionally, incentive awards work best when awards are appreciated and valued by employees. At one advertising agency, the employee of the month is allowed to drive the president’s car for one month—the car is a Maserati. Highlights in HRM 2 provides suggestions for noncash incentive awards based on the generational grouping of employees.

Chapter 10: Pay-for-Performance: Incentive Rewards: 10.4e Incentive Awards and Recognition Book Title: Managing Human Resources Printed By: Cedric Turner ([email protected]) © 2016 Cengage Learning, Cengage Learning

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