Boost Performance When Times Get Tough
The special role rewards can play in the overall mix of engaging people is often overlooked.
- By Bruce Bolger
- Jan 01, 2009
The economy is weak, and unemployment is growing. Most employees have watched their retirement accounts tumble in value. Prospects for raises this year appear dismal. It is understandable that many may feel depressed and hopeless. Just at a time when organizations need their employees to work even harder and with greater focus to maximize performance, morale in many places is probably at an all-time low.
Properly structured reward systems can provide a highly cost-effective, measurable way to rev up your organization during hard times to meet the challenges ahead. If your organization depends upon people to manufacture products or provide and deliver services, chances are your organization’s level of engagement can have a concrete impact on financial performance.
Alex Edmans, a finance professor at the Wharton School, conducted a study evaluating the stock performance of the companies listed in Fortune magazine’s “100 Best Companies to Work For” between 1998 and 2005. This study found companies with “engaged” employees returned 14 percent per year on each dollar invested, while the overall market return was only 6 percent per year. In addition, according to a study conducted by ISR/Towers Perrin, a global research firm, companies with engaged employees showed nearly a 20 percent increase in operating income over time, while those with low engagement showed corresponding declines of up to 33 percent.
Effective reward systems link employee engagement with an understanding and awareness of how they contribute to the operation. They address the critical combination of human and operational aspects that translates into bottom-line performance improvement.They also can improve the mood when raises are low and times are tough.
Obtaining a financial benefit from employee engagement, though, is not just about morale. People can happily whistle while they work at doing precisely the wrong things your organization might need to accomplish. It’s not just about being motivated; it’s about being engaged in the right behaviors that will guarantee success. In a manufacturing setting, that means watching out for safety or other hazards that could endanger a person or machinery; identifying small problems that, in an automated production setting, can spell big problems later; or continually looking for ways to help the operation function more safely and smoothly. Training and communication are critical to making sure employees have the capability and awareness needed to identify problems or opportunities or otherwise to work more productively.
The Ingredients of Engagement
“Incentives, Rewards, and Workplace Motivation,” a classic study on business motivation produced for the International Society of Performance Improvement with a grant from the Incentive Research Foundation, found that properly run incentive programs can increase performance in groups up to 44 percent and 25 percent among individuals. The study identifies the following elements as fundamental to success:
Understanding of goals -- what needs to get done and how they can help;
Emotion -- how people feel on the job;
Communication -- understanding of goals and what needs to be done to achieve them;
Capability -- the ability to do their part;
Task value -- feeling their job has purpose;
Support -- a sense that the organization cares about one’s contribution; and,
Feedback -- the ability to provide or obtain useful information related to performance.
Addressing the Human Element
Properly structured engagement strategies address the human element by:
Fostering a sense of fun in the organization to give people a sense that they are able to get extra recognition, and even something special, for meeting organizational goals;
Improving the effectiveness of communication and training by promoting them with rewards that will get people’s attention;
Providing a clear idea of what can be done to improve performance, including making suggestions, identifying problems, and improving efficiency;
Making people feel their jobs have a purpose by recognizing their contribution to the organization; and,
Using data gathering or other systems to track the program to identify ways to improve results.
Incentive -- or what are now coming to be known as engagement -- programs have compelling economics. When properly structured, their final cost (and, therefore, return on investment) is highly tied to the outcome, meaning the cost will be much less if the program fails to produce results. There is one key warning, though: You can’t fake engagement and expect a positive benefit. If your organization addresses the process insincerely or with deception in mind, you might get some short-term boost, but only until people find you out.
The Reward Factor
The special role rewards can play in the overall mix in the process of engaging people is often overlooked. Tangible, non-cash rewards do not replace compensation but are a part of the internal marketing process needed to get people’s attention and foster understanding of exactly how they contribute to success. When best used, rewards are more a part of communication and relationship-building than they are about carrots.
When viewed this way, rewards should be selected based on:
Your objectives. If you’re asking employees to reach tough goals and you offer rewards of little value, you run the risk of looking cheap and insincere.
Your audience. What has the best chance of creating buzz within the organization and with the recipient, his or her family, or significant others?
The message you wish to convey.What you offer, as with any gift, says a lot about who you are and how much or little you care. The rewards, even the brands you use, should support the overall values and culture of the organization.
The Measurement Bonus
Performance has a value. Sometimes it takes arbitrary determinations to establish that value, but most suggestions and improvements come with a theoretical or tangible value to the organization.When rewarding people for behavior, it is often quite possible to assign a value to that behavior that can be translated into a unit of measurement. Even the most basic incentive program management software can include the capability to translate a unit of performance improvement into tangible benefit to the organization as a whole.
Rewards and ROI
There are key elements to keep in mind that are critical to success in a rewards program:
Clear objectives. Specify what you are trying to accomplish.
Involvement. Clearly identify the exact things people can do to achieve specific goals and identify what obstacles may exist.
Strategic planning. Organize the effort as you would any other marketing effort, with clear measures, strategies, plans, and actions, as well as clearly identified roles and responsibilities.
Communication. Utilize consistent outreach to engage people and reinforce key messages that outline what they have to do to achieve the goals.
Training. Make sure people know how to do what is being asked of them.
Fair goal-setting. Make sure people know exactly what they have to do to achieve their goals, understand they have a real chance of achieving them, and know that rewards will be distributed.
How to Learn More
The incentive field has a variety of organizations that offer helpful resources providing research, white papers, and best practices. These include the Incentive Performance Center , which offers original content and links to additional information on all aspects of incentive programs and performance improvement; the Incentive Research Foundation, offering original research on the effective use and resultant benefits of motivation and incentives in business and industry; and the Incentive Marketing Association, which offers a host of white papers and case studies on incentive programs.
This article originally appeared in the January 2009 issue of Occupational Health & Safety.