Will corporate award planners every truly understand the difference between an incentive program and a recognition program? Try as some of the experts in the industry might to educate them; these two terms are constantly being interchanged.
The Employee Engagement Alliance defines the two types of programs as this…
“Incentive programs are used to drive behaviors conducive to practically any business objective. Recognition programs are used to recognize individuals whose accomplishments were particularly noteworthy.”
We’ve addressed the issue on several occasions but many folks still persist on confusing them. Here’s an excellent post from our friend Paul Hebert at I2I Incentive Intelligence that will give you one way of looking at a difference between the two. Another great way to differentiate them is by reading this post from the Compensation Café on the Right vs Wrong Incentives. As this article comes to us from a well-respected blog on cash compensation, it gives us a good look at the same things we need to consider when discussing incentives or recognition to improve performance.
The key paragraph in this compensation piece is the discussion of a financial rationale and these questions…
“What will the company receive in return for the increased costs of an incentive program?” and “If you are planning to increase your targeted compensation costs of an affected group, how will you answer the ROI question?
All well planned non-cash incentive programs follow the same methodology. They plan for an ROI. This is the single largest difference between incentives and recognition!
The award industry has struggled for years to apply any sort of meaningful ROI to a recognition system. They haven’t figured out a good way to do it and never will based on the metrics and fundamental structure they use for these types of programs.
And as mentioned in the Compensation Café article…
Caution: You had better provide a business rationale, and not subjective phraseology like “survey says” or “everyone else is doing it” or even “it’s the right thing to do.’ Management tends to frown on such trivial rationalizations.
So for all corporate award planners, please get your definitions straight. Regardless of what all the prize peddlers in the industry tell you, you won’t change behavior and drive significant results with a recognition program. Recognition programs can provide you with a whole different set of benefits. You can drive results with an incentive program that is well designed and implemented, but it won’t necessarily recognize specific behaviors of employees whose accomplishes are particularly noteworthy.
read comments (0)
This is the kind of article that is written by those who think they understand incentive programs, but is what he says correct? Unfortunately much of it is correct all too often, but it is not the norm, nor is it what happens when the incentive program is designed and implemented by professionals in the industry. While the author offers a list of disadvantages of sales incentives, they are not disadvantages of using sales incentives them; they are disadvantages of how they are used. Let us review the points mentioned in the post and how they differ from ours.
Rewards for Top Performers
“Most sales incentives tend to reward only the top performers …some of these representatives may already be selling at a high level. They do just enough to collect their bonuses or trips”
Most top salespeople will be the top salespeople regardless and will always work to be the top. For them it is intrinsic. If historically only the top salespeople earn, the objectives and rules structures were not set properly to include 80% of the universe, not just the top 20%. A properly designed system will motivate the majority to better their own performance. In essence, they should compete with themselves.
Narrowly Focused
“Many sales incentives are also narrowly focused on just sales. This causes sales representatives to focus only on revenue-generating activities.”
Absolutely! That is as it should be. If you want them to focus on something else then incent that objective as well, but good salespeople are success driven. And that’s where you want them to be. The best programs will be those that are narrowly focused with qualifications to avoid other issues.
Costly
“Sales incentives also have high associated costs. Small companies which fail to tie incentives to the right performance variables may needlessly be paying tens of thousands of extra dollars per year for bonuses, trips and impromptu rewards.”
This should never really happen. Before you implement any sales program, enough time and due diligence should be spent so your measurements and objectives are tested against historical averages, taking all current marketing conditions into consideration. Any client who spent tens of thousands of dollars needlessly did a poor job of planning.
“The best sales incentives should be equally tied to increases in new business and sales of specific products and services. Some products or services may be ignored for higher-priced products or higher volume sales. “
Not necessarily. You can’t solve all problems with one program, but there are ways to tie them all together with one program using combinations of these other objectives as qualifiers or bonus earning opportunities when the main goal is achieved.
A professional incentive salesperson has the experience to turn these perceived disadvantages into advantages that will make your program the best it can be. One of the best incentive consultants in the business is Paul Hebert of I2I Incentive Intelligence. Drop him a line if you want that well developed and successful sales incentive program.
According to this article on the PRNNewswire, global employee satisfaction lagged in 2011. Aon Hewitt, the consultancy that specializes in HR services has released data from their 2011 Employee Engagement Database showing that engagement has been lagging for some time now. Given the state of the economy both here and around the world, these figures are not all that surprising.
The AON 5700 employee database which represents over five million employees worldwide, reveals …
“an engagement level of 56 percent for the end of 2011, which is the same as 2010, but lower than 2009 (60 percent) and 2008 (57 percent). Traditionally, engagement levels between 65 percent and 100 percent represent a high-performing culture; 45 percent to 65 percent indicate the workforce is indifferent to organizational success or failure; and anything lower than 45 percent represents a serious or destructive range.”
It seems that the largest drop in engagement comes from employees’ perceptions of how companies manage performance. Or in other words, employees think their bosses have not provided the proper level of management that leads to better productivity. They also don’t do a very good job of connecting the employees performance overall to company goals.
The report goes on to state that significant numbers of employees are not motivated to work beyond job requirements and are thinking of leaving in the near future. When measuring satisfaction scores for key drivers of engagement “appropriate recognition beyond pay and benefits for employee contribution” is only 40% globally, 48% in the US, but still the lowest of the drivers analyzed. Recognition has been on this list for years. Does that mean that all the money and time spent on employee recognition programs is not producing results? Some consultants outside of the recognition industry would support this conclusion. The analysis concludes that …
“even at the height of the recession, employees felt a greater connection to their work and role in achieving organizational success than they do now.” This is a harsh reality, but also an opportunity for those employers willing to invest in specific areas that will have the largest impact on employee engagement. While there is an expense in doing so, the return on investment can be well worth the effort.”
From our perspective, the time for rewarding and recognizing employee performance could not be better. It is one of the easiest and least expensive ways for improving and maintaining employment engagement, and as mentioned the minor expense per employee for doing so can be well worth that expense.
Sound like a trick question? Well it’s not; it is raised by this article that discusses research conducted by the Impact Achievement Group, a leadership development consultancy. Just when you thought the entire recognition aspect of employee engagement has become a proven employee improvement strategy, along comes “research” that attempts to negate the value of employee recognition programs. Well at least it tries to contradict employee recognition programs as the research download states that they want to “challenge existing assumptions and provide an impetus to further exploration.” They probably should have said “provide an impetus for further clarification” as the research was not very evident nor was it very clear and certainly provided no evidence to support conclusions drawn.
In our opinion this piece is nothing more than a compilation of re-occurring thought on the values of recognition awards to change behavior in the workplace and is more self-promotional than anything else. In addition they include some thought from the works of Herzberg in the sixties as if to authenticate their position, all of which makes for a hodgepodge of creative deductive reasoning that leaves you a tad baffled. Hey, we’re not saying their conclusions are wrong, just a little confusing.
As is often the case, the Impact Achievement Group, who did the research, doesn’t seem to have a clue about the difference between an employee recognition program and an employee motivation or incentive program. They also hang their case on “happy employees” not being productive, but productive employees being “happy.” Not sure where the “happy” came into to picture, we’ve always heard “engaged” as the buzz word of the day. We’ve been designing and implementing recognition or incentive programs going on 40 years and have never used “happy” as the objective of the program.
We believe the issue here is who is best equipped to assist companies in improving employee performance. There are many who claim the high ground on this, not the least of which is the consultant types as mentioned here whose income is dependent on assessment, coaching, training etc., but not awards. Others include those research types who want to research every nuance possible of the employee world. Then we have the communication companies who feel that all you need to do is communicate better and your woes will be gone. Then you have the recognition and award companies who hang their hat on the award as the driving factor. Take your pick, read up on all of them, you’ll find that they all say much the same thing.
If you believe that employee engagement (or happiness) is a behavioral issue (which we do) you might want to consider tackling the issue using the behavior model. In it you’ll find that research, training, communication and measurement and feedback are all part of changing behavior, with positive consequences as the piece to close the loop and continue the behavioral circle. As “positive consequences” include the reward piece, than it would seem that it is kind of difficult to extricate the reward and recognition from the total. Or are we just being too simplistic here?
Let’s stop thinking about whether reward and recognition does or doesn’t work in helping to engage employees and improve performance. There is plenty of evidence out there to support that conclusion. I don’t know if engaged means they’re happy, but it does mean they are performing better than those who are not engaged. What do you think?
There is some interesting data that has come out of the 2011 gift card survey of subscribers to Incentive magazine.
First, the number of responses from large budget incentive users has nearly doubled over 2010 figures. Traditionally companies with these large programs who have used other forms of awards for their programs now seem to be embracing gift cards as their award of choice. One reason we believe is the value and choice given by gift cards that was not readily apparent in the traditional merchandise awards. This trend has been increasing for several years, but 2011 seemed to be a peak. According to the survey:
“Of special note to gift card suppliers are the survey responses that place more value on gift cards than merchandise – gift cards are overwhelmingly seen as a more influential incentive or reward than other options. Since 57 % of respondents said their budgets were untouched for 2001, the outlook for gift card suppliers is even brighter this year.”
A significant survey question was:
How gift cards compared to traditional merchandise awards?
- 59.6 % said more effective
- 27.6% said equally effective
- 5.7% said less effective
- 7% didn’t use merchandise.
These types of responses would have been unheard of twenty years ago. Traditional merchandise awards had been the backbone of the incentive awards industry because they drove all the profit. There was only a small handful of suppliers selling gift cards and only to a limited market. Today gift cards are very well accepted as an award that will drive performance. They no longer have that “impersonal” label that was given to them by all the traditional merchandise suppliers when faced with them as competition.