A Little Thank You Goes a Long Way

What can you give employees to keep them happy when you can’t give them a raise?

For companies operating during times of uncertainty, it’s not a rhetorical question. No one can predict when or if substantial salary increases will return.

That leaves companies to find other incentives to hang onto workers.

One carrot that more are dangling is a comprehensive rewards program that recognizes those who go above and beyond the call of duty.

Companies leaned on rewards and recognition programs more than ever when the economic downturn wiped out jobs and raises, even if it was just to send thank-you cards or tokens of appreciation that cost little or nothing.

Industry experts don’t expect those practices to go away once the economic downturn runs its course. If anything, with businesses starting to bounce back, companies are spending more on the programs, even as they hold off raising salaries. Companies that switched to non-monetary rewards due to the economic downturn are putting money back into their programs, says Andrea Dumont, senior director of global marketing at Globoforce, a Dublin, Ireland, rewards and recognitions vendor with customers in the United States and Europe. “There’s a rebound,” Dumont says. “There’s some cautious optimism going on, but we’re definitely seeing a trend.”

Today some companies give out “spot rewards” – digital thank-you cards, Starbucks gift cards or prepaid debit cards – on a weekly or even daily basis. Others offer the equivalent of an online shopping mall where employees who’ve been recognized for a major achievement have their pick of goodies, including jewelry, camping gear or a flat panel TV.

Managing Rewards Programs Goes High Tech
The types of giveaways aren’t the only things that have changed. More vendors offer Web-based technology for managing programs, letting clients point and click to track which employees are up for years-of-service awards or to keep an eye on program budgets.

Midsize companies have new options for running rewards and recognition programs too. Business owners who don’t want to design their own programs can hire a consultant to do it for them or outsource to a third party. Vendors that once worked exclusively with Fortune 1000 companies are actively courting midmarket customers. Among the industry leaders are Globoforce, OC Tanner, Rideau Recognition Solutions, TharpeRobbins and Michael C. Fina.

It’s a good idea for midmarket companies to put some type of rewards program in place, especially if they’re afraid workers would jump to a larger company with more sophisticated compensation packages if given the opportunity. Even if they can’t afford raises right now, midmarket companies can hang onto employees by offering other things that make them happy – engaging work, training, a chance to make a difference, a comfortable work environment and opportunities to socialize with fellow workers, says Ravin Jesuthasan, an employee rewards and performance analyst at management consultant Towers Perrin. Rewards and recognitions build on that. “It could be a gift certificate to a restaurant, a merchandise discount or being named employee of the day, which doesn’t cost anything but for the individual has psychic value and recognizes them to their peers,” Jesuthasan says.

Regardless of what a company offers, programs have to be properly accounted for in a company’s overall compensation plan and for tax purposes. That’s where the finance department comes in. Analysts and consultants say a CFO or finance manager should work with an HR counterpart to make sure policies are uniform across the board. Rewarding one department based on one set of criteria while another plays by different rules is a sure morale killer.

The exorbitant perks that got AIG and other Wall Street firms in trouble at the height of the financial industry meltdown have put pressure on companies of all sizes to keep a lid on overly extravagant rewards and tie programs into strategic objectives. “You can’t run these things willy-nilly,” says Paul Hebert, managing director of I2I, a Greenville, South Carolina, rewards and recognitions consultant. “That’s where a CFO gets involved – not just to give them a budget, but to make them justify it.”

Rewards and Recognition Do’s and Don’ts
Whether your company is setting up a rewards and recognitions program or fine tuning something you already have, here are some important things to remember:

Programs aren’t the same as policies – The first step in setting up a program is coming up with policies for behaviors or milestones you want to reward, how you’ll do that and how often. Avoid rewards for meeting basic expectations – you shouldn’t reward someone for being honest or showing up for work on time, because that’s expected, Hebert says.

One prize doesn’t fit all – Not everyone on your staff will be motivated by the same rewards, so the more options the merrier. Some companies account for this by giving gift cards or cash. Vendors have added hundreds of items to their online catalogs to have something for everyone. Others produce items for certain age groups. To appeal to Gen Y workers, TharpeRobbins recently introduced a jewelry line with lots of silver, big stones and “a more urban youth feel,” says Anthony Luciano, senior vice president of sales and marketing at the Statesville, South Carolina, company.

Create a budget – Programs should be part of a company’s overall compensation plan. Typically, companies spend about 2.7 percent of payroll on rewards and recognitions, according to WorldatWork, the HR industry trade group. Decisions over how to grant rewards should be tied to a company’s bottom line, which is why it’s important to have a CFO helping make decisions, says Hebert, the consultant. “From a CFO’s point of view, they need to know why they’re spending the money, what’s the return,” he says.

You may want to use an outside vendor – Depending on the size of the company, an HR or finance manager could run a program. But outsourcing can allow for buying gift cards in bulk and other economies of scale that might not be available if you go it alone. Plus, vendors’ technology platforms can make it easier to manage programs, says Jesuthasan, the Towers Perrin analyst.

Be part of the selection process – If you opt to outsource, finance should sit in on presentations and negotiations, even if HR is heading the selection process. Finance executives should be familiar with how a particular vendor’s system works so they can weigh in on how well it would fit into payroll and other financial processes, says Dumont, the Globoforce executive.

Originally published on Inside Edge, June 1, 2010.