Published on February 10, 2009
TheWhitePaper* ISSUE 2 JUNE 2008 Who Says Cash Is King? The Importance of Non-Cash Recognition in Building Motivation across a Global Organization
TheWhitePaper* Business Is Global! In today’s global economy, world-leading organizations require the global reach necessary to recognize and reward employees and sales channels in some of the most rapidly growing economies in the world. As more and more global corporations open and expand operations in worldwide locations, the need to implement relevant multicultural programs continues to increase. barriers to recognize employees and channel part- Previously, running global reward and recognition pro- ners around the world in a personalized fashion. grams was expensive, disparate, and so administrative- ly burdensome as to be almost impossible. Expensive As an expert in the recognition and reward industry, shipping costs, translation charges, culturally inappro- we help today’s world-leading companies overcome priate rewards and various unaligned programs in dif- the global challenge to launch successful, non-cash ferent countries were the order of the day. recognition programs that deliver optimal results. Our clients may differ in size, industry, and location, Today, Globoforce provides global corporations with but they all faced the same set of questions when an online platform that enables them to issue, track setting goals and objectives for the launch of a new and manage their entire recognition program needs reward and recognition program. from one system. Through this platform, we offer ap- propriate and motivational rewards that get to their In our experience working across a wide variety of in- winners quickly and efficiently. We are committed dustries, we have noted five recurring questions com- to helping global corporations overcome geographic panies raise while launching a recognition program. Q1. How important is recognition? Q2. Should our recognition program be 100% cash based? Q3. Is a non-cash recognition program as effective in motivating employees? Q4. How will non cash recognition impact our bottom line? Q5. What rewards should we use?
TheWhitePaper* Q1. How important is recognition? Tip 1: Retention, Reinforcement, Today, world leading enterprises are those that base their recognition strategies on building a culture Return on Investment! of appreciation by acknowledging the efforts of all deserving employees on a more personal level and Recognition is a valuable tool for recruiting and recognizing the behaviors that are most important to retaining qualified employees as well as reinforcing their company as a whole. These organizations are positive employee performance. successful because they know recognition of their It should come as no surprise that employees who employees directly impacts their companies’ bottom receive regular recognition and praise are more en- line as it helps manage retention, increase employee gaged. This engagement leads to demonstrable in- satisfaction and thus enhance overall performance. creases in profits, sales, customer loyalty and above average productivity. “Companies that utilized an effective employee recognition program enjoyed a 109% Gallup studies have proven that increased employee three-year median return to shareholders vs. a 52% return for the same period for engagement results in: those companies that did not.” * 27% higher profits - Watson Wyatt Study of 3 million employees, as quoted in Forbes magazine (2004). * 50% higher sales * 50% higher customer loyalty Effect of Recognition on Company Status Fortune’s Most Admired Companies * 38% above average productivity. All Others Ultimately, your company’s success is influenced by its ability to recognize and reinforce positive behavior Reward Programs 25% Attract Talent in your people. 45% Reward Programs 28% According to motivation studies conducted by Fred- Support Retention 48% erick Hertzberg, a renowned psychologist and re- 16% Financial and Non-Financial searcher of human motivation in the workplace, Recognition Programs 28% salary, supervision and working conditions, at best, Line Managers Create 21% prevent employees from being dissatisfied. It’s rec- Positive Work Environment 41% ognition that positively impacts morale and loyalty to Regularly Reinforce Company 64% the organization. Recognition is a strong influencer of Reward Philosophy 82% job satisfaction in that it feeds Psychic Income™—a person’s need for social acceptance, increased self- 0 20% 40% 60% 80% 100% esteem and self-realization. - Hay Group Research, March 2008
TheWhitePaper* Q2. Should our recognition program be 100% cash based? Tip 2: Cash Is Not king! Cash-only recognition programs may appear to be the quick and easy solution but, based on our cli- Often, we hear from our clients that their employees ents’ previous experiences with cash-only programs, and sales partners would prefer cash. Traditionally, they neither maintain program consistency on a their HR departments were happy to accept that re- global scale nor do they ensure local participants feel quest because: motivated and involved in the organization. * Cash is flexible By building a recognition program on cash alone, companies not only lose out on establishing a cul- * Cash allows everyone to get what they want ture of appreciation across their global organization, * Cash is easy and works in payroll but also on delivering an extra boost to their return on investment. * Cash helps people meet their basic needs Recognition is no longer a nice to have. It must be * Cash just cuts it! part of your Total Rewards Strategy if you aim to: 1. Be competitive in the marketplace “Recent research shows that what employees say they want and what they actually 2. Communicate to employees that they add value work hardest to receive do not always match up… Those working for a cash incentive and that you will acknowledge them boosted their performance by 14.6% over those who did not receive any incentive for performance… Those who were working toward a non-cash incentive improved by 3. Create a great place to work 38.6% relative to the no-incentive condition… For the same amount of money, a non- cash incentive created more than twice the performance improvement!” A Total Rewards Strategy is one that achieves the highest return on investment for a company with the (University of Chicago study, 2004) optimal mix of cash and non-cash rewards. When developing your total rewards strategy, you must first consider your business objectives—certain objec- tives may be better accomplished with a compensa- tion approach (cash) while others would be met with a recognition approach (non-cash). Together, non-cash and cash awards provide the maximum motivation.
TheWhitePaper* Q3. Is a non-cash recognition program as effective in motivating employees? Tip 3: Efficient and Effective rewards, you reinforce the relationship between the reward earner and reward provider. Recognition! Non-cash rewards are ideal for improving perfor- Keep trying to motivate your employees with cash mance, creating promotional value and satisfying and you’ll soon become all too familiar with a phe- the human ego. They appeal to the recipient’s need nomenon that researchers call “reward inflation.” for Psychic Income by providing your program par- People become “habituated” to cash no matter how ticipants with a tangible symbol of achievement that much you give them. fulfills their needs. When the issue is performance, cash is often the In addition, they reinforce the recipient’s wrong answer because it’s viewed as an entitlement commitment to the company, helping without trophy value or corporate equity. to ensure long-term success. Cash rewards are “slippery” in that they are forget- n itio Awards table or “slip” a recipient’s mind, often “slipping” gn co right into the paycheck unnoticed. As it’s not socially Incentives Re & Contests acceptable to discuss cash or salaries—especially in front of co-workers—you lose a recognition moment Variable Pay/Bonus by recognizing your workforce with cash rewards. ion sat en Non-cash rewards, on the other hand, are “sticky,” mp Base Pay/Salary/Benefits Co ensuring that the personalized redemption options are memorable or “stick” in the recipient’s mind. By recognizing your program participants with “sticky” Total Rewards Strategy Cash Is Slippery Non-Cash Is Sticky * * Cannot be discussed in front of co-workers Fulfills recipients’ needs and creates memorable value * * Is easily spent on necessities such as gas and groceries Reinforces recipients’ commitment to the company * * Becomes an expected entitlement Provides trophy value and a tangible symbol of achievement * * A 1999 Wirthlin Worldwide survey showed how cash rewards were Offers opportunity for recognition moments * spent: Enables other communications opportunities (newsletters, posters) * Bills – 29% * Provides something physical to “show off” * Do not remember – 18% * Are socially acceptable to brag about * Never received a cash reward – 15% * Provides a lasting reminder of achievement * A 2007 survey showed how cash rewards were spent: * Provides guilt-free enjoyment of the reward * $500 reward – 25% did not recall how it was spent * Delivers a higher perceived value * $1000 reward – 33% did not recall how it was spent * Participants may involve family in selecting reward Cash = Poor Return on Investment Non-Cash = Next Big ROI Opportunity
TheWhitePaper* Q4. How will non-cash recognition impact our bottom line? Tip 4: Increase Productivity and Gallup estimates that 22 million workers in the US alone are disengaged, having a significant impact on Save Money! the productivity and ultimate success rates of many Engagement of your employees matters. It’s about businesses today. creating an organization that moves forward posi- Engagement of your employees is the next big ROI tively, by encouraging more discretionary effort from opportunity. Research has shown that companies its people. that implement a global recognition program can ex- According to the results of a worldwide survey con- pect an ROI of 200-500%. ducted by Gallup, employees typically fit into one of With non-cash recognition programs, you not only these different groups: save money by reducing manual intervention and 1. Engaged employees work with passion and feel eliminating the paper chase, you also create this a profound connection to their company. They drive positive, engaged environment where people see innovation and move the organization forward. best practices, strong ethics and exceptional perfor- mance are recognized and rewarded consistently, 2. Not-engaged employees are essentially “checked openly and fairly. Such an environment encourages out.” They’re sleepwalking through their work day, loyalty, commitment and honesty of effort, resulting putting in time—but not energy or passion—into in significant ROI. their work. 3. Actively disengaged employees are unhappy at work; they’re busy acting out their unhappiness. Every day, these workers undermine what their en- gaged coworkers accomplish. “Companies that recognize their people outperform those that don’t by 30% to 40%.” - Kriegal PhD. Extract from Contented Cows Give Better Milk
TheWhitePaper* Q5. What rewards should we use? Tip 5: Locally Relevant, Your participants are likely to be spread across the country if not many countries. They come from dif- Personally Meaningful and ferent backgrounds, genders, and age groups— all Actually Motivating Rewards! with varied cultural tastes and preferences. An essential part of a non-cash recognition program To appeal to the wide variety of needs and interests is making sure the rewards offered actually motivate within your program participant pool, you must pro- to your program participants. By offering them the vide variety in your rewards selection. “gift of choice,” you ensure no one is disappointed. By offering a worldwide “reward of choice” selection, Many of the companies we work with today first of- global organizations can ensure every one of their fered cash only and then merchandise before finally program participants will have something to select settling on our gift certificate model. We’ve heard that is culturally relevant and personally meaningful some real horror stories related to merchandise in to them —no matter where in the world they reside. our experience in global rewards! Some of our favor- Successful programs are those that deliver both con- ites are related to trying to ship merchandise world- sistency and “meaning” on a global scale by ensur- wide! For example, the grand-father clock shipped ing their program offers access to millions of different from the US to Australia ended up costing five times shopping, dining, entertainment and travel options its value when shipping, customs and duties were across all six continents. paid—in addition to the two months it took to arrive! Needless to say this is where thinking local really be- comes essential – knowing not to talk about “French Dollars” or knowing that electronic merchandise is a global rewards disaster. Think about the variety of electric plugs the world!
About Globoforce Globoforce is the leading worldwide provider of on-demand strategic reward and recognition solutions for Global 2000 companies. Globo- force’s flexible and efficient recognition tool can scale from one user to millions of users with ease, offering global companies a powerful and secure solution to implement and manage their companywide or divisional employee recognition programs. Through a dynamic, easy-to-use, on-demand technology platform, Globoforce transforms the way companies engage, motivate and empower their workforces across the world. Co-headquartered in Southborough, Mass., and Dublin, Ireland, Globoforce was recently selected by the Great Place to Work® Institute as one of the “50 Best Companies to Work For.” Globoforce won a 2007 Process Innovation Award for the creative deployment of Dow Chemical’s global, on-demand employee recognition program. Globoforce also won Human Resource Executive magazine’s coveted “Top HR Product of the Year” award in 2004 for its revolutionary on-demand software solution. Some of Globoforce’s world-class customers utilizing this enterprise- class solution include Amgen, Avnet, Dow Chemical, Intuit, Procter & Gamble and Reuters. www.globoforce.com. Globoforce (North America) Reservoir Corporate Center 144 Turnpike Road, Suite 310, Southborough, MA 01772 USA Phone: +1 (888) 7-GFORCE (436723) Fax: +1 (508) 357 8964 Email: firstname.lastname@example.org Globoforce (Europe) 6 Beckett Way, Park West Business Park, Dublin 12, Ireland. Phone: +353 1 625 8800 Fax: +353 1 625 8880 Email: email@example.com © 2008, Globoforce Limited. All rights reserved.
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