Does having engaged employees translate into better financial performance? Compelling research from numerous sources suggests that the answer is yes. Recent studies from Purdue University’s Krannert School of Marketing, the International Journal of Retail & Distribution Management, and Personnel Psychology have found a clear link between engaged employees, customer satisfaction, and profitability. (For a summary list including this and other research on the connection between motivation, engagement, and profitability, click here.) From the standpoint of investors, the impact may be just as great. A study conducted by The Russell Index found that since 1998, publicly held stocks on Fortune magazine’s list of “100 Best Companies to Work For” returned five times as much to investors as the broader market indices, notably the S&P 500.
Overall, research suggests that employees work more productively when they have clear goals, derive value from their job, feel the support of their organization, enjoy a positive mental state, and have the capability to do the job. Rewards, Motivation, and Workplace Performance, a study conducted by the International Society of Performance Improvement, suggests that employee incentive and recognition programs can help address many of these factors by providing direction, helping employees develop relevant skills, focusing attention on positive behaviors, and giving employees the sense of task value, and feelings of support that underlay motivation.
Incentive programs often get confused with recognition programs. Both reward behavior; however, incentive programs promote a financial or physical benefit before the behavior has been demonstrated, while recognition elicits a psychological benefit after a specific behavior has occurred. Incentive programs tend to promote specific actions; recognition focuses on values. Goals for non-sales incentive programs often focus on safety, productivity, and quality. Non-sales recognition programs might focus on issues like idea generation, length-of-service, attendance, etc. Programs that award employees for exemplifying organizational values generally are the focus of recognition programs. Many organizations combine elements of both in their internal marketing.
Finally, contrary to the title of this section, some “non-sales employee” incentive programs often have a direct or indirect sales aspect, such as programs promoting better service, cross-selling of services, referrals, or quality. This explains why many organizations now refer to employee communications and motivation efforts as “internal marketing.” For many organizations, employees can have a considerable direct or indirect impact on customer satisfaction, on referrals, and even on the brand.
Even though recognition programs are distinct from incentive programs, keep these key differences in mind. This section covers both types.
Types of Non-Sales Employee Incentive & Recognition Programs
Latest studies from the Society of Human Resources suggest that over 80 percent of companies now use non-cash awards in some form of incentive or recognition program for general employees. And a 2005 survey by the Incentive Federation found that 72 percent of respondent companies used incentive and recognition program for non-sales employees.
A variety of business conditions are contributing to the growth of non-sales incentive and recognition programs:
Increased focus on the customer experience. Many organizations have recognized the competitive edge achieved by more effective engagement of non-sales employees. Recent studies by the Forum for People Performance Management and Measurement, affiliated with the Department of Integrated Marketing Communications of the Medill School, have found a direct link between engaged workers and satisfied customers, and between satisfied customers and profitability. (Go to http://www.performanceforum.org)
Increased measurement capabilities. Today, the Internet and enterprise-wide data collection systems have significantly improved the ability of organizations to measure specific performance elements, greatly reducing the resistance to using incentive and recognition systems.
Stress on pay for performance. In their bid to reduce fixed costs, organizations increasingly favor performance-based pay and recognition systems.
Enhanced communication options. The Internet and company Intranets have made it possible for organizations to much more rapidly share information, training, and internal marketing messages, creating the need for incentives and recognition to draw attention to key values and information being conveyed.
Looming labor shortages: Organizations in many fields already face difficulties finding skilled workers, and the problem could grow more acute in coming years if baby boomers tend to retire at the same age as their parents’ generation.
According to the 2005 Incentive Federation survey, organizations typically use employee incentive programs to:
- Boost morale
- Show concern for workers
- Generate leads
- Improve customer service
- Improve quality and productivity
- Foster teamwork.
Many organizations increasingly recognize that employees are the face of their brands. This has spurred them to publicly devote more resources to motivating and engaging employees to help deliver customer satisfaction. Rewarding employee excellence can increase productivity, lower turnover, increase customer satisfaction, and create a positive brand image in the marketplace.
Incentive programs for non-sales employees target and reward specific employee behaviors that are as varied as the companies employing them. Even so, certain factors about individual employee types can have an impact on incentive and recognition program design.
Job function. Today, many companies have incentive, reward, and recognition systems for nearly all non-sales job functions, from customer service and logistics to manufacturing and research and development. Not only will the job function help dictate what behaviors get rewarded, but it will also have a bearing on the mentality and culture of the target audience. Incentive programs naturally need to be tailored based on the job function, because the behaviors and goals will be quite specific to that job and the desired objectives. Recognition programs, on the other hand, can help unify an organization by promoting values common to all groups, such as good attendance, extraordinary efforts, or exemplary values in keeping with those the organization wishes to promote.
Full-time or part-time. Many organizations have highly flexible work forces, with a relatively high percentage of part-time workers. These organizations now realize that part-time workers can have just as much impact on customer impressions or work quality as full-time workers, and they increasingly include part-timers in incentive or recognition programs.
Remotely located employees. Large numbers of employees now work from home, and they can feel quite detached from the organization unless efforts are made to make them feel part of the team. Properly communicated incentive and recognition programs can help make sure that the behavior of remote employees closely aligns with your organization’s current mission and the activities of your full-timers.
Income. Employees who are at the lower end of the wage scale may view rewards and recognition systems differently than high-paid workers, whose basic needs generally are covered by their higher levels of pay. Rewards and recognition work best as a means to promote values and actions when clearly distinguished from compensation.
Differing motivational factors. Not everyone is motivated the same way. Some employees appreciate public recognition; others prefer to remain anonymous. Some people prefer to work in teams; others function better as loners. According to available research, the near universal motivators are: task value – a feeling that the work has benefits; emotion – a sense of enjoyment or fun; support – feelings that the organization appreciates the effort; communication – knowing what has to get done; capability – having the ability to perform, and feedback – getting information that can help lead to more effective actions in the future. (Source: “Incentive, Motivation, and Workplace Performance,” International Society of Performance Improvement.)
Lifestyles. Not everyone is motivated or feels recognized by the same things. Award options should give employees a wide selection from which to choose. Recognition awards that are tailored to individual lifestyles are valued as well. Managers who ask their employees, “What do you like to do in your spare time?” can get ideas as to identifying awards that will be valued and appreciated by individuals.
Cultures. The world is growing smaller. High turnover and non-English-speaking employees all require careful adaptations of incentive and recognition programs to ensure success. Language issues should be a key consideration in program communications.
Employment. Employees of channel partners who are non-sales oriented may in fact have an important role in customer satisfaction. For example, consider the importance of people who install or deliver products.
What makes some employees committed and others indifferent? Research suggests that there is no simple answer. What is known is that motivation increases when the organization is fully committed to fostering a motivated and engaged workforce from the top down. Pay is obviously an important element, but so are company-wide communications, a commitment to training, flexibility, positive feedback, and tangible recognition. This takes not only top management leadership, but middle-management leadership as well, which is difficult to achieve in large organizations.
In general, employees perform more energetically when they feel strongly connected to the organization and when they feel valued by the organization. Incentive and recognition programs that work to create this connection and commitment address the following motivation issues identified in the “Incentive, Motivation, and Workplace Performance” study, among others.
Sense of purpose. People perform better when working toward tangible goals or when building toward something that has an outcome they can visualize. This requires management to have a clear vision of what is being built and to be able to communicate it through middle management to the rank and file. Incentive and recognition programs can help promote this vision and instill a sense of purpose in people by showing that the organization values their contributions.
Sense of being compensated fairly. Employees do not necessarily need to feel rich, but they want to feel they are compensated along the lines of other people doing similar work.
Feeling of support and appreciation. People who work hard for an organization generally want to feel appreciated or recognized for their work, whether publicly or privately. The manager who believes that people need no recognition and should be content simply to have their jobs generally will not get the most out of his or her employees, especially in a large organization. This attitude is most pervasive in companies with little concern for high turnover.
Feeling of participation. Contrary to the belief of some managers, most employees want to have a say in the way their jobs are done. Employees believe, often correctly, that management overlooks numerous ways to improve quality and efficiency. Idea systems (suggestion programs) can help foster greater input from employees. So can training and rewarding managers to listen for and recognize good ideas.
Inspired middle management. Tapping employee commitment requires a shift from a dictatorial management style to one of coaching, encouragement, and empowerment. This is not an easy transition for some managers who have worked for years to become the boss. Middle management enamored with power can thwart a corporation’s best engagement efforts. Power struggles between departments and business units limit knowledge sharing as well as efforts to align organizational activities towards central goals.
Top-management commitment. Unless the CEO and senior executives believe that employee commitment is as important as product development, finance, and marketing, there is little chance that an organization will achieve peak engagement and motivation.
Clear communications. Employees perform best when they have a clear understanding of how their performance and actions affect customer satisfaction and corporate success. Understanding the need to market to internal audiences as much as to customers makes these communications effective. Most people like to know what's going on throughout the organization, so that their work stays coordinated and is mutually reinforcing.
Systematic measurement and reinforcement. Many people like to feel successful and play on a successful team. That creates a need to clearly understand everyone’s role in achieving success, and that happens when organizations consistently measure desired behaviors and reinforce performance that achieves desired results. Effective, engaging, and informative communication is at the center of all successful recognition and incentive programs. And the more immediate the reinforcement, the better.
Fairness. Complex psychological theories and business process strategies stand behind successful recognition and incentive programs. Clearly, one of the issues most important to overall campaign success is the belief by participants that programs are fair and treatment is equal.