Rewards and Recognition: Make a difference to the talent in your organisation

Aniruddha LimayeRalsi Sharma

Whitepaper by Great Place to Work Institute Presented to you by Edenred

We are thankful to all participant companies for giving us an opportunity to study their Rewards & Recognition practices. We are also grateful to these organisations for sharing with us the knowledge and wisdom that they have developed with rigorous efforts over many years.

We are also grateful for the assistance of the following individuals in producing this report:

Acknowledgements

Authors:Aniruddha Limaye Director, Great Place to Work Institute

Ralsi SharmaProject Manager, Great Place to Work Institute

Reviewers:Prasenjit BhattacharyaCEO, Great Place to Work Institute

Preeti MalhotraPractice Head, Great Place to Work Institute

Divya MartynProject Manager, Great Place to Work Institute

Project managed byRalsi SharmaGreat Place to Work Institute

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Workforce today is more articulate about their needs. Employees desire the best of everything competitive salaries, comfortable & aspirational lifestyles, job security, career enhancement options, work-life balance, and so on. Competition for talent is ever increasing and organisations need to have well-defined philosophies and strategies to help them develop innovative ways of tapping intrinsic motivation of employees by engaging their hearts and minds. While many organisations are struggling to make sufficient progress in this direction, there are organisations that have institutionalized robust practices and effective processes in different people practice areas that go a long way in positively impacting employee perception. Indias Best Companies for Rewards and Recognition was conceptualised to recognize companies who are leading the way in the area of Rewards and Recognition for us learn from.

This white paper aims at sharing our understanding of effective and innovative rewards & recognition practices.

Methodology of the Study:While employee responses to the entire Trust Index Employee Survey was used as a qualifier, the employee responses to eight statements related to rewards and recognition in the TI Survey were the key factor in determining the winners of the study. Standard deviation in employee responses to these statements was used to gauge the consistency and universality of the employee experience. Since practices drive employee perception, rigorous evaluation of Rewards and Recognition practices in the participating organisations was also carried out to make the evaluation comprehensive. Employee perception (captured through TI Survey Scores) carried 2/3rd weight and assessment of practices in the area of R&R carried 1/3rd weight in determining the winners.

Major findings and key insights:1. Effective rewards and recognition practices need to reflect a

companys culture (basic values & beliefs) and integrate well with the nature of its business, strategy and goals.

2. Absence of fairness significantly hurts employee perception and efficacy of R&R practices. Absence of fairness is evident by factors likea. Insufficient external parity, b. Inadequate internal equity c. Lack of impartiality in assessment, d. Lack of clarity of desired actions & results which will be

rewarded, and e. Inadequate transparency on how and why some employees

get rewarded.

3. Recognition practices (which are essentially non-monetary) represent great unutilized potential, as recognition: a. can be given both publicly and privately,

b. does not require big budget,c. can be provided not only by the organization and its senior

leaders, but also by peers and juniors,d. can be more proximate to the actions and results, and

hence strongly reinforcing,e. can be done frequently

Most companies are not utilizing the potential of recognition sufficiently.

4. Empowering and encouraging people managers and peers to provide recognition makes recognition practices more effective.

5. Involving employees while deciding on varied ways in which rewards and recognition can be provided, instead of taking unilateral decisions makes R&R programmes much more effective.

6. Using rewards and recognition, particularly recognition, to drive desirable behaviours and efforts, not just the results which go beyond sales performance or customer satisfaction, make R&R practices more impactful.

7. Making rewards and recognition more individualized or personalized, without violating the essence of fairness to match with the individuals preferences and personality make the rewards and recognition more meaningful and motivating.

8. Setting realistic, achievable and line of sight goals drive success. Rewards for goals that seem unachievable do not motivate.

9. It is necessary to strive to strike a balance between driving and rewarding individual results and team performance because only focusing on individual achievements and rewards/recognition can harm team work and collaboration, while only focusing on team achievements without encouraging and rewarding individual excellence can affect individual drive and productivity.

Based on these findings, it would be prudent for organizational leaders to examine to what extent they their existing and proposed R&R practices are in line with these finding to make them impactful.

Executive Summary

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1. Introduction to the Study

2. Understanding Rewards & Recognition

3. Great Place to Work Institutes philosophy of Rewards & Recognition

3.1 Thanking & Rewarding

3.2 What does GPTW include in its definition of Rewards and Recognition?

4. Importance of Rewards and Recognition

4.1 Objectives that an effective Rewards and Recognition program seeks to fulfil

4.2 Characteristics of most positively perceived Rewards and Recognition programmes

5. Methodology of the study

6. Rewards and Recognition at Best Workplaces

6.1 Philosophy & Strategy

6.2 Execution Expertise

6.2.1 What to recognize and how to make the recognitionheartfelt?

6.2.2 Recognition as the way of life

6.2.3 Transparency and communication

6.3 Methods for recognising and rewarding

6.4 Budgeting for Rewards and Recognition

6.5 Measuring effectiveness

7. Current Challenges

8. Key learning

9. Conclusions and way forward

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Great Place to Work Institute is primarily known across the globe for the Workplace Studies it carries out. It conducts the studies to recognize best employers and has tie-ups with leading media partners across the globe in over 40 countries, including Fortune Magazine in the US, The Financial Times in the UK (& European Union) and The Economic Times in India.

Organizations for this study are assessed on three parameters: Trust, Pride & Camaraderie, which are further broken into various dimensions and sub-dimensions.

Great Place to Work Institute has also been instrumental in helping numerous organisations in their journey to become a great workplace. One of the ways in which this has been made possible is by creating and sharing intellectual capital and practical wisdom that resides in the best workplaces. We, at Great Place to Work Institute, have done this in various ways like providing best practices reports, conducting learning events, etc.

To ensure that above mentioned parameters are experienced by employees, an organisation needs to undertake ahost of activities and institutionalize a number of practices. They do so in 9 People Practice Areas, namely Hiring, Inspiring, Speaking, Listening, Thanking, Developing, Caring, Celebrating and Sharing, through which people managers in the best workplaces enable their employees to experience the organization.

It is evident that the workforce today is much more articulate about their needs and wants the best of everything competitive salaries, comfortable lifestyles, job security, career enhancement options, work-life balance, etc. Acknowledging this fact, companies now need to have well-defined philosophies and strategies which will help them develop innovative, intrinsic ways of motivating and engaging with their employees. While many are struggling to make the difference, some organisations have institutionalized robust practices and effective processes that go a long way in impacting employee perception.

Considering the above, it is the need of the hour to celebrate the achievements of such organizations and provide a wider platform to share their best practices. One practice area, recognized in multiple studies as an important lever for engaging employees is rewards and recognition. With the objective of recognizing organizations with outstanding rewards and recognition practices, Great Place To Work Institute, in collaboration with Edenred, has launched a first-of-its-kind study called Indias Best Companies for Rewards and Recognition. This platform will encourage a number of organizations to create an effective program addressing the entire employment value proposition of remuneration, benefits and careers.

Edenred, previously known as Accor Services, is the international leader and Indias foremost in work-life benefits, rewards & loyalty

solutions. Edenred operates in 38 countries, and has become a major player managing rewards, recognition and incentive programs for corporate organizations and public institutions.

Mr. Prasenjit Bhattacharya, CEO Great Place to Work Institute in India says: This Study is an attempt to study what the best workplaces in this area do differently and to encourage more organizations to improve their rewards and recognition practices. The study has brought focused insights in this important area for organizations who want to use the power of appropriate rewards and recognition to create high performing organizations.

Speaking on the association of Edenred and Great Place to Work in this study, Mr. Sandeep Banerjee, CEO and Managing Director, Edenred India said: For over 50 years, Edenred has been committed to its vision For an Easier Life and has developed innovative solutions that enhance employee well-being & performance of organizations. We are at the forefront of work-life benefits, rewards and loyalty solutions in India. Taking it to the next level, Edenred along with Great Place To Work Institute has established this benchmark study to

honour those organizations which have set an example by creating programs, practices, elements and dimensions that define their intent to reward and recognize their employees. This study salutes the business and leadership that has championed programs in order to maximize the effectiveness of rewards and recognition, which is a space we closely associate with and have over 50 years of experience in, globally.

1. Introducing the Study: Indias Best Companies for Rewards and Recognition 2012

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Rewards and Recognition, these days, is a familiar concept and is being used by most organisations as a tool for employee motivation. Understanding what motivates an employee has always been a key challenge for managers, but considering the importance of it for an organizations success, one has to continuously attempt to understand it better. With human capital gaining prominence over financial capital in the recent times, it becomes all the more important. Today, the competitive advantage of a business is determined by its people. Hence, the use of Rewards and Recognition is becoming more and more critical.

Rewards and Recognition are many a times considered synonyms: however they are greatly different. Recognition mostly refers to non monetary ways of saying thank you and can take the form of thank you notes, pins, plaques, award ceremonies, company products, gift vouchers, employee photograph in the company newsletter or on the wall of fame , to name just a few. There are unlimited ways to say thank you for doing the right thing and they are not necessarily expensive. They cater to the psychological need of the employees of being appreciated and have high intrinsic value.

Rewarding aims at strategically designing ways to compensate employees for their efforts and contribution towards the organisation. It motivates by fulfilling employees desire for monetary gain. This allows employees to receive a share in the financial gains made by the organization through their contribution.Great Place to Work Institute studies rewards and recognition through the employee survey using statements related to this aspect and through its culture assessment tool both of which are administered to thousands of organizations every year. The Institute uses the term Rewarding and Thanking respectively for Rewards and Recognition. According to the definition in the study by Great Place to Work, rewarding assesses how an organisation shares the fruits of peoples efforts generously and fairly with them whereas thanking focuses on the way an organisation recognizes and appreciates good work and extra levels of effort and strives to create a climate of approval and positive reinforcement.

2. Understanding Rewards and Recognition (R&R)

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Several years of research by Great Place to Work Institute has established that a great workplace is a place where employees trust the people they work for, have pride in what they do, and enjoy the people they work with. Creating a great workplace has many benefits. From a managers point of view, a great workplace is where people achieve their organizational objectives, give their

personal best and work together as a team/family all in the environment of trust.

To ensure such an experience at the workplace, organisations and their managers need to focus on the following nine areas:

Great Place to Work Institute has also found that all people practices and programmes in great workplaces have most of the following characteristics, which make them effective and positively perceived universally by employees.

a. The programmes use variety to deal with different situations, and different kinds of needs of their employees.

b. They have an original and unique twist that enables employees to strongly identify with these practices and initiatives and draw pride.

c. They are inclusive and cover the largest number of employees across functions and hierarchies from those who deserve to be recognized or rewarded.

d. There is generosity and human touch in actions under these practices.

e. The practices are individualized and fit the context well.

f. All programmes are well aligned with values, culture, strategy and goals of the organization to enable all employees to pull in the same direction, creating additive impact.

1. HIRINGFocus is on hiring for potential and character of the person, rather than primarily on skill set. New employees are welcomed and assimilated into the team with orientation programs, personal sponsorships, and the like.

2. INSPIRINGEmployees learn and understand how their job has meaning for the organization and for society, beyond earning a salary and making a profit for the business.

3. SPEAKINGManagement goes to great lengths to be open and transparent, offering access to information across the board, enabling and encouraging employees to contribute beyond the scope of a narrowly defined job.

4. LISTENINGSpecial open systems for incorporating peoples ideas, for including people in decision-making, and enabling them to air their concerns and grievances.

5. THANKINGRecognizes and rewards good work and extra levels of effort; strives to create a climate of approval and reinforcement.

6. DEVELOPINGFocus is on nurturing individuals gifts to foster personal growth and development as well as offering job-specific training.

7. CARINGA multiplicity of systems and programs are put in place for creating a caring environment for the individual and his/her family.

8. CELEBRATINGCelebrations of both personal milestones and company successes are built into the way people work together.

9. SHARINGEmployees share in the fruits of their labour in a variety of ways; rewards are equitable and egalitarian in nature.

3. Great Place to Work Institutes philosophy of Rewards and Recognition

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Thanking helps the organisation fulfil employees need of appreciation, positive reinforcement and recognition. Thanking not only acknowledges employees for their loyalty to the organization but helps cultivate a climate of appreciation by sincerely recognizing good work and extra effort frequently and in unexpected ways. This is done through creating a wide variety of recognition programs, encouraging peer recognition, presenting awards for performance, service, safety at individual or team levels, recognizing employees for demonstrating company values and appreciating mistakes as learning opportunities.

Rewarding helps in the fulfilment of the need to be fairly rewarded for their capabilities, efforts and contribution. Rewarding aims at

offering competitive wage/salary/bonus packages, sharing the fruits of peoples mutual efforts generously and fairly, and to distribute gains widely with all, through profit sharing, bonuses or other incentive plans and providing opportunities for wealth and ownership sharing. It also ensures that employees understand how their performance relates to the organizations success and their compensation.

These practices in an organisation motivate employees to give their personal best and promote the feeling of working together as a team.

Rewards and recognition is a wide concept and is increasingly being re-defined to include not just traditional ways of thanking and compensating employees, but also newer areas like physical, and emotional well-being of people (Total Rewards). Some of the areas included under Rewards & Recognition are:

1. Assured compensation/salary2. Special or annual increases in assured compensation/salary3. Increases in compensation and benefits on account of

promotions/grade change/position enhancement4. Performance based variable pay/incentive/bonus, etc., that

may be monthly, quarterly, half yearly, annual or even long term5. Performance based retention rewards6. Rewards in cash/kind for specific actions/behaviours/efforts

and contribution/results

7. Public and sometimes even personal recognition/appreciation for desirable actions/behaviours/efforts and contribution/results

8. Wide range of benefits & perquisites (particularly the ones which are beyond those statutorily mandated)

9. Long term wealth sharing mechanisms such as stock grant, restricted stock units grant, phantom stock grant, stock options grant, discounted stock purchase scheme, etc.

The Institute has been studying these practices in various organisations across several industries. It is with this understanding and knowledge that Great Place to Work Institute has conceptualized the study in Rewards and Recognition.

3.1 Thanking and Rewarding (Sharing)

3.2 What do we include in our definition of rewards and recognition?

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The purpose of rewarding and recognizing, as we all understand, is to tell employees that their contributions are valuable to the organisation. It matters to employees because they feel validated, important and respected.

Studies show that there is a statistically significant relationship between reward and recognition and motivation and satisfaction respectively.

Our annual study has revealed the following statements to be among the key differentiators between the best workplaces and other workplaces. They are: People here are paid fairly for the work they do; We have special and unique benefits; and I feel I receive a fair share of profits.

Differentiating Statements are derived by comparing percentage difference in the scores of 25 Best Workplaces for each statement in the Trust Index Questionnaire with the scores of good and average workplaces (who get placed in the bottom 25). The differentiating statements have the highest percentage difference between the scores of best and the others when compared with the scores for other statements. These statements represent issues or aspects that are at the core of employment relationship and are difficult to do very well consistently, even for great workplaces.

The analysis of employee comments across participating organisations in the Best Companies to Work For in India Study - 2011, to an open ended question asking, What will make your Organization a better place to work, showed that salary and promotion were some of the key themes that employees wanted their organisations to improve upon.

Studies by other researchers have also revealed that if rewards or recognition offered to employees were to be altered, there would be a corresponding change in work motivation and satisfaction. Oosthuizen (2001) has stated that it is a critical function of

managers to motivate the employees successfully and influence their behaviour to achieve greater organizational efficiency. Flynn (1998) has argued that rewards and recognition programs maintain high spirits among employees, boosts their morale and creates a linkage between performance and motivation of the employees.

A 2005 Watson Wyatt Worldwide study has found that companies with an effective recognition program realized a median return to shareholders that is nearly double that of companies without such programs. A study conducted by the Society for Incentive and Travel Executives has found that properly constructed rewards and incentive programs can boost employee performance by up to 44%. Another study has estimated that employees who are extremely negative or actively disengaged cost the U.S. economy between $250 and $300 billion every year, simply in lost productivity. Rath and Clifton have found that 9 out of 10 people report being more productive when they are around positive people, who are more inclined to appreciate and recognize.

According to Andrew (2004), commitment of all employees is based on rewards and recognition. Lawler (2003) has stated that prosperity and survival of organizations is determined by how their human resources are treated. Most organizations studied have shown to have made significant progress by implementing a well-balanced rewards and recognition program for employees. Deeprose (1994) has stated that the motivation of employees and their productivity can be enhanced through providing them effective recognition, which ultimately results in improved performance of organizations. According to Broad (2007), tangible incentives are effective in increasing performance for tasks not done before, to encourage thinking smarter, and to support both quality and quantity of goals to be achieved. Incentives, rewards and recognition are the prime factors that impact employee motivation. Motivation also has a direct effect on the innovation in an organisation. This presupposes that organizations provide recognition not only for achievements but also for efforts.

4. Importance of Rewards and Recognition in the organisational context

All effective programmes of rewards and recognition seek to fulfil three objectives:1. They positively reinforce and sustain desirable actions and behaviours among employees, which in turn lead to sustained excellence in performance.2. They help to retain best talent that the organization requires for its growth and continued success.

3. They help the organization to attract best/suitable talent from the talent market, whether it is raw talent out of the best educational/professional institutions or talent pool of outstanding experienced professionals.

4. 1 Objectives that an effective rewards and recognition programme seek to fulfil

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Our research indicates that the most critical characteristics of effective rewards and recognition programmes are the fairness, equity and justice inherent in these programmes. This sense of equity is both internal within the organization and external with respect to comparable organizations operating in the marketplace. There are three aspects of equity and fairness which are relevant here. The absence of these three aspects hurts the effectiveness of rewards and recognition programmes significantly.

a. Distributive Justice: The proportion in which financial resources and gains/profits of the organization are distributed between various stakeholders such as promoters/owners/investors/shareholders, managers and employees at different levels in the organization, belonging to different divisions/functions/locations, etc, define distributive justice. If some stakeholders are disproportionately rewarded (in the eyes of the other stakeholders), then the effectiveness of the rewards programme can suffer. Another aspect of distributive justice, as well as procedural justice, is that differentiation in rewards and recognition reflects true and significant differentiation in performance and contribution.

b. Procedural Justice: Answers to the following questions indicate whether requisite procedural justice exists, the absence of which hurt the effectiveness of the programmes - For what actions/behaviours/efforts and results/contribution/performance are rewards and recognition provided? Are only results rewarded and recognized, or do they apply to sustained efforts as well? How fairly, transparently and correctly are efforts and results measured? Does everyone get sufficient opportunities to perform and to be recognized and rewarded? How does the organization ensure that results achieved through wrong behaviours and non-performing people dont get rewarded or recognized due to favouritism, nepotism and organizational politics?

c. Interactional Justice: This is about the human element of fairness and justice which forms the capstone of effective rewards and recognition programmes. Do the recipients of rewards and recognition (and even those who dont receive rewards at any point in time) feel the sense of being appreciated and thanked genuinely from the bottom of the heart by those who are in a position to reward and recognize?

4.2 Characteristics of the most positively perceived rewards and recognition programmes

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All organizations participating in Indias Best Companies to Work For Study 2012 were invited to participate in Indias Best Companies for Rewards and Recognition. A total of 76 organizations who applied for this Award were finally considered, following the laid down process.

Organisations from all major sectors and across 11 industries participated in the study.

A rigorous evaluation methodology was followed. To be eligible to be one of Indias Best companies in Rewards and Recognition, it is not enough to have great looking rewards and recognition practices on paper - a significant majority of employees must consider it so. This was verified by the Institute by administering an employee survey using its well established Trust Index Questionnaire.

If an organization crossed this first hurdle, a closer analysis was made based on their employee feedback, in particular their employees response to the statements related to rewards and recognition in the employee survey. These were:

Everyone has an opportunity to get special recognition. Management shows appreciation for good work and extra effort. People here are paid fairly for the work they do. I feel I receive a fair share of the profits made by this organization.

Additionally, the employee response on a few more statements was also looked at to ensure that there is good degree of satisfaction amongst employees as far as the procedure of arriving at decisions related to rewards and recognition is concerned. Statements related to benefits and promotions, which also form

the part of the Total Rewards Package at most best workplaces, were looked at. Therefore, following additional statements were used for evaluation apart from the above mentioned core statements.

Promotions go to those who best deserve them. We have special and unique benefits here. Managers avoid playing favourites. Performance of employees here is fairly evaluated.

We also looked at the standard deviation in the responses by all respondents from an organisation for each of the above 8 statements to gauge the consistency and universality of experience across the organisation.

Alongside, a detailed study of the rewards and recognition practices in each organisation was done to get a comprehensive view of how an organisation is performing in this area.

The study revealed many things that organisations are doing to recognize and reward their employees. However, the proof of the pudding is in the eating; therefore whether the rewards and recognition practices in an organisation are effective can only be established if the employees are also experiencing the same.

Therefore, the employees response to the related statements on rewards and recognition was the important determinant of who would be the winners in this category.

5. Methodology of the study

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Philosophy here refers to a system of values or beliefs with which an organisation operates and the strategy refers to a plan of action designed to achieve what it values.

Philosophy forms the basis of the goals that an organisation sets

laterally, from the industry. Thus these organisations would need to align their compensation strategy accordingly. Most organisations resort to the following strategies to attract and retain best talent from the available pool:

Competitive Pay: The organisations evaluate the positions systematically and attempt to place them within a pay structure that is competitive nationally, within their industry, and within the local community.

Pay for Performance: They reward each employee on the basis of performance and the achievement of objectives, and provide incentives for individual growth and contributions through merit increases, bonuses and stock options.

Equal Pay: Paying each employee without regard to race, caste, language, religion, colour, national origin, ancestry, mental or physical disability, age, gender, gender identity and/or expression, sexual orientation, veteran status, pregnancy, medical condition, marital status, or other basis protected by law.

Apart from being competitive, equitable and egalitarian as far as paying employees is concerned, an organisation needs to ensure that it differentiates between performers and others.

for itself. The rewards and recognition philosophy of an organisation in turn will be based on its talent management philosophy. Organisations have different philosophies for talent management as expressed through their rewards and recognition programmes; for example, many organisations believe in hiring at entry levels and grooming these employees for leadership roles. On the other hand, there are organisations that prefer to hire experienced talent

Some basic fundamentals that organisations seem to apply are:

Set a clear benchmark for the average level of compensation within the organization across job families, job levels, functions and businesses and expected level of performance, which determines pay competitiveness in the industry.

Determine bottom-line goals of the company and tie peoples

pay to the goals: This help an organisation to reward for performance that directly contributes to its business objectives. This is done by introducing the aspect of variable pay linked to achievement of business outcomes. Ensuring the line of sight of the goals/business outcomes is of key importance to make the programme effective. Line of sight here refers to the direct control/ability of (each) employee to influence the achievement of business goals through his/her abilities and efforts.

Differentiating performance & being competitive:

TPG Software differentiates outstanding performers from the rest in terms of compensation, promotions, rewards and recognition. Increments sanctioned to outstanding performers are about 50% more than an average performer in fixed compensation. Another committed component is added as Performance Bonus - 50% of the fixed increase of the average performer is sanctioned additionally to the outstanding performer at the end of the year.

Moreover, TPG Software has aligned its Performance Review & Appraisal Cycle in a manner that they are able to revisit compensation & designation of its high performing employees every six months and take corrective-preventive measures if required, without unnecessary delay.

Semi-Annual Total Rewards Review

Qualcomm also conducts full reviews for all employees twice a year. In addition to strengthening the ongoing dialogue between managers and employees which helps achievement of goals, this approach provides the company an opportunity to maintain a competitive position in the market. Components of each review cycle include opportunity to earn a merit increase, performance based bonus rewards, stock awards as well as a promotion.

6. Rewards and Recognition at best workplaces

6.1 Philosophy & Strategy

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To ensure the quality of overall experience that can be provided to employees at the organisation, the best workplaces now are looking at the concept of total rewards. This concept helps organisations to articulate the rewards and benefits that employees enjoy in the organization, apart from competitive compensation. Intuit, Intel, American Express, Qualcomm and SAP Labs are the names of a few organisations that have proactively identified and articulated the aspects that contribute to the total rewards experience of employees.

Most of the organisations studied depend on the external benchmarking to ensure the competiveness of the compensation packages offered by them. Organisations take help of the compensation consultants for this purpose. The benchmarking is not limited to salary but benefits and other kinds of rewards also.

Some organisations have also worked out other ways to get relevant data to stay competitive as far as the compensation is concerned.

When TPG Software compared this trend with latest reports on Gen Y traits and expectations, it didnt find an alignment. It realized that introduction of variable pay for younger generation people will only cause disappointment to them without any major gains for the company. The organisation has majority of its manpower in the age group less than 30 years. Thus, it decided to introduce variable pay only for people who are at managerial positions drawing salary in excess of Rs.10lakhs per annum.

TPG Software felt that compensation reports that it got were far away from reality when compared to feedback that they themselves got from the candidates interviewed for recruitment (whose compensation their Talent Acquisition team had verified against authentic documents) and at the time of exit when they moved on to other organisations. Hence, it decided to make benchmarks from primary data collected from the above two sources to be used to strategize and structure the compensation every six months. The talent acquisition team provides the compensation & benefit data captured from the candidates interviewed during the previous six months, which is further validated, analyzed and acted upon in order to be ahead of competition.

Most companies in the IT sector have the aspect of variable pay, pay for performance or deferred salary for people at all levels ranging between 5% and 20%.

Intel: Employee Bonus program (EB) is a variable-pay program for all non-commissioned, regular Intel employees worldwide.

The Employee Bonus (EB) plan is designed to align the business groups at Intel around the Corporate Strategic Objectives. It is paid out annually and is calculated based on three equally weighted components: Absolute financial performance, relative financial performance, operational performance.

The components of the EB calculation enable an employee to create a line of sight between his contributions and company profitability. The target amount increases at higher grade levels thereby placing more pay at risk for employees who more directly influence the achievement of financial and business goals.

Bands Organization Achivement Individual Achivement

B1 50% 50%

B2 25% 75%

B3 0% 100%

The following band-wise break-up at Music Broadcast shows how the ratio of individual and organisation performance varies with bands, keeping in mind the line of sight of business goals:

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At American Express, each component of the Total Compensation plays an important part in enhancing the organizations Employee Value Proposition. It also reviews programs under each of these

categories periodically to ensure that they continue to remain focused and relevant to deliver to employee needs, support its business objectives and remain competitive in the market place. It regularly reviews market pay across different talent pools to create internal ranges that reflect market reality and enable it to compete effectively for talent. The Performance Management Program also provides a strong input into Base Pay where merit increase to pay are linked to performance, irrespective of the pay positioning. Intels Total Compensation and Benefits Philosophy, or T-Comp Philosophy is a holistic approach that aligns company, employee

and stockholder interests. It provides employees with incentives to focus on meeting or exceeding business objectives. The programs purpose is to attract, retain and reward the people responsible for the companys long-term growth and profitability.

To ensure that rewards and recognition systems at an organisation are effective, it needs to have programs that reinforce company values and goals and encourages employees to act in line with such goals whilst also emphasizing the importance of achieving these goals.

To ensure the same Qualcomm has what they call as QCards. These are a quick and easy ways to send ones appreciation to fellow co-workers for displaying values.The QCard is an electronic greeting card intended to recognize contributions and behaviours which represent Qualcomms culture of innovation and leadership. These behaviours are summarized as the CDMA behaviours (Qualcomm is the inventor of CDMA protocol [Code Division Multiple Access], a channel access method used for radio communication):

Creating and Innovating Idea generation Creative processes Innovative thought Doing Whatever it Takes Makes things happen Takes initiative

Mastering Technology Demonstrates and applies expertise in their field Achieving Excellence in our people and in our industry

Exceptional management or leadership Demonstratingteamwork Enhancing effectiveness and efficiency

An organisation needs to clearly identify the culture that is required in the organisation for its business to succeed and see how their rewards and recognition practices would promote the same.

Reliance Commercial has identified what it calls DNA for success. Thus, it rewards every year The DNA Employee. He/she is the one who exhibits the behaviors which reflect the organisation DNA (value system). It is instantaneous appreciation & recognition on display of DNA behaviour. Six DNA behaviours are as follows:Entrepreneurial MindsetOwnership and CommitmentSpeed & ExecutionIntegrityRespect & DignityPride & PassionEach one of the above is further detailed out to make employees understand what is expected under each of these.

A strategy is only as good as its execution. One can have the very best strategy, but if not executed well it will be ineffective. Ineffective implementation will not only lead to wastage of money and efforts but is also capable of having negative impact. To implement a total rewards plan, a broad range of aspects need to be considered. It includes understanding objectives, defining metrics, designing the plan to measure and track achievements against the defined goals and metrics and deciding on the types of rewards.

6.2 Execution expertise: Making the strategy work

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Aditi Technologies Recognizing teams for fulfilling the business goals and adding positivity to the culture

Customer Centric TeamFor high CSAT, Repeat business, high billing team

Fastest Growing TeamHigh revenue growth & team expansion

Fantastic TeamMost vibrant, Energetic team that creates a very positive environment

Recognition has been found to have direct impact on the kind of behaviour reinforced in the organisation. Therefore, it is always necessary for organisations to think through the areas for which they want to reward/recognize their employees. It is also of utmost importance that the organizations clearly define the metrics for the same so that the desirable outcomes are achieved and can be tracked and shared. Organizations should be wary of unwittingly encouraging or tempting employees to behave and act in an undesirable or unethical manner to win an award.Some of the areas commonly recognized and rewarded in organisations are:

Outstanding sales performanceDelivery excellence: in time, within budgetYears of service

The categories in which companies reward employees depend on the nature of business of the organisation. The alignment of these systems with organisation strategy is what helps the organisation to achieve the desired impact of their rewards and recognition programmes. For example, the R & D organisations have rewards related to patents, product organisations have rewards associated with product innovations, and there are awards to incentivize sales, etc. Organisations also recognize areas like customer service excellence, team excellence, innovations and ideas that have lasting impact on the business.

Best workplaces proactively identify areas that have high impact on sustainability of the business success, and which tend to get missed out during the normal course of business. By implementing practices that recognize achievements for a variety of reasons, organisations provide an opportunity to many more employees to get appreciation and recognition.

Some such innovative areas are:Collaboration, Effective Managers, Best new comers, Social volunteering

Intel: TRUE BLUE Partner Award for Being a solid partner

to the business.

360 Degree Award is something given out to individuals for effective stakeholder management.

Rolling Bat/Rotating Flag to commend employees who have added value to the business and this bat/flag is rotated on a quarterly basis.

The Technology Submission Award Program is designed to help fuel ICAPs Technology Licensing Groups (TLG) licensing business by encouraging blue badge employees to submit proposals for suitable licensable technologies.

6.2.1: What to recognize and how to make recognition/appreciation heartfelt?

Reliance Commercial gives Award for being the Best Collaborator. Best Collaborator is a person who brings all people together to arrive at a solution ensuring business continuity & decision. He/she bridges the communication gap thereby creating win-win situation for all. This behaviour encourages team working among various stakeholders, creates more positive outlook, greater acceptability of decisions & process requirements, provides greater clarity in communication and helps in getting informed decisions within timelines.

TPG Software: Best Debutante Award: Most promising new Joiner(s) during the Year is recognized, appreciated and awarded for quickly adapting to TPG Softwares culture by getting well connected to people across the organization irrespective of project or work assigned, and by contributing with innovative and creative thoughts which prompt everyone to think differently.

TPG Software: Managerial Excellence Awards: For demonstrating excellent managerial qualities leading to effective implementation of 6 Bs (Buy, Borrow, Boost, Build, Bind, and Bounce).

STAR CSR VOLUNTEERS at SAPLabs

Based on involvement, enthusiasm and overall impact in the CSR activities. This award carries Rs. 50,000/=, which the employee can choose to contribute to an NGO of his/her choice.

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Organisations now also understand that recognition should not be limited to achievements only. Thus, they have devised mechanisms and provided employees with a platform to praise efforts. The following matrix from American Express shows how the organisation provides a clear picture to its employees about what actions and behaviours are desired by the organization which it will reward and recognize.

Rewards and Recognition programmes in organisations have now extended their boundary to include other stakeholders, over and above their employees, whose contribution is critical to the organizations success.

Organisations now are also investing a lot of effort in ensuring the rewards are individualized. They understand that these rewards will be valued by the employees most when they cater to their personal needs/styles. Organisations also involve family members and significant others at the time of recognition to add personal touch and provide the family or partners a sense of belonging.

Best Practice - Connecting with family:

TPG Software lays a lot of emphasis on connecting with the families of the employees being recognized. All the award schemes try to convey the organizations respect, recognition and importance towards the employees family. All the prizes won by BrickRedians in routine daily/ weekly events are carefully chosen to suit the personalized needs of the families of the employees. Similarly all the awards offered to the awardees are aimed at offering something unique to the family members, which a common salaried person will certainly love to have but may not be able to buy it. Also, the compensation has a component of Leave Travel Assistance (LTA) and Mediclaim which is family focused towards entertainment and medical exigencies respectively.

Rewarding Contractors:In addition to rewarding the permanent employees, SAPLabs India also rewards its contractors and vendors. They have a Vendor Recognition Program where the top 2 vendors from each service area are rewarded every year. They also rewarded their bus drivers for exemplary work.

Intel has clearly articulated it objective behind following a tiered approach to rewarding, ensuring that it rewards:

at the right time - not waiting for too long after the accomplishment

for the right reason - ensuring we are rewarding the desired behaviors

in the right way - choosing the appropriate forum in combination with the right level of reward -

monetary, parties, recognition in a visible manner such that an opportunity to

share learning is created

Intel has Hall of Fame to publicly recognize High performing instructors

Its about making employees feel great on being recognized at Intuit. The following recognition practices exhibit its generosity and thoughtfulness. Each type of recognition keeps in mind the nature of achievement.

Celebrating the service anniversary The reward is in the form of e-mail and cash Spotlight Award from Brad Smith, CEO. In addition the employee gets a goody bag here at the India Development Center that includes a crystal memento, Rs. 1,000/= Flipkart voucher and a box of chocolates. Intuit also sends a bouquet of flowers to the employees home on their service anniversary.

Scott Cook Innovation AwardsIt rewards through a statuette, recognition on the Innovation Wall of Fame, dinner with the executive team and a travel award, including an expense-paid, three-day, trip anywhere in the continental United States. Theyre also allowed to dedicate time to work on a project of their own creation. This can be either half their time for six months or full-time for three months. It is given by Company co-founder Scott Cook.

Annual Awards - All-expense paid trip to destination of choice.

An important aspect of execution is recognizing and rewarding in such a way that every employee feels valuable and is proud of the achievement. The spirit behind it should come alive. Togetherness and timing are also critical for effective recognition. It is, therefore an important challenge to ensure a good balance between promptness in recognizing and doing it in such a way that it becomes a proud moment.

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Mission 2012 allowed BrickRedians (TPG Software employees) to delegate tasks considered important by them to their senior management. The senior management sincerely stood accountable to achieve the upward delegated targets that they are in best position to achieve and posted progress on a dashboard on a regular basis for people to comment. This provided an opportunity to the managers to get recognition from their juniors.

Institutionalizing the culture of recognition!TPG Software An Appreciation Tree is placed at the office entry

and exit gate. As people enter and exit from the office gate, the appreciation leaves pasted on the appreciation tree reminds them to look back and paste an appreciation slip for their colleague in recognition of extraordinary work done by them.

Sharing success stories of BrickRedians by CEO/COO in All Hands Meetings

Managers write personal notes about good performance through e-mails or paste slips

Managers hold morale-building meetings to celebrate success

When discussing ideas with other people, peers or higher management, managers make sure to give credit to the person who came up with the idea/thought

The best part of recognitions on joining anniversary celebration at TPG Software is that every gift is personalized to suit the needs of the anniversary girl/boy which Team HR arrives at by informally studying the lifestyle and interests of every BrickRedian to procure the gift accordingly. This brings immediate smile on the face of the employee being awarded with high level of excitement shared by the family members when they get to know about the award.

Moreover, the Steering Committee (senior leadership team) while choosing and nominating people for awards, deliberates on the following factors: a. Match the reward to achievements b. Match the reward to the person c. Measures of achievements in the light of award

TPG Software also provides its employees flexibility to choose their compensation structure and increment cycle.

Organisations now understand the power of recognition and appreciation. They understand that it requires a lot of effort on the part of employees to continuously contribute towards organizations success. It is the recognition or words of praise that give an employee the push to go on. Gone are the days when recognition had a top down approach. Organisations now are creating platforms for all to recognize each other, which includes peer to peer and junior to senior recognition. Organizations employ multiple broad-based recognition programs to encourage achievement and to sustain a culture of customer focus and high employee involvement.

Apart from its periodic or recurring rewards and recognition programs, JM Financial Services regularly launches contests to encourage healthy competition between teams/locations to boost sales, encourage learning and collaboration. The following contests were launched in the last calendar year:

1. Race Against Yourself2. Predict the Index3. Work in Pairs

4. T20 Dwitiya5. Mission Thailand6. SIP 7500 to Thailand

Aditi Technologies runs periodic contests and events (Cubicle Decoration based on Business Themes, Usage of new tools from the IS Team, Quality Team Quiz, Sports, Cooking Competitions, etc.) that bring in active participation from employees, who are rewarded for their outstanding contribution.

Organizers of various events, including housekeeping and external service providers receive kudos from the management for events well done.

6.2.2 Recognition as the way of life: creating a chance for all to be recognized

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Employee Appreciation Month: American Express believes that its always a good time to say thank you, applaud and show appreciation for the great work done every day by colleagues or leaders. However, many a times an organization can lose focus on this important aspect when so much is happening. Thats what Employee Appreciation Month at American Express is all about; purposefully putting Recognition in the spotlight! In November 2011, globally, the organisation focused on R&R through RewardBlue. The entire month celebrated recognition across businesses, across markets. Felicitation ceremonies were organized for winners and high achievers. Also highlighting the

month were a series of contests and prizes to encourage employees to recognize and thank their peers using RewardBlue. Throughout the month, employees who used RewardBlue to recognize deserving colleagues entered the contest to win a RewardBlue Everyday Giveaway.

RewardBlue, the wide online Reward and Recognition platform at American Express is one-stop shop for recognition worldwide. Seventy five percent of its global employee population has received recognition through RewardBlue.

Rewards and Recognition motivate employees for results only if they are perceived to be fair. It is found that the perception of unfairness associated with Rewards and Recognition discourages employees. To be transparent, organisations need to ensure constant and comprehensive communication around rewards and recognition. Use of intranet and e-mail for communication related to rewards and recognition is a common practice. Best workplaces

differentiate themselves by using additional methods like posters, teasers and newsletters for the same. Extensive information about Rewards and Recognition is provided during the induction process in these organisations. The best workplaces also conduct periodic training/education sessions to equip managers and employees to

use various rewards and recognition methods effectively. Intuit uses videos and online tutorials to educate employees about rewards and recognition.

TPG Software makes effective use of Display Boards and Workstation Decorations to share information about recognition in a creative way. Intuit uses local events, online tutorials and videos for communication.

To create the kind of buzz and excitement that these rewards and recognition deserve and to attract the attention of employees, these organisations come up with creative names and brand these rewards and recognitions programmes through their constant communications.

RewardBlue, as mentioned earlier, is an internal American Express brand. This branding remains consistent across all markets and is delivered through multiple channels. Messages are delivered through the American Express Corporate Intranet, brand signages are used throughout major offices, during celebratory events, and leadership training and communication. Typically using imagery from the system, such as an eCard, eButton or an image of Blue Awards to create a sense of familiarity, RewardBlue has fun and engaging aesthetic. American Express also organised RewardBlue Day in India, which is a nationwide launch event on RewardBlue. It had participation from leaders & team members. The events highlights were actual lifesize dashboards to say thank you to colleagues through actual cards & e-buttons. The thanks and awards received can be displayed by an employee on their virtual dashboard on the RewardBlue tool!

6.2.3 Transparency and communication play an important role in the effectiveness of the rewards and recognition system

SAPLabs: The company portal has elaborate information on all policies that impact employees. The information on the portal is always up to date and is easily accessible. Quick links are provided to employees that are easy to remember (e.g. /go/equity-331 for share plan).

It also conducts a People Week across the globe. The objective of this initiative is to communicate to employees various HR and Learning Programs available in SAP. There were talks held on important topics and demo pods done which addressed important programs with live facilitators on standby to handle direct employee queries/suggestions.

Qualcomm has a Recognition website that provides employees a central place to learn key tips about the power of recognition, and provides links to all recognition tools, has guides for presenting awards and provides links to the courses given through Qualcomms Learning Center that are related to employee recognition. To help mangers and peers execute the recognition in the most appropriate manner it provides Dos and Donts, which are as follows:Do: Make it special by presenting the certificate in person

Use the nominees preferred name Be sincere and reflect on what the employee did Mention how the contribution benefited you and/or the

company Invite others as appropriate

Dont: Send certificates through inter-office mail Show up unprepared Use inappropriate humor Generalize the contribution

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Music broadcast has given creative names to various categories of rewards that it has: Cheers to Peers: Peer recognition Sher of the Month Significant contributions towards the achievement of the organisation vision Jaldi 5 New comer recognition

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To ensure that an organisation is able to serve the needs of different segments of employees and to differentiate between various categories of rewards, an organization needs to have several methods for recognizing and rewarding. Commonly used methods for recognition are giving certificates, trophies, cash, vouchers, etc.The use of variety of methods helps an organisation

Considering the importance of Rewards and recognition, more and more organisations are planning a separate budget for it. Various approaches used for budgeting are:

External benchmarking, following the industry norm. Per person basis. Establishing a certain number of programs based on the

objectives to be achieved. To estimate the number of people that would like to reward/recognize and estimate reward value for each individual category.

The budget for the Rewards and Recognition system is also arrived at based on trend analysis of previous years and the number of awards given out as a ratio of headcount.

An increment on the last year usage and disbursement: Total number of winners last year, total reward amount/winner, Administrative cost, Cost of Trophies/souvenirs, etc., are used to prepare budgets. Apart from increasing the last years spending by a percentage, organizations also consider the

changes in employee numbers, new locations, new award categories being planned for introduction during the coming year, as well as the logistics of covering an increasingly expanding population.

At JM Financial, the R&R budget is based on:

Cost of the event organised in the previous financial years Number of awards decided upon Inclusion of new concepts or modifications in the Awards based

upon feedback from Business Heads

Most organisations look at the budget as a percentage of total staff cost. The range of budget is between 0.1 % and 20% of the total employee cost. It not only depends on how much an organisation is willing to spend on Rewards and Recognition, but also on what elements an organisation includes as part of this budget ranging from rewards amounts, variable compensation to health and wellness expenditure, etc. For example, SAPLabs

to be more personalized by customizing a reward according to the individuals need. Personalizing or individualizing also helps in enhancing the overall experience of the employees. Best workplaces are using methods like salary increase, bonus award and Restricted Stock Units (RSUs), holiday packages, extra leaves, etc., to recognize efforts as well as contribution. Many of these rewards are broad based and designed to promote the sense of ownership. Here are some more methods/ways to recognize/reward employees, which are being used by organizations.

A highly rated employee stock award program:

Qualcomm offers restricted stock units to employees. All employees, including those who are non-exempt, receive Qualcomm stock awards when they are hired as part of the job offer package. In addition, employees are eligible to receive on-

going stock awards every six months as part of the semi-annual review cycle. Qualcomms annual award receipt rates, and value delivered, are above market and often exceed the market 75th percentile at every organizational level (i.e., non-exempt, professional, management and executive-level employees).

A generous Employee Stock Purchase Plan (ESPP):

At Qualcomm all employees are eligible to participate in Qualcomms Employee Stock Purchase Plan (ESPP). The program enables participants to contribute between 1% and 15% of their salary through regular payroll deductions and use that money to purchase shares of Qualcomm stock twice a year at a minimum 15 percent discount. Currently, approximately 73 percent of eligible employees participate in the ESPP globally. Over the past year, approximately 58 percent held their purchased shares for more than two years from the beginning of the Offer Period.

Intels equity program is unique in that it touches employees at all levels and seeks to share the companys success and wealth creation across its employee base. Intel has offered its employees a broad-based stock program. Intel employees acquire a stake in the long-term growth of Intel and can potentially benefit from the capital appreciation.

6.3 Methods used to recognize and reward

6.4 Budgeting for Rewards and Recognition

Use of social media platform for recognition: At TPG Software, managers personally congratulate people for doing a good job. They do so by writing personal notes about good performance on Intranet/ LinkedIn, Facebook, etc. Employees, this way, can share their achievement and proud moments with wider set of people.

American Express has an appreciation tool called eThanks. Employees say that these tools make recognition fun, spontaneous and creative. eCards, eButtons, and airThanks are social networking tools that create great work conversations. They require no approvals and there are no limits to recognizing. You can use them over and over again.

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Measuring effectiveness of the initiatives and programs is the key to ensuring that an organisation gets right outcomes for the money and efforts that it invests on the process of recognizing and rewarding employees. In the absence of such measures there is possibility to lose focus of the objective with which an initiative/

program was started, and thus, it may not add the expected value.

Informal feedback from employees and employee surveys are the most common methods used by organisations to measure the effectiveness of Rewards and Recognition Programs.

The usage of different methods to recognize also provides an important input to organisations on how effective/useful the employees are finding these methods.

In addition to measuring progress of employee performance towards corporate goals, well-defined performance measurement

systems help to gauge employee reception, understanding and buy-in for reward systems. This critical feedback can help managers make adjustments necessary to drive improvements and avoid unforeseen undesirable behaviours and actions that negatively impact corporate goals and the organizations culture.

Feedback taken from employees through various other channels also helps understand the effectiveness of the rewards and recognition programs. Employees have the opportunity to share their feedback through forums like HR Open Houses, skip level meetings, etc.

Fall in percentage of attrition is considered to be another significant input that speaks about the overall culture of the organisation of which appreciation and recognition are an essential part.

Some organisations have seen a decrease in turnover of employees from identified high performance category post the implementation of rewards in the category, which clearly exhibits the effectiveness of system.

Intel measures effectiveness of Recognition through SAM (Self Assessment Methodology) Survey. This survey is conducted once in 1.5 years and looks at systems and processes to keep the work site healthy and vibrant.

spends nearly 15% of its total employee costs on rewards, recognition and benefits. Intuit invests more than $1 billion in Total Rewards for their employees worldwide, of which service anniversary and performance recognition budget stands at approximately $8 million.

Supervisors and line Managers are provided a budget for informal rewards. At American Express, the global R&R budget is set at a companywide level, which is further allocated to each LOB based on their respective employee populations. Each leader is accountable for their budget and must manage it responsibly. On

RewardBlue (Amex reward platform), the budget is capped at 0.5% of the total payroll costs.

It is also important to give careful thought to the demographics of the target audience while planning the budget. For example, if your service program is targeting a group that makes six figure salaries, the award must have either a significant symbolic value or be a fairly nice award in order to get their attention. Similarly, if the target is Gen Y employee then the reward item should trendy and in line with their lifestyle and personalities.

6.5 Measuring effectiveness

JM Financial: A measurement MIS based on the deliverables like TAT, revenue generation, client acquisition, etc., are maintained prior to the Reward and Recognition activity. Similar MIS post the activity is also maintained to measure the difference in terms of performance.

TPG Software finds itself assured of the effectiveness of its practices by Increase in Customer Satisfaction & Retention Client Appreciation and better rapport Lower Attrition Rate: especially of the high performers Improved Productivity: Reduced delivery time Reduced Absenteeism rate Higher Employee referral, Greater use of peer recognition Minimal time required for new joiners to be productive.

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The way rewards and recognition are designed may sometimes boost individual performance and achievement of short term goals but may harm team work, collaboration and organisation growth and sustainability in the longer run. On the other hand, team and organisation level rewards may not motivate each employee to contribute equally, and hence may affect individual productivity.

Following chart shows different levels of rewards and their advantages and disadvantages:

Rewards and recognition systems misaligned with corporate objectives can result in behaviours that are not anticipated or desired by the management. These unanticipated actions may be personally beneficial to front-line sales representatives, manufacturing floor managers or even senior executives, and yet, they may move the company away from its overall goals or cause systemic and cultural harm.

There are challenges associated with the kind of performance management system chosen. For example, there are flaws with forced ranking method (also called applying the bell curve) that mandates managers to distribute ranks amongst their teams in a certain ratio. It plays against those managers who are able to hire/train and motivate their team members better than other teams in the organisation due to fixed quota percentages. Another example is organisations falling into the trap of implementing metrics, which although push sales for a shorter period of time tend to lead to negative customer experience.

There is need to clearly establish the importance of other rewards like empowerment and opportunities to learn from supervisors and other colleagues. At the same time organisations must understand that using rewards indiscriminately is as bad as doing too little; it leads to complaints and indifference. While heartfelt non-monetary appreciation and recognition can retain sustained effectiveness, primarily monetary awards can quickly lose their impact or set up ever increasing expectations, which are difficult to sustain. An organisation can go on spending without getting the

desired outcomes if the effectiveness of rewards programmes is not measured proactively and accurately.

Organisations are yet to devise very effective and pinpointed ways to measure ROI on the budget used for Rewards and Recognition. There is unavailability of hard data or well tracked patterns, which can show tangible outcomes of Rewards and Recognition.

Some of the challenges that were shared by the companies on our list are:

Managers are at times not comfortable in discussing and sharing the not-so-good news with employees. Therefore, the challenge of the organizations is to equip their managers to ensure that they maintain a balance and become good/effective managers instead of aspiring to be nice/populist managers. Managers need to exercise due diligence in implementing the programs that require their involvement. Diluting standards in the quest of

Criteria Incentives Advantages Disadvantages

Individual Performance

Sales commissions, piece rate pay

Exerts most powerful impact on individual productivity (30% increase)

Does not promote teamwork or ensure a commensurate increase in product service quality/ organisation development

Group Performance

Gain-sharing, goal sharing and team based incentive plans

Encourages team work and collaboration which leads to better overall output/outcome

Moderate impact on productivity, particularly individual productivity (13 % increase)

Organisation Performance

Profit sharing, stock sharing, including broad based stock options, stock purchase programme and employee stock ownership plans

Increase shareholder returns and company profits, longer commitment, increased loyalty

Small increase in productivity - 6 %

7. What are the current challenges?

Source: A study by SHRM

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popularity can do a lot of harm. Managers who are recently inducted need to be trained on the company philosophy and the spirit governing its rewards and recognition programs.

Some managers complain that they dont get time to complete the necessary paper work and it is difficult for them to manage rewards and recognition formalities for a large team. In some cases rewards programs do more harm than good when people believe that they are being compared negatively to reward winners, similar is the case with Incentive Pay (Pay for Performance). If it is perceived by employees that many winners have won their rewards more on account of favouritism, nepotism and politics, then the programme is likely to have adverse impact on morale, motivation and performance.

It is hard to balance between promptness and trying to make the recognition individualized, especially keeping in mind the hectic schedules.

The organisations which have global presence find it difficult to balance between consistency/uniformity and local needs.

Creating a consistency across different teams and Business Units is also a challenge. Many times different Business Units interpret guidelines differently. Teams sometimes find themselves getting constrained in applying creativity to the extent they would have liked to.

For example, all award amounts in some companies are Geo Adjusted, which implies different award amounts for different countries based on cost of living/purchasing power parity and compensation levels. When employees work in cross-geo teams, such a policy can create a perception of discrimination among employees. Here it becomes important to share the logic and rationale for such a policy with employees in a persuasive way. However, it is important to bear in mind the fact that if the differences are unjustifiably high, the perception of discrimination is likely to linger.

Outside challenges include managing vendor relationships, pricing and being on top of fast-moving market information. Catalogue systems also involve handling of many taxation and logistics aspect.

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Rewards and recognition programs have the potential to produce positive returns to shareholders. Research demonstrates that such benefits will only be achieved through an effective program that reinforces an organizations goals and values. These programs should be thoughtful, should touch a large number of employees and should be well publicized. Best workplaces have been able to develop rewards and recognition programs that promote organisation goals and values and reach out to a large number of employees, sometimes even all employees. This has helped them to sustain their organizations success through the discretionary efforts that their employees put in.

The strength of a rewards system depends on the relevance/appropriateness of the metrics (how well you have defined them) and how accurately and transparently they are measured and shared. Weight of the reward is equally important. If it is meagre or unattractive employees tend to lose interest; on the other hand if they are unrelated to performance, employees do not believe in the fairness of the evaluation. The more attractive a reward, the more robust the metrics should be to be able to drive the right behaviours and follow more robust and transparent evaluation; otherwise it can have more negative outcomes than positive.

There are numerous examples amongst best workplaces of their ability to define effective metrics to measure performance, to provide clear guidelines, to communicate the same widely through various channels that can ensure transparency and fairness of assessment, while offering substantial rewards.

For effective implementation of rewards system organisations:

Determine who will be eligible for each type of reward

Ensure that the new system has the support and ownership at all relevant levels, particularly among people managers who have to spearhead the implementation

Establish the reliability and the validity of the performance data that is gathered to determine who gets rewarded and how much

To deal with the challenges of implementing the reward system at the global level, rewards program leaders need to understand the different cultures and local needs of various countries, while designing programs that are consistent across the company and provide value to employees.

American express uses the following information to make a decision for each market:

Exchange rates/purchasing power parity

Cost of Living Index in each country

Average salary by country

The goal behind this is to create a payment that reflects the same value to the employee given cost of living and average salary in that country.

Organisations have institutionalized a variety of programs that recognize/reward for a variety of reasons to ensure overall and sustainable development of the organisation. The following are some of the ways to promote behaviours that matter:

Link incentives to sales and service performance metrics to preserve high-quality customer relationships

Patents to revenue from patented products to ensure meaningful research & development

Link compensation with team performance to drive collaborative behaviour

Team performance and team excellence are essential for organizations to grow and prosper. To promote the same, linking it with merit pay becomes essential. Teams start out with merit pay criteria that are based 80 percent on individual factors and 20 percent on team performance factors. As a team matures and peer support and approval acquire importance, it may move this allocation to a 50-50 allocation, which ensures that merit pay distributions hinge equally on team and individual performance. Merit pay is zero-based, meaning that the allocation of merit pay in one period is not predicated on previous allocations. Placing merit pay on team activities helps ensure project teams, process teams and task forces work toward common goals. Linking compensation to teamwork and sharing establishes the proper incentive structure to drive across the territory improvement.

The rewards and recognition ownership/implementation pattern in the best workplaces shows that to ensure effective and widespread reach, organisations should decentralize recognition. They need to be able to institutionalize practices and rest the responsibility of recognition with team leaders, peers and juniors rather than with a distant authority or essentially the HR function. They need to monitor implementation to ensure that there are no unjustifiable differences in teams. They need to define right metrics of effectiveness and measure and track them to ensure that recognition has positive impact on performance.

Additionally, Rewards and Recognition practices at best workplaces have the following features:

All the standards and instructions for their rewards program are lucidly documented with clearly defined objectives and evaluation parameters and published through intranet, dashboard newsletters, etc.

8. Key learning from best workplaces

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Goals set, even if stretch goals, are realistic to motivate people to perform

Creating a Balancing Act - Rewards are neither too few that employees find it difficult to get them, and hence, are not motivated aspire for it, nor too many that they become commonplace and stop to excite people anymore

Deploy risk and reward compensation systems to drive employee development, team sharing, and teamwork excellence

Develop standardized quality tools to measure cross-functional team and manager performance

Link cross-functional team compensation to financial goals which go beyond the traditional computation of profit. Thus, incentive compensation links are forged with Economic Value-Added (EVA), People Value-Added (PVA) and Customer Value-Added (CVA) goals.

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Often when we, from Great Place to Work Institute, share robust and effective practices from great workplaces, some members of the audience tell us that their organizations also have the same kind of practices. Their question is: Why dont our employees (and consequently, Great Place to Work Institute), rate our organization as a best workplace? We address this question there, and it is important that we address it here as well.

First of all, the similarities are deceptive because they are similar at a superficial level. The differences come in when we examine the details of what they do. The differences dont end there. They become more manifest as we examine why they do what they do, and how they do it. The great workplaces dont implement these practices in a transactional manner. They are not copying someone else because the idea seems appealing. They design what suits their purpose and circumstances. The entire organization, beginning with the top leaders, share a deep conviction based on their values and beliefs that this is the right thing to do. This ideological or philosophical underpinning provides them impetus to implement their people practices in a heartfelt manner and over an extended period of time, seeking feedback and trying to improve the practices and the impact of what they do. This conviction also imbues what and how they do it.

Great workplaces believe that their people practices and organizational culture should be animated by a sense of fairness and equity represented by distributive justice, procedural justice and interactional justice (whether they say this in these words or not!). Internal and external compensation benchmarking and parity, generous and extensive profit sharing and wealth sharing are examples of striving to achieve distributive justice. Robust and relevant performance metrics, which are rigorously measured, tracked and shared so that the right actions and behaviours, right results and contribution, and therefore, ensure that right individuals and teams are rewarded goes a long way to establish procedural justice. The climate of approval and reinforcement and the heartfelt sense of appreciation and gratitude expressed in personalized manner by leaders, managers and peers convey the sense of interactional justice.

The best workplaces try to introduce variety (of methods and programmes) in their practices to enable them to deal with different needs of employees and different situations; their practices have a unique flavour or twist that their employees can identify with, resonate with and feel proud about; their practices touch the widest number and categories of employees and are not restricted to a select privileged few; their practices are humane and generous creating a gift like feeling among the employees who benefit from these; and above all, their practices are integrated with their organizational values, culture, strategy goals such that they create an additive vector!

Studying various organisations clearly shows us that the

importance of the rewards and recognition has been well understood by many organisations and it gets the time and attention it deserves. More and more organisations are looking at total rewards as the concept to articulate the employee experience that can be expected by employees in their organisation. However, there is scope to structure budgeting and measuring effectiveness further.

While the recipients of this award have shown us the way by making some significant strides, there is always a scope to improve and overcome challenges.

There is scope to find the right balance between encouraging and rewarding individual excellence and encouraging and rewarding team performance. There is scope to ensure that the means (actions and behaviours) and the ends (desired outcomes) always run hand in hand and one of them is not sacrificed. There is scope to reward the short term performance as well as the long term contribution. There is scope to better recognize, appreciate and reinforce actions and behaviours that lead to the desired outcomes and not just focus on rewarding and recognizing results. There is scope to fine tune differentiation between the outstanding performers and solid performers (who constitute a large percentage of the employee population) so that while the outstanding performers feel highly appreciated, motivated and remain loyal, bulk of the population made up of solid performers dont feel neglected or devalued, and thus, get alienated.

Measuring return on investment on rewards and recognition more accurately will help organisations rationalize and reinforce the need to recognize and reward. It will also help organisations to choose from variety of options that are available for both measuring performance and rewarding. However, the measurement should not overshadow the philosophical and emotional aspect of why to reward and recognize.

To sum up, rewards and recognition programmes must connect to the emerging needs and expectations of the workforce and link them with the companys overall goals and strategies to be successful. There needs to be more research on the impact of different types of Rewards and Recognition Programmes on diverse employee categories to be able to provide different strokes to different folks, without sacrificing the all important sense of fairness and equity.

9. Conclusion and Way forward

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Companies Featured in this report

American Express India Pvt. Ltd.Industry: Financial ServicesBusiness Description: Credit cards and Travellers Cheques.India HQ: GurgaonFounded in India (Year) 1921Ownership Subsidiary, Division, or Majority owned of another CompanyEmployee Strength 6158

Aditi Technologies Pvt. Ltd.Industry: Information TechnologyBusiness Description: Enterprise solutions, Mobile client application development, Test and automation, Sustenance engineering, Software product engineering, Consulting, etcIndia HQ: BangaloreFounded in India (Year): 1994Owne