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Like other HR functions , employee recognition programs move online with fewer administrative headaches, lower costs
When John Wilhelm became manager of benefits administration at beauty products company L’Oreal USA, he was shocked by the company’s time-consuming and complicated service award program.
“It was ridiculous,” he recalls. “We had a person on staff who spent a significant amount of her time tracking down gifts, finding missing orders, sending reminders to employees and helping them make returns. I knew there had to be a better way.”
That’s when Wilhelm contracted with a vendor to provide the company with an online program. Now, the company hands in a list of people eligible for service awards at the beginning of the year, and the vendor handles the rest.
But isn’t L’Oreal USA paying a premium for such service? “It’s actually less expensive than the paper program when you factor in the zero amount of time anyone here spends administering this,” Wilhelm explains. “The lost work time was really the hidden cost in the old program.”
As more HR functions go online, there’s an increased interest in bringing awards programs online, says Bill Termini, national sales manager for Hinda Incentives Inc. in Chicago, a longtime industry vendor that began offering web-based awards programs in 1999.
Online awards systems can be connected with HR management systems, payroll systems or the company’s enterprise resource planning system, says Kevin Jorgensen, president and CEO of Beyond Work Inc., a provider of incentive and recognition programs based in San Jose, Calif.
The ease and convenient access for employees is what prompted Southern Company, a Fortune 500 energy producer in the Southeast, to move its program online.
“When we moved the benefits enrollment process onto the web we saw immediate interest. In one year, online participation went from 26 percent to 82 percent,” says Tripp Cagle, HR communications manager. “Based on that, we knew employees would be interested in an online awards program.”
Mercury Interactive Corp., a software company in Sunnyvale, Calif., reaped financial rewards from its online incentives program. Amit Ronen, vice president of field technical operations, wanted to motivate field staff who maintain and troubleshoot computer systems.
“We asked them to voluntarily jot notes about opportunities they saw when on assignment, but the program was so-so. I thought that if we could create an incentive program we’d generate more interest,” he explains.
For example, the field staff should look for holes in existing client systems and be alert to hear about weaknesses from client staff. Such situations could provide sales opportunities. The company implemented an online program in which field staff receive points for such leads and even more points for leads that generated business.
“The administration of this would have been way too much if the program wasn’t online,” Ronen says. “A $7,000 investment has generated more than $600,000 in new business.”
Dana Hubbard, a compensation analyst with Southern Company, says the online system has simplified administration of awards for the company’s 26,000 employees.
“We can see what’s being redeemed; so we know what’s appealing to employees and can keep the program meaningful,” she says.
PacifiCare Health Systems Inc., in Santa Ana, Calif., made the move to an online program for its 9,500 employees in June 1999 after an IRS audit turned up discrepancies.
“Each business unit had its own awards, nothing was centralized and it was a nightmare to keep track of,” explains Tonia Rockwell-Koren, a senior compensation analyst.
Now that the online program automatically deducts taxes and keeps records for PacifiCare, Rockwell-Koren says, “I don’t know how we ever managed the other way.”
Online programs also give managers easy access to data and the flexibility to adjust information. “You can capture data easily and keep information current,” says Michelle Smith, vice president of strategic sales for Bravanta Inc., an online awards program provider in San Francisco. “As priorities change, so too can programs. They can be altered with a click of the mouse.”
With the data centralized in online systems, HR also can improve the effectiveness of the awards program and demonstrate that the program is making a difference.
For example, say you’re running a safety program. HR can pull data to show a direct correlation between reduced accidents and incentives. In addition, the computer can run comparisons to highlight differences in accident costs before and after implementing the safety program. Then, those figures can be compared to program costs. The online program calculates these statistics, so no one has to spend weeks tallying and tracking information.
“Online programs prove what we already knew instinctively, that incentive programs motivate people and have an effect on the bottom line,” says Smith. “An online system enables HR to keep data on ROI that generates board-level interest.”
The actual per-employee cost of the awards is the same for online programs as traditional plans. According to Hinda Incentives, organizations allot about 1 percent of base pay for non-sales staff (4 percent to 7 percent for employees in sales)—for an average of $100 to $400 per employee annually.
And upfront costs and maintenance fees associated with online programs typically cost less than old-style paper programs, primarily because online programs save on labor and printing costs.
“We have a client with 9,000 employees who has one person run the whole program part time,” Jorgensen says. “Before, they had six people working on the program for the same employee population.”
Some traditional programs depend on expensive promotional brochures. “Our brochures looked great, but they had to be updated constantly as items changed, which got expensive,” says Wilhelm.
“We found that companies [that move programs online] save 50 percent or more on printing costs alone,” notes Smith.
Training is almost always included in the vendor package. Most online incentives providers offer a train-the-trainer program for an employee who then trains other HR staff. Front-line employees generally need no training to access the program. “If they can sign on and find e-mail and a browser like Yahoo! they can use the programs,” says Jorgensen.
One of the biggest benefits is that online programs offer an immediacy that offline programs just can’t match, proponents say.
“Managers can send immediate recognition for a job well done, which has a big impact,” says Peter Fornal, vice president of HR for Log On America Inc., a regional telecommunications services provider in Providence, R.I., who studies the online awards industry. “You can recognize people in ways you couldn’t before. Think about companies with employees who telecommute or work from satellite offices.”
Online programs also enable organizations to recognize and motivate a variety of employees by running multiple programs at once.
One caveat: To reach everyone, everyone must be wired. While that’s rapidly becoming a reality, some companies have employees on factory floors, in the field and at cash registers across the country who cannot readily tap into PCs. Most online vendors continue to offer supplemental paper materials for these employees. Meanwhile, many companies are making the investment to give all employees computer access.
“Dismiss any myths about online programs not working when some employees are not online. We have one client who is a manufacturer with 13 locations,” says Hinda Incentives’ Termini. “The money they saved in administrative costs enabled them to invest in kiosks so all employees have access.”
That’s what Debra Engel, an SHRM Foundation board member in Sunnyvale, Calif., helped to arrange while she was senior vice president of corporate services at 3Com Corp. “We made a number of PCs available at kiosks and scheduled time on the computer as part of the workday,” she says.
And because online programs run 24/7, programs can span thousands of miles and all time zones.
“Online systems uniquely enable a manager in the U.K. to recognize employees in New York, something one would not even attempt with an offline system,” Jorgensen notes.
Previously, complex international regulations often rendered overseas programs impossible.
“Rules for taxation and shipping can be programmed right into the system. While implementing a global program is always more complex, the online system substantially reduces the overhead and provides greater control,” says Jorgensen.
Old-school vendors kept warehouses full of incentive items. As large as warehouses may be, there’s finite space. Online providers may still have warehouses, but they also contract with other vendors to provide more products.
Southern Company had very specific product needs. In addition to gift certificates for national retailers, the company wanted to include gift certificates to local hometown stores. “We gave our vendor a list of Mom-and-Pops that we wanted to include, and they incorporated them into our program,” Hubbard says.
PacifiCare wanted an option that would work like cash, so the company’s vendor included a debit card among the gift choices. “It’s a real debit card with real dollars that employees can use like any debit card anywhere,” explains Rockwell-Koren.
L’Oreal USA wanted to update awards. “Employees were unhappy with the old program with only vases and watches,” says Wilhelm.
The vendor counseled L’Oreal on popular types of awards. “They were right. We see a lot more people take lifestyle items like DVD players, camcorders and big screen TVs,” says Wilhelm.
One of the biggest drawbacks to an online system is the impersonal nature of presenting an award via computer. For 71 percent of companies with incentives programs whose managers have personally presented awards, the idea of acknowledging people through e-mail can seem a bit cold.
It’s not just old-economy businesses that find online presentation lacking. “One of our high-tech clients, a networking services provider, asked that we implement a rule in their recognition system that prevented awards from being presented online,” Jorgensen says. “They felt that their computer-based culture was becoming too impersonal and they wanted to use recognition as a way of boosting the people factor on the job.”
Most companies use the online system to notify managers of important anniversaries (for service awards) or provide a spot for managers to log performance awards, but the actual congratulations is done in person.
“The online program shouldn’t take the place of personal contact, but should be a supplement to it,” says Fornal.
Andrea C. Poe is a freelance writer based in Easton, Md., who specializes in human resource and management issues.
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