Decoding Reward and Recognition Strategy in Small and Medium Enterprises

By Udaya Reddy Jun 13, 2017
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There is a world of difference between doing a great job and being recognized for doing a great job. It is the impact on employee morale, motivation and the resulting effect on employee engagement, productivity and stickiness with the organization. In employee climate surveys, it has been inferred that the factors of recognition and loyalty go hand in hand. Those employees who believe that they are valued in the organization continue to be associated with the organization even in times of economic turbulence and engage in strong advocacy for the organization both within the peer group internally and externally in the employment market. In the current employee-employer relationship determined by 'What is in it for me,' both parties have begun to expect more yields from each other. Employers want more productivity for the same wage rates while employees want more wages for the same job done. In such a deadlock scenario, employers have to resort to innovative ways to satisfy their employees as the salary budget is always finite. While this is a universally applicable disposition, it is more so for SMEs as they have tighter resources to manage. Rewarding and recognizing employees is one effective method to reinforce positive contributions and provide employees the value they deserve for that great job done.

R & R in SMEs: Coffers, Constraints and Complexities

SMEs, in the nature of the operations of their business, differ from large conglomerates and global giants at multiple levels. Broadly, SMEs work on tighter budgets, witness larger realms of change and are constantly combating operational chaos emanating from managing the change. This evidently rubs off on key people processes like reward and recognition (R&R) and it becomes imperative for HR departments to be nimble and invent continually to keep the processes current and aligned to the changes. Some ground realities concerning reward and recognition in small and medium sized businesses are outlined below:

  • Availability of resources is limited to run the R&R program.
  • In the growth phase, the organization is busy in an effort to sustain operational stability and celebrating successes is pushed to the back seat.
  • Stellar contributions and wins of scale could be minimal.
  • There is unlimited opportunity for innovation and countless creative ideas for reward and recognition.
  • Visibility of achievements is much higher than in large organizations.

Practical concepts for devising the R&R strategy

IBEC, in its Human Resources Best Practice series states that a reward and recognition strategy is a set of guiding principles which aligns all forms of reward and recognition to the business strategy in order to clarify 'the deal' and to motivate and recognize desired performance and behaviors. Some of the key components that determine the strategy are as follows:

Budget - The one factor that singe handedly determines the strategy is budget availability. Most SMEs struggle with the predictability of the budget inflow for employee activities. It is to be noted that R&R should not be accounted under the quarterly overhead budget like the employee engagement or travel kitty. All financial sign-offs for the R&R program are to be obtained at the beginning of the financial year so the quarterly performance does not become a show stopper and the program continues to laud the exceptional employees.

Frequency - How frequent is too frequent? The R&R strategy of the organization should tread on that fine line that differentiates applauding every single noteworthy contribution from trivializing the program, rewarding normalcy. Frequency, hence, depends on the culture an organization wants to build within. For an organization striving to establish a tough standard of performance and ethics, a less frequent recognition program might be best suited to make the awards coveted and aspirational. However, studies have shown that organizations with varied frequencies and categories of recognition, ranging from the spot pat-on-the-back to the prized annual achievers awards have had the best scores on their employee engagement and motivation dashboards.

Categories - A common pitfall for organizations while devising their R&R strategy is to base it on their job categories. It is very usual to see categories like best employee, best manager, best leader and best business enabler, in small and medium enterprises. While this is a simple and less complicated approach, it may not necessarily cover all groups of employees and may not drive the organizational goals. A good approach to come up with the categories is to identify the organization's top goals and direction for the year and use that as a starting point to base the categories on. For example, if an organization intends to enhance its quality focus for the year, a reward category on the best green belt project can be included in the framework to drive the focus. Another recommended way of defining the categories is to cover the entire cross section of the organization.

Make My Trip, India's leading online travel company's R&R policy is an example to this approach with its recognition program covering all segments of their employee base under the following categories.

  • Peer to Peer Award - It empowers employees to recognize their peers for behaviors that reflect the company values and help achieve strategic objectives.
  • Bravo Award - It is for those Trippers who inspire others to follow their lead and work as an example to the rest of the team.
  • Raving Fans - This is for the Trippers who have succeeded in creating a fantastic experience for the external customer.
  • CustoMore Awards - These awards recognize superior customer service by an individual or collectively by a team.
  • Einstein Award - This award appreciates and rewards innovation at work.
  • Appreciations Unlimited Award - This award appreciates the individual who has received the most positive and encouraging customer feedback.
  • Town Hall Meets - At bi-annual THMs, Star Performers, Exemplary Managers, StandOut Leaders and Team Extraordinaires are felicitated.
  • Rookie Award - This award is to appreciate an outstanding contribution made by a new Tripper.
  • Long Service Award - This award felicitates trippers who have spent a considerable number of years with the organization.
  • Study and FAM Tours - A unique way of rewarding the top performers by sponsoring a visit to the destinations and they are expected to drive the sales for that destination.
  • Making a Difference (M.A.D) Award - This award recognizes the efforts of trippers towards committed community service.

R&R as Total Rewards - While R&R in small and medium organizations is synonymous with recognition alone, it has to be agreed that it is not the same for employees. Employees equate multiple outcomes as sources of motivation and recognition. This includes a wide spectrum from performance-based bonuses to flexibility in working schedules to promotions to awards. Having a holistic strategy has its advantages by making use of a broad set of tools for rewarding and recognizing employees. It is an integral part of the strategy to socialize the total rewards as a part of the R&R communication and allowing for feedback.

Sustaining R&R in Trying Times

Let us zero in on some tips to not scrap R&R and sustain it during trying times common to SMEs till the time they reach a stable state of predictable guidance and consistent results:

  • Bank heavily on innovative non-monetary incentives.
  • Timely recognition with lower rewards is more impactful than delayed recognition with equivalent rewards.
  • Allow for flexibility of work schedules and opportunity for cross training as a part of the R&R strategy.
  • Make the process more inclusive by allowing peers to nominate for the relevant categories.
  • Focus on the process of letting the employee know that s/he is appreciated, and not necessarily on the takeaway.
  • Identify channels of recognition that hold emotional value in order to make the process more impactful (Example: Inviting family for the long service award ceremony)

Unpredictability and susceptibility to economical ambiguities are two major factors that have a strong bearing on how SMEs run their employee engagement programs, inclusive of reward and recognition plans. These factors act as a double-edged sword by playing out to the advantages of innovation and customization, at the same time posing a challenge where structured and consistent execution is necessary. HR professionals designing the R&R strategy in small and medium sized units have to bear in mind that all outcomes that have a linkage to employee motivation and happiness are to be defined under this umbrella. Leadership buy-in and commitment is a crucial factor that can determine the strategy and its repeatable roll-out. SMEs rely largely on their star performers to take them to the next level and having a right reward and recognition strategy in place ensures that the stars remain tied to the organization and continue to steer it in the direction of success.

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