Employee engagement » How to use research to optimize recognition and incentive spend

Based on research presented by the Incentive Research Foundation, the percentage of U.S. businesses using non-cash rewards rose from just 26% of all U.S. businesses in 1996 to 84% of all U.S. businesses in 2016. As the culture supporting the importance of employee engagement continues to grow, particularly in a service-driven economy, non-cash incentives used for both recognition and reward are frequently used to motivate employees.

In 2016, Incentive Magazine reported that U.S. companies spent $90 billion annually on non-cash incentives, a figure reflective of the belief in these initiatives. Furthermore, 90% of U.S. companies have formal recognition programs as a component of their company culture. Yet, for the significant investment made into non-cash incentives, many employees report the primary reason for leaving their jobs is lack of appreciation. Indeed, satisfaction with recognition is frequently a low rated area on many employee satisfaction surveys, despite well-intentioned attempts to express gratitude to employees for their workplace efforts.

Among the reasons for these less-than-effective efforts is the fact that recognition and rewards programs are often designed without the benefit of understanding what employees really value. There’s an assumption that everyone likes gift cards and award points, and many indeed do value these tangible rewards. But tangible rewards are often given in a perfunctory manner, without perhaps understanding the true motivators of employee performance.

Segmentation research is often used when seeking to understand the buying motivations of customers. If effectively designed, these studies can identify how various customer segments are motivated to purchase by learning the psychological factors that drive their behavior. Similarly, when applied to employee populations, segmentation research can help better target recognition and reward strategies in a manner that aligns to the most effective employee performance motivators. Some potential segments that may exist:

Points Junkies
These are the people who love to earn and save award points that can be redeemed for a variety of tangible items. They are analogous to the points junkies who join loyalty programs to earn large amounts of points that can be redeemed for an airline trip, a stay at a luxury hotel, or valuable merchandise.

Experience Seekers
Rather than being motivated by merchandise, these are the people who find greater value in a special travel experience, a nice evening on the town, a ballgame, or perhaps something as simple as a complimentary dinner with their family.

Praise Cravers
While not everyone needs to be thanked for good work performance, there is a certain segment that wants to be genuinely thanked by their managers and colleagues for going above and beyond in their work performance. While some might see a paycheck as a sufficient expression of gratitude, others need to receive verbal and written expressions of appreciation for their work.

Freedom Seekers
The best way to recognize these employees is to give them autonomy and flexibility in their work day. Allowing them to operate outside of constant overwatch will help these people thrive in any business environment.

Developmental Opportunists
Many people, particularly younger workers, want to be recognized by being given new opportunities to learn and grow. These people are rewarded by having new skills and experiences to add to their resumé and enhance their personal employee brand. This might include being given the opportunity to attend a conference, join a professional association, or being able to learn new skills in the workplace.

Upward Movers
It may surprise some to know there is a small percentage of people in the workforce who are best recognized and rewarded by being given more responsibility at work. These are generally the people most engaged in their jobs, who find their work itself to be inherently enjoyable. While this may not represent a large portion of the workforce, it’s a segment companies usually like to identify and promote.

Bottom Liners
For all that can be said about the value of non-cash incentives, there are always those people in the workforce that just want more money. They don’t really care about other expressions of gratitude if they are paid more money.

There are undoubtedly many more segments within workforces that can be identified. Some are more prevalent in certain companies or industries than others. For example, lower paid workers are likely to have a disproportionately higher interest in receiving tangible rewards. Younger workers who are seeking to grow and advance their careers may find developmental opportunities more appealing.  Certain professions, such as academia, attract people who are natural born Freedom Seekers. The key is to identify the various segments in your workforce and align recognition and rewards to their preferences.

A one-size-fits-all manager may inadvertently frustrate their employees by recognizing them in meaningless ways. There are few employees who wouldn’t enjoy more money, but if all you do is offer cash bonuses, you’re creating a dangerous precedent. These bonuses will become an expectation and will only create dissatisfaction when they aren’t given – rather than stimulating greater performance.

The challenge, of course, is getting to the granular level to personalize recognition. It’s easy to argue that if you have 1,000 employees, you can’t have 1,000 different approaches. In some cases, you simply don’t have the resources to appeal to your entire workforce. However, companies that conduct annual or bi-annual employee surveys, can create incentive and recognition strategies by department. For example, your sales department may love the idea of a nice incentive travel experience, while your operations department would prefer award points. Certain departments may love public recognition while others prefer to be privately thanked. As managers understand their own direct reports’ preferences, they can further tailor their departmental recognition strategies.

Some companies have undertaken the progressive step of conducting conjoint, or discrete choice research around incentives. This research allows employees to trade off potential rewards against one another based on the total amount the company has available to spend on these programs. While this research represents one useful approach, other research approaches are a bit simpler to design such as TURF (Total Unduplicated Reach and Frequency) simulators can be produced to identify the motivators that have maximum reach for the investment a company can make.

While market research statistics are widely used, it is surprising how few companies apply these techniques around their recognition and incentive programs. Given the amount of financial investment in these programs, as well as the time commitment required to personalize reward and recognition strategies, it makes sense that effective application of market research approaches would easily pay dividends – not just in terms of a better use of financial resources, but more importantly, by having a much more motivated productive workforce. Instead of creating motivation programs that may be ineffective at best, and de-motivating at worst, companies can insure themselves of a much better designed approach to employee motivation.