Rewards and Recognition

Rewards

Purpose

To get anyone to go an extra mile, there’s got to be something in it for them. Rewards & Recognition represent tangible proof to employees that their input is valuable to the organization; and research confirms that both these elements share equal weighting in the favorable perception of their recipients. These important tools not only act to validate the effort, but also go a long way to motivating the entire employee population while acting as a trust-building instrument for participation when visibly promoted by senior management (Planbox provides its clients with time-efficient best practices for senior management involvement).

Rationale

In an Idea & Innovation Management process, it is critical to include all stakeholders in the Rewards & Recognition structure. After all, if only the Idea Submitter(s) get the laurels while a team of other people facilitated its evaluation and implementation, it is not hard to understand how those doing the ancillary work would quickly feel left out; and thus un-committed to continuing to pull their share of the extra weight that is being asked of them going forward. That is why you need a formula that includes and motivates the various support resources involved; they are the ones that ensure a timely and enduring process flow (Planbox provides its client with the proper formulas and ratios).

Pay-out

The actual award (regardless of currency i.e. cash, merchandise, travel etc) needs to be equitable, certain and immediate. The current Planbox benchmark pay-out for an Idea Submitter is 10% of an approved ideas first-year net contribution. Pay-out to Idea Coaches and Idea Evaluators range from 1%-3% of an approved ideas first-year net contribution and are awarded on a sliding table criteria based on other criteria such as accuracy and expediency.

Funding Strategy

To pay for your rewards without dipping into existing budgets can be done by funding your awards out of implemented ideas. The trick is to implement the approved idea as soon as it is approved; ideally within the first month (most easily done with cost saving ideas). You can recognize the approval immediately, follow-up the next month with a “payment” notice by mail (or pay slip stuffer) and actually pay-out monies captured from the implemented idea on the ensuing month; thereby deferring the payment until the idea has proved itself financially and is starting to generate the money related for rewards ex-budget to pay for it.

Actual Pay-Out Cost

Historically, less than 1% of all approved ideas are “one-time benefits” (i.e. divestiture), therefore your actualized pay-out provides you a higher ROI. By amortizing your idea value over a three-year period (conservative according to Planbox benchmarks) and paying-out for only first-year net contributions, your actualized ROI on each idea nets out to 96.6%.

Recognition

Purpose

Recognition demonstrates in a tangible way that the Idea Submitter’s contribution is important and valuable to the organization. Whether this is a published photograph of the employee shaking hands with a senior manager, its own item on the agenda at a staff meeting or getting the President’s parking spot for the day; it clearly shows that management has gone out of its way to recognize the employee’s input and show their appreciation. The benefits of practicing this go far beyond the here & now; results of in-program surveys consistently confirm that recognition is perceived as being equally important to compensatory rewards in the mind of the employee.

Recognition is self-esteem building and motivating. It is an integral part of the peer evaluation process and should always be part of the overall reward mix. Besides it not costing much, in some organization, this course of reward may be the only option due to stringent policies.

Long-Term Idea

Rewarding and recognizing ideas that have longer-than-average gestation periods still needs to be done clearly, positively and immediately. The trick is to do it in way that is equitable to both the employee and the organization.

Ideas that only deliver their full value over time tend to come in to varieties:

  1. Ideas that require capital costs (investments involving large sums typically the purchase of expensive equipment, machinery or real-estate)
  2. Revenue-generating ideas whose net contribution can only be estimated and whose development cost can only be truly amortized once they have been fully launched

Because it is desirable to stay consistent across one’s reward & recognition policy, adjusting the weighting of the mix is the best solution.

This can be achieved by issuing a smaller, nominal reward up-front - say $100 - $500; along with a recognition dimensional such as a letter of recognition from the CEO (a copy of which should also make it to HR and be included in the employees file for their annual review). Any communication back to the employee regarding that specific idea should include a notification of the idea’s longer-than-average implementation timeline and that any future pay-out based on results would be based on an EBIT formula tied to net profit margin actually derived from the idea (versus the estimated contribution at the time of idea approval). These items should also be clearly stated in the rules of the program so that it doesn't come as a surprise.

Rewards as Process Incentives

Aside from motivation and participation, rewards of different scale are purposeful in guiding process use, behavior and performance; and that doesn’t mean increasing the spend. For example, one can attribute full reward point s to employees whose approved ideas were developed using the system tools; as such easing the burden on evaluators to substantiate the idea.

Rewards for External Submissions

When reaching out to customers, suppliers or shareholders, one’s first option to reward, if feasible, is to offer one’s own products or discounts thereon. This not only reduces the pay-out cost to the organization, but also serves to further promote your brands.

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