Employee Recognition Optics

Employee Recognition Optics | Human Resource Executive Online The public continues to criticize companies that received bailout money spending big dollars on expensive employee-recognition trips. The same outrage may be leveled at companies instituting layoffs, but businesses are beginning to fight back, calling recognition not only necessary but a potential profit builder.

Monday, February 23, 2009
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It all seemed to start with AIG. After receiving $85 billion in federal bailout money in September, the company spent $440,000 on a corporate retreat a few weeks later, which included $23,000 for spa services. Newspaper headlines screamed bloody murder. The late-night talk shows had a field day. Political cartoons showed fat cat AIG executives getting massages and pedicures while burning taxpayer money.

Barack Obama, still campaigning for president at the time, called for employees on the trip to be fired.

Soon after, a slew of companies receiving bailout money found themselves receiving similar harsh criticism for employee-recognition events -- and many cancelled them to save face. Morgan Stanley called off trips to Monaco and the Bahamas after the media reported on the plans. Bank of America went through a public relations nightmare after reports surfaced that it spent $10 million on a five-day carnival at this year's Super Bowl in Tampa.

And then, there was Wells Fargo -- which lost $2.3 billion in the fourth quarter of 2008 and received $25 billion in bailout cash -- scheduling a 12-night employee-recognition trip to Las Vegas, which included stays at the five-star Wynn and Encore hotels.

"Let's get this straight: These guys are going to Vegas to roll the dice on the taxpayer dime?" said Rep. Shelley Moore Capito, a Republican from West Virginia who sits on the House Financial Services Committee. "They're tone deaf. It's outrageous."

Capito was hardly alone. The public outcry eventually became too much to bear and the company cancelled all of its major recognition events for the rest of the year.

But Wells Fargo's president and CEO John Stumpf still saw value in the trip and made sure to let the public know he didn't see anything wrong with employee-recognition events.

In a full-page ad that appeared in the New York Times on Feb. 8, Stumpf wrote that "deliberately misleading," media stories on employee recognition have caused people to believe that "every employee-recognition event is a junket, a boondoggle, a waste or that it's for highly paid executives. Nonsense!"

In this new economic reality, where does employee recognition fit in for bailout companies? Should companies receiving public money accept that it comes with scrutiny against spending that many see as wasteful? Or should recognition programs continue to be emphasized because they actually drive profits by rewarding a company's most important assets -- its people?

The same questions may be of interest to companies that have not received bailout funds, but are laying off workers. Critics will surely second-guess such events.

John Bremen, global practice director in Watson Wyatt's Chicago office, says that study after study has shown the value of employee recognition, but this year, bailout companies need to find some kind of balance -- and tone down their recognition efforts.

"In the past, a company may have had a big recognition event, maybe a sales recognition event in some dramatic place, such as the Caribbean or Hawaii," says Bremen. "Maybe this year, they want to do something more conservative. Maybe do it closer to home for something that costs far less money."

After accepting taxpayer money, companies should not be surprised that there is more oversight, he says.

"I think companies have to expect in these times when their values have gone down and they're taking public funds, there are going to be more people looking at what they're doing," says Bremen.

Tim Gardner, associate professor of management at Vanderbilt University, disagrees, saying that before the recession, most people agreed that companies should do all they can to invest in their people -- a theory that should still hold true now.

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"Why, when [companies are] using outside money or government money, would investing in motivating and retaining these assets be any different than with shareholders?" says Gardner.

He also argues that competing companies not receiving bailout funds can conduct employee-recognition events out of the public eye, possibly allowing them to lure away top talent from bailout companies.

Martha I. Finney, author of numerous books about motivation and performance, also finds a place for employee-recognition programs at bailout companies.

"If there has been a long-standing budget for these types of programs that has been directly tied to enhancing performance, I think it's a legitimate expense -- if it's a program that's well thought out, is proportioned with the value of the employee's productivity, [and] is not some ego-stroking lavish junket for a handful of people who are doing it because they can," says Finney.

She warns companies continuing to implement these programs that they should be sure to reward employees at all levels of the organization, not just the top brass.

"When you're sending those goodies to [top leaders] and telling the rank-and-file to 'tighten up your belts,' you are alienating and disenfranchising the vast brain trust of your company," says Finney.

In a recent column in the Times, columnist Maureen Dowd estimates that the Wells Fargo ad could have cost up to $200,000. Some argue that the money should have been used to pay back the government, while others say it should be used for employee recognition.

Still, others have suggested the ad was a worthwhile venture because it shows that the company is listening to public opinion.

"Having companies show they are listening is very important right now," says Bremen.

HR's role is to figure out and manage the trade-offs between the costs of such recognition programs, their optics and effectiveness, says Bremen.

"I don't think there's anybody better in the organization to balance out those three things," he says.

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