REWARDS & RECOGNITION: The Engaging Factor

Companies are paying more attention to -- and spending more of their recognition and rewards dollars on -- keeping employees involved and satisfied.

Monday, November 19, 2007
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In an informal poll I recently conducted, three out of three executives told me they feel the competition for top talent will accelerate in 2008. In addition, Vistage, a leading CEO membership organization, revealed in a recent study of CEOs that finding and hiring qualified staff was the most critical challenge at more than one-third of responding firms.

This is not a new issue. Remember, it was less than 10 years ago when, in many industries, there were more job openings than qualified people. New college grads were enticed with signing bonuses and high entry-level salaries.

Today, the competition for the right employees is more profound and the stakes are higher than a decade ago. Businesses that have created a competitive advantage through innovation, technology, quality products and pricing strategies will, in the future, differentiate themselves by delivering "customer service that exceeds expectations."

Finding the right people to deliver extraordinary service is only part of the challenge. Satisfying and exceeding employees' expectations will be equally critical and perhaps more difficult to realize in a tight labor market when people feel more employment options are available to them.

These challenges create exciting opportunities for human resource professionals. You have always known your organization's success depends on your people strategy. You also know that to win the battle for top talent, you must convince your top management to view your employees as profit centers rather than cost centers.

Fortunately, the growing body of research illustrating that an engaged and motivated work staff is good for the bottom line will help make this shift in thinking a possibility.

Consider this compelling insight: The Forum for People Performance Management and Measurement's landmark study, Employee Engagement, Customer Satisfaction and Profitability (, conducted by Purdue University professor James Oakley, found satisfaction levels among employees who had no direct customer contact were directly linked to customer satisfaction and improved financial performance.

A key finding in a new study from the Forum, Testing the Internal Marketing Model: An Empirical Analysis of the Relationship between Employee Attitudes, Customer Attitudes and Customer Spending, revealed employee effort and customer behaviors are intrinsically linked to financial outcomes.

Researchers measured the link between four psychological drivers of hotel staff behavior and four metrics of customer/hotel guests' spending. They found a 10 percent increase in one key driver, the extent to which employees try to satisfy customers, translated into a 22 percent increase in customer spending.

Alex Edmans, a professor at the MIT Sloan School of Management, agrees with these findings. He analyzed the financial performance of a portfolio of stocks selected by Fortune magazine as the "Best Companies to Work for in America" from 1998 to 2005.

These stocks, he says, "earned average annual returns of 14 percent by the end of 2005, over double market return." The portfolio also outperformed industry-matched benchmarks. In his May 2007 abstract, Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices, Edmans concludes that, "employee satisfaction improves corporate performance."

What Drives Satisfaction?

Clearly, your organization will benefit by investing in increasing your employees' level of satisfaction and engagement. In a follow-up study for the Forum, The Road to an Engaged Workforce, Oakley found "engagement is largely driven by the employee's feeling that the organization values his or her contribution, and that the organization will do its best to remove barriers from getting the job done."

This study also identified eight drivers of satisfaction and engagement:

* The employee's intention to remain in the organization. The more likely employees are to indicate their intention to stay, the more likely they are to be satisfied with the organization and their status as an employee.

* The skill variety employees are able to exhibit in their jobs. The degree to which employees feel their job tasks require a wide range of personal skills and competencies influences the satisfaction of individual employees. Employees tend to feel more satisfied if given the opportunity to stretch their wings a bit.

* Level of customer-service orientation achieved. Employees are more satisfied when they believe they are responsible for identifying and satisfying the needs of customers, and when they believe that the organization has the best interests of its customers in mind. It would appear that when employees are more satisfied, they have an inherent focus on making sure the customer is too.

* Degree of coordination between units of the organization. The extent to which employees across organizational units cooperate to articulate inter-unit activities and minimize disruptions, delays and interference appears to be an indicator of satisfaction. Employees are more satisfied with the organization and their roles within it when they feel it coordinates activities well between sub-units; that is, they feel more satisfied being a part of a well-structured and coordinated organization.

* Reduced role conflict. The extent to which employees receive inconsistent expectations from the organization and are expected to do things that conflict with what they believe to be correct is identified as a factor negatively impacting engagement. The organization must provide clear and consistent information to employees and must take into consideration the ramifications of that information.

Employees are unlikely to be motivated to blindly follow instructions merely because they are given. They may follow such instructions or bow to expectations, but if they are counter to what the employee feels to be appropriate, engagement will not occur.

* Proper training. Consider the extent to which employees, both new and existing, are provided with the type of orientation and training that promotes their personal development as well as their contributions to the organization. This is not just training for the sake of training, but rather the development of skills that improve the contribution of each individual employee.

* Personal autonomy. "Autonomy" is defined as the degree to which the job provides freedom and discretion to the employee with respect to scheduling and work procedures. The employee is not only given freedom and independence in his or her work, but is provided with the resources, information and training to execute his or her role in the organization optimally.

* Effective utilization of expert, referent and exchange power by managers. Effective utilization of power by managers can be described as the extent to which employees are influenced by their supervisors' technical expertise or managerial competence (that is, expert power), the respect that they have for their supervisors (that is, referent power) or their supervisors' willingness to be influenced by them (that is, exchange power).

Clearly, organizations can take concrete steps to engage their people. Armed with this knowledge and the reality of a tightening job market, you are positioned better than ever before to integrate an employee engagement strategy into your organization's overall business plan and culture.

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Fortune 1000 corporations, which have traditionally used sales-incentive programs and consumer promotions to drive sales, also utilize incentive programs to improve workplace productivity, reduce absenteeism, improve customer service and reward employees' contributions. Seventy-two percent of the companies polled in the Incentive Federation's 2005 Study Among Current Users of Merchandise and Travel Items for Motivation/Incentive Applications ( indicated they have non-sales incentive programs in place, up from 67 percent in 2003.

Bottom-Line Considerations

If you are not using incentive programs as a tool to engage your staff, consider the fact that such programs are among the few business tactics whose cost can be based on actual performance and paid out after the desired results have been realized.

Most important, the desired results achieved with an incentive program make a positive impact on the organization's bottom line. Incentives, Motivation and Workplace Performance: Research & Best Practices, a study conducted by researchers for the International Society of Performance Improvement and funded with a grant by the SITE Foundation, ( found:

* Incentive programs improve performance. In fact, effectively designed and properly implemented incentive programs increase performance by an average of 22 percent. Team incentives can increase performance by as much as 44 percent.

* Incentive programs engage participants. The research found that incentive programs can increase interest in work. When programs are first offered for completing a task, a 15 percent increase in performance occurs. Asked to persist toward a goal, people increase their performance by 27 percent when motivated by incentive programs. When incentive programs are used to encourage "thinking smarter," performance increases by 26 percent.

* Incentive programs attract quality employees. Organizations that offer properly structured incentive programs can attract and retain higher-quality workers than other organizations.

These findings were substantiated by T-Mobile USA's "Do More, Get More" employee incentive program. The program, developed to improve customer service and reduce employee turnover in their 15 call centers located around the country, touched more than 11,000 employees representing a true cross-section of the American workforce in terms of age, ethnicity, geography and job responsibility.

Less than two years following the launch of the "Do More Get More" program, a J.D. Power and Associates study named T-Mobile USA "the domestic wireless industry's top-provider of customer satisfaction." T-Mobile also ranked first in J.D. Power's 2005 follow-up study. Within two years following the implementation of the program, employee attrition rates decreased by 50 percent, far surpassing the original goal of a 30 percent decrease in attrition rates in three years.

In the battle for talent, an incentive program will not compensate for inadequate compensation, lack of training, a poor product or lackluster marketing. However, as a part of an integrated business/people strategy, well-executed incentive programs can be utilized to motivate and engage people at all levels of the organization. The bottom line is this: The organizations that successfully engage their employees and motivate them to achieve specific goals will realize the greatest financial gains over time.

Karen Renk, CAE, is the executive director of the Incentive Marketing Association. A certified association executive, Renk has managed associations in the incentive marketplace since 1986, and is one of the founders of IMA. Her organization is a leading member of the Incentive Performance Center and a founding member of the Forum for People Performance Management and Measurement at Northwestern University.

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