Highly effective managers recognise the value of using employee recognition as part of their day-to-day management style.

These managers intuitively recognise what behavioural researchers have expostulated for years. Employees who are valued and engaged are more likely to actively contribute to the success of the organisation.

Every reputed HR consulting company has reams of research on the correlation between employee engagement and total shareholder return (TSR). Studies by these companies indicate that highly engaged employees can ensure a return of up to 29 per cent on the average TSR over a period of time, making these companies “high performing” companies. So how does employee engagement correlate with recognition, performance and retention, you ask?

At the heart of any engagement are employees who feel “valued”.  To some extent, traditional compensation vehicles such as total fixed pay, incentives, short term bonuses and benefits let employees know they are valued.

Unfortunately, most of these vehicles do not provide timely or specific feedback about employee behaviour. Sophisticated compensation tools such as long term plans and deferred cash plans are restricted to a few and often, prohibitively expensive, to recognise the efforts of a wider base of eligible and deserving employees.

Employee recognition can fill this gap. Many organisations need ways to institutionalise employee recognition and make it part of the organisation culture. The primary goal of a recognition programme is to express appreciation for the efforts and achievements of employees. Regular and frequent acknowledgement of employee contributions can be a powerful addition to an organisation’s reward strategy.

Recognition encompasses wide and varied tools from something as simple as a pat on the back to an institutionalised programme. While designing a recognition scheme, it is important to establish the linkage of the programme with the business strategy. This helps maintain clear line of sight of an individual or team’s contribution to the overall business objective. Next is to arrive at the “right” recognition tool. Undervaluing anyone’s contribution might just end up sabotaging the very purpose of the programme.

At the same time, managers need to guard against overstating an individual’s contribution. Cost is an important consideration as well. Managers typically struggle at arriving at the monetary value of a team member’s performance. The answer lies in setting realistic expectations or goals that can be quantified as financial results or increase in customer satisfaction.  Therefore, HR teams need to clearly articulate the purpose of the recognition programme, arrive at the linkage to business strategy, and design tools that are commensurate with the contribution.

There are various types of recognition programmes, formal or structured; informal and day-to-day recognition. Formal recognition programmes largely have defined guidelines, application and review process, are more infrequent and usually have fewer recipients with higher costs to the employer. Informal programmes have no defined timing, are more frequent and involve large groups of people. Contests, quiz competitions with prizes etc fall into this category. Usually these are driven towards a specific purpose such as idea generation, building consensus toward a particular goal and so on and so forth.

Day-to-day recognition programmes are tools that are available at a manager’s discretion and are largely a manager’s or co-worker’s acknowledgement of behaviour at work. These are highly personalized, immediate and are low/no cost items. Examples include a well done card or a pat on the back or a smiley face.

While driving and rewarding the right behaviour and performance in the organisation, a combination of monetary and non monetary rewards is effective. Monetary rewards must be linked with the total compensation and communicated as such as they tend to lose their sheen otherwise. It is important to balance risk while running incentive schemes that drive short term objectives and may not necessarily last over a period of time.  Non monetary rewards build a strong sense of culture and association.

However, it is worthwhile to note that public acknowledgement, recognition or a group appreciation email in India evokes a positive response. This approach may not be equally well received in The Netherlands. Interestingly, in India, lottery tickets or scratch cards with freebies manage to capture imagination while scratch cards are not considered appropriate in Sri Lanka. Therefore, while designing these schemes it is prudent to understand cultural nuances and make adaptations accordingly.

Instant recognition programme goes a long way and ensures you send positive signals about an individual’s performance. There are many forms of letting someone s/he is valued. Once such idea is the “Magic Kit” where a supervisor is provided a treasure kit that contains instant recognition tools such as a coffee coupon, meal vouchers, book coupons, well done and thank you cards. The idea is to build a certain element of flexibility and helping a manager use his discretion while recognizing the right behaviour and performance. Such programmes are easy to implement and cost effective while retaining essence of recognition.

Implementing, communicating and administering recognition programmes are equally important as these tend to lose their impact if not branded, communicated or executed well. At this stage it is also critical to identify success factors that will measure the impact of the recognition programme. Like any product, most programmes have a defined shelf life and these have to be revisited in terms of contour, construct and outcomes from time to time.

Lastly, any recognition programme runs into typical problems such as underutilisation, the value of the rewards, manager’s perceptions, being overly complex, inconsistent link with business goals and employee’s preference for higher cash in hand.

While some of these are probably cultural or contextual, half the battle is won in recognizing them and open communication ensures that these do not become show stoppers or derail from the objective of the recognition programme. Employees need to be educated that recognition is indeed part of the total reward concept and while not always quantifiable, it goes a long way in supplementing existing reward programmes.

Recognition along with learning and development opportunities and a great work environment constitute the other elements of a “total reward”. Unfortunately, these aspects are rarely tied in and communicated as lucidly leading to over reliance on traditional tools.

Ultimately, a programme that is designed keeping in mind the culture, context and seeks to reinforce the right behaviours in the organisation cannot go wrong if executed with right attitude and intention by the managers themselves. Carpe diem!

(The writer is Head – Talent, AEGON Religare Life Insurance)