Why Do Continuous Rewards and Recognition in the Workplace Work?
Motivating employees is one of the most important, and costly, HR activities. It involves the guidance and oversight of finance and HR, plus it needs managers and department heads on the ground to report on performance. Annual pay rises or bonuses are a heavy overhead for companies so they can’t afford to get it wrong. Unfortunately, many today still are.
Out of the dust, however, is rising a new rewards and recognition process in the workplace. Continuous rewards and recognition such as spot awards are becoming increasingly popular, and it’s easy to see why.
Why are Businesses Using Continuous Rewards & Recognition at the Workplace?
HR professionals are no longer seeing the same boost in productivity that traditional pay for performance models have had in the past. In a recent survey, only half said that their annual incentive programs were still effectively improving performance levels. While annual bonuses might still provide some motivation to employees, they are clearly no longer enough on their own to outweigh the costs.
It’s not just HR professionals that are finding the traditional methods lacking. Employees have also become disillusioned with the annual payout. Most employees don’t even understand the link between their performance and pay and many lose sight of achievements from earlier in the year. With HR professionals no longer feeling like their annual bonuses are truly reflective of employee performance, it stands to reason that employees won’t see the connection either. This can mean that some employees see others getting the same annual bonus or recognition for less work, while others have come to expect the annual bonus as a certainty rather than something that is earned.
With both management and the workforce finding traditional annual bonus strategies lacking, many HR professionals have turned to alternative pay-for-performance methods. Unsurprisingly, continuous rewards and recognition methods like spot awards have come out on top.
Employees Prefer Continuous Rewards & Recognition
Demographically, the workforce is changing and so are their needs. Recent research has found that the new generation of workers, Millenial and Gen Z employees, prefer to be rewarded and recognised for their achievements at least monthly. That’s much more frequent than traditional annual bonus methods and demands a more continuous system.
Performance Management is Changing
Many top companies are also changing the way they measure performance. For a while now it has become clear that traditional annual performance reviews are no longer the most effective way of tracking and measuring performance. More frequent performance reviews, where ongoing success can be recognised closer to the time of achievements and managers can work more closely with employees to set goals and track when and how often they meet them, are becoming increasingly popular. This type of continuous performance management has proven to be much more effective at accurately recording and tracking employee performance.
A true pay-for-performance culture is still understandably the most desired and for good reason. Distributing rewards and bonuses that are more reflective of actual performance makes better use of budgets and employees benefit from a fairer system that accurately recognises the top talent. It stands to reason then that with performance management changing, the way that performance is rewarded needs to change to.
Continuous rewards and recognition models at the workplace are a natural fit for the new performance management system. With more frequent reviews and progress reports, managers can naturally review achievements closer to when they happen and reward then and there rather than trying to cover it later in an annual bonus.
The Workforce is Changing
It’s not just changing demographics that make continuous reward models a better approach. The workforce and the roles within it are changing too. Transient workers, including temporary and part-time employees or even employees that work from home or abroad are becoming an integral part of the workforce. These types of workers are often essential to the success of a company and key to reaching business goals and achievements, for example, skilled temporary staff that helps to get the project over the line on time, yet they often aren’t covered in the annual bonus system.
For a company to continue to get the best out of this new workforce and motivate them in the same way they do full-time workers to improve productivity, they need to be recognised and rewarded too. When these types of workers might not be on the payroll in the same way or may even be gone by the time annual bonuses come around, a continuous reward and recognition approach is the only effective solution.
Accurately Reward Your Top Talent
Rewarding employees at the time of their achievements means you more accurately recognise those that are genuinely performing well. Managers won’t lose sight of employee achievements from earlier in the year and employees won’t feel like their hard work has gone unnoticed. It’s also a much more personal approach to performance and rewards, making employees feel recognised individually rather than just another number in the grand annual bonus plan which can ultimately be much more motivating.
The Technology Supports it
Continuous rewards and recognition methods are becoming so popular now because the technology is finally there to support it. Spot awards are not necessarily a new concept but they have previously been difficult to implement. Even annual bonuses can take an extraordinary amount of time and resources to organise, so managing frequent rewards and payments throughout the year across the organisation is near impossible for companies operating with an Excel spreadsheet. Annual reward methods have remained as such because of necessity rather than anything else.
Today, the rise of superior cloud-based compensation and HR solutions means businesses finally have the power to accurately and easily manage whatever rewards system they think is best. With solutions like SuccessFactors Compensation, companies can easily and efficiently manage the entire rewards and recognition process even for spot awards from integrating goals through to payouts and approvals. HR can set clear guidelines and benchmarks for the goals and achievements that qualify for rewards, finance can set out budgets across the company, departments, and teams, while managers have the autonomy to recognise and reward employees within these parameters.
Replacing Annual Bonuses?
Continuous rewards and recognition in the workplace clearly have a place within businesses but that doesn’t mean they have to completely replace annual bonuses. For years, annual reward methods have worked and they still provide a type of recognition that employees recognise and are motivated by. Continuous methods like spot awards can supplement your traditional annual system and can even help in making better decisions when it comes time for yearly bonuses. If you’re ready to start including spot awards in your compensation strategy then you need the right technology to be able to do so.
Talk to us today to see how SuccessFactors can help you manage the whole process from more accurately tracking and recognising employee performance to managing budgets with improved cost-efficiency plus all the analytics you need to help forecast and improve your strategy.