The Case for Employee Recognition. Build Your Case for an Employee Recognition Strategy

Transcription

1 The Case for Employee Recognition Build Your Case for an Employee Recognition Strategy

2 The Modern Workforce and Changing Workplace Organizations Now Complement Hierarchy with Cross-Functionality As organizations become flatter, today s employees have more opportunities to collaborate and thrive. Employees have more accountability and opportunities to take ownership and collaborate cross-functionally. The Evolution of Cross-Functional Companies: Yesterday Hierarchical Top down Information on a need to know basis Status and rank determine control Recognition is ad hoc and disconnected Today Authority broadly delegated Collaborative and bottom up Open information flow Status and rank are not key factors Everyone recognizes each other s successes A Dearth of Skilled Employees Will Intensify the War for Talent The war for talent is on. Successfully recruiting and retaining top talent has become a major competitive differentiator. With unemployment hovering at one of the lowest rates in the last 40 years, a continued shortage in skilled workers is being predicted for the foreseeable future. 1 A recent report from the Conference Board cited the following demographic and economic factors for this extreme tightening of the skilled labor market, including: Baby Boomers are retiring faster than young workers can replace them, especially in the skilled trades, manufacturing and health care. As unemployment levels have fallen, so has worker productivity, meaning that labor shortages are unlikely to be offset by increased automation and other labor-saving technology. Business conditions, such as slow corporate revenue growth, high labor costs, and rising employee attrition, are likely to heighten the impact of labor shortages over the next 15 years. 2

3 Millennials are Taking Over the Workforce In 2014, Millennials made up approximately 1/3 of the workforce. By 2018, that number will have increased to 50%. 3 This generation is unique, and as such, presents unique challenges for top employers looking to attract and retain them. Frequent feedback, open communications, collaborative work environments, and having a clear sense of purpose are key engagement drivers for this group % of the workforce are Millennials % of the workforce are Millennials Gen Y is fast-becoming the majority of the workforce : Baby Boomers reach retirement age 2030: Gen X reaches retirement age Millions Ages : Gen X ches retirement age : Gen Y makes up half of the working age population Pre Bab 25 Ge 18: Gen Y kes up half of the rking age population Ge Pre-Boomers Baby Boomers Generation X Generation Y and beyond

4 Customer Centricity is the Rule Today the customer is in complete control. Companies that prioritize the customer experience will prevail, as they generate 60 percent higher profits than their competitors by doing so. 4 Your employees are ultimately responsible for creating repeat customers so you must empower them to OWN the customer experience. Adapting to the modern workforce and changing workplace is critical to long-term business success. The foundation for new strategies begins with focusing on your employees and prioritizing what needs to change based on the reality of this new talent landscape. You ll be set for success if you create a future-focused recognition strategy to engage and align employees. Companies Face New Challenges to Inspire All Employees Especially Outside the Office Understanding how to keep your remote employees engaged, aligned, and recognized will be paramount to business success. Knowledge and service employees can work anywhere even outside the office. Remote employees aren t just an extension of your team; they are your team and they expect flexibility within their work environment. Cubicles are quickly being left behind as we shift to a mobile workplace. The Mobile Workplace 1 in 5 people own a smart phone today 5 76% of businesses say mobile devices increased employee responsiveness and decisionmaking speed 6 By 2017, 90% of enterprise apps will be both desktop and mobile, up from 20% in

5 Recognition catalyzes engagement and alignment Employee recognition helps companies align employees to business objectives by reinforcing behaviors tied to corporate results. And it solidifies employees emotional connection with your company, making them more engaged. Recognition is a catalyst for engagement and alignment. These are the three ingredients to drive remarkable business success every single day. That s because engaged, aligned, and recognized employees will work harder to satisfy your customers, and in turn create greater shareholder value. Otherwise known as the service-profit chain, employee engagement and customer loyalty are inextricably linked. These employees have been given the development and tools to delight the customer and deliver exemplary service that creates repeat business. This translates to higher revenue growth and profitability. Strong employee alignment requires that all employees get the big picture. Only 37 percent of employees have a clear understanding of what their organization is trying to achieve and why. 8 Employees need to understand how they directly impact your business success for their jobs to feel valuable. Alignment is dependent on communicating your business objectives and core company values across the company. Recognizing employees for living your core values every day helps to connect employees with the bigger picture and purpose, and reinforces the right behaviors for your company. Make sure employees understand the behaviors being measured and why. This requires frequent and effective communication, especially from managers to employees. Organizations that have leaders who are highly effective communicators have 47 percent higher total shareholder return. 9 If you reinforce desired behaviors with positive feedback, they will be repeated. Engagement and alignment are the invaluable results of employee recognition. Recognition makes it possible to better leverage your best resource your people.

6 According to a recent Harvard Business Review Report, When asked, Which factors are most critical to improving employee engagement? almost three-quarters of respondents chose recognition given for high performers as their top choice, followed by individuals have clear understanding of how job contributes to strategy and senior leadership continually updates/communicates strategy and business goals communicated company-wide and understood. Before digging in to define your recognition strategy, considering how to frame the plan for senior management will go a long way to secure buy-in. 71% of respondents rank employee engagement as very important to achieving overall organizational success % of respondents rank recognition given for high performers as having a significant impact on employee engagement. 11

7 Securing senior management buy-in When senior leaders are actively involved in employee recognition, companies are nine times more likely to have strong business results. 12 Everybody wins. They re probably reluctant to admit it, but your C-level executives view your employees as your number one cost. And they re right. They also think in quarters, semi-annual, or annual timeframes, while employees work hourly and daily. However, your executives will warm up to employee recognition if you speak the same language: using data. That will mean ROI for financial leaders, customer satisfaction for sales leaders, and engagement for HR. Provide evidence of the outcomes that can be achieved from a recognition strategy that engages and aligns employees. 1. Present the ROI on engaged workplaces: Comparative Annualized Stock Market Returns 13 ( ) A recent study from a Russell Investment Group report identified a significant market increase over a fifteen year period between FORTUNE Magazine s 100 Best Companies to Work For list versus the S&P 500 and Russell FORTUNE s list is comprised of employers that offer dream workplaces, and are measured on employee satisfaction scores. There s no denying it, Fortune 100 Best Companies perform more than two times better than the general market. 10.8% Best Companies perform more than 2x better than the general market 4.5% FORTUNE 100 Best Companies to Work For S&P 500

8 2. Share the impact of employee engagement on financial performance: Engaged employees perform 20 percent better and are 87 percent less likely to leave their organizations. 14 And organizations with high engagement rates are 78 percent more productive and 40 percent more profitable than those organizations with low levels of engagement. 15 Impact of Employee Engagement on Financial Performance % 13.7% 27.8% -32.7% -3.8% -11.2% 12 month change in operating income 12 month net income growth rate 12 month EPS growth rate High employee engagement Low employee engagement 3. Show how recognition has a strong impact on employees: There is a negative correlation between the effectiveness of a recognition program and employee turnover rates. Research suggests that the less effective a recognition program is, the higher the employee turnover rate will be. Companies with poor recognition programs have 3.3% higher turnover rates than companies with Excellent recognition programs. Furthermore, recognition can reduce voluntary turnover by up to 31.4%. Voluntary Turnover 17 Rate % reduction in voluntary turnover 7.2% 8.7% 10.5% Excellent (5) Fair (3-4) Poor (1-2) Effectiveness of recognition programs at improving employee engagement. 75% of employees receiving at least monthly recognition (even if informal) are satisfied with their job. 19

9 Employee Recognition Impacts Engagement Meridian Credit Union Meridian Credit Union, with $8 billion in assets, saw measurable, positive business impact when they implemented an Achievers Employee Success Platform to engage, align, and recognize their workforce. The company serves more than 260,000 customers, has 63 branches and eight commercial business centers. The firm fully believes that the greatest leading indicator of success is employee engagement. In 2009, administrative and management costs of running their homegrown recognition program were greatly reduced by implementing the Achievers Employee Success Platform. Analyzing the impact of engagement by comparing the top and bottom quartile of engaged employees showed that each highly engaged employee (top quartile) was responsible for over $2 million in growth, while each of the least engaged employee (bottom quartile) were responsible for $1.29 million. The most engaged employee was solely responsible for a 4.7 percent increase in the company s client-base, while the least engaged employee was responsible for just over 1 percent. Meridian s operating margins increased over 10 percent for employees within the top quartile of engagement. On the other hand, the bottom quartile of engaged employees caused -1.2 percent in operating margin growth. and alignment every day. You ll build your reputation as a top employer and attract the best talent. So what should you do next? Make your case.

10 The investment you have today in recognition or rewards can be better spent and deliver more impact and ROI. Gather relevant information about your company and ask questions. Survey employees to determine whether you have low or average engagement scores. Present the findings to your executives and show them you can reduce your company s costs and have a positive impact on the results that matter most, revealing the ROI of employee recognition. Engaged employees were the key drivers of success for Meridian s improved financial results. Their recognition program was responsible for driving the behaviors that created better alignment and improved business performance. Your Next Move An employee recognition strategy that has buy-in from senior leaders can transform your company by creating a culture of recognition that promotes strong engagement.

11 The Achievers Employee Recognition and Rewards Solution provides companies with a robust foundation for their employee engagement initiatives which enables both social and rewardsbased recognition. It s built to align everyone with business objectives and company values, fueled by recognizing and rewarding shared victories every day. 95 % 93 % 84 % Recognitions Per Member Per Year Learn how your company can change the way the world wor ks at 1 Bureau of Labor Statistics, October The Conference Board, Help Wanted: What Looming Labor Shortages Mean for Your Business, April, Kelly Global Workforce Index: Employee Engagement and Retention, Kelly OCG, Feb Gartner Group. Leading on the Edge of Chaos. Web. 10 Feb Heggesteun, John. One In Every 5 People In the World Own a Smart Phone, Business Insider. 15 Dec Web. 10 Feb The Expanding Role of Mobility in the Workplace. Forrester Research for Cisco Systems. Feb Web. 10 Feb Predicts 2012: Four Forces Combine to Transform the IT Landscape. Gartner. 9 Dec Web. 10 Feb Covey, Stephen. The 8th Habit: From Effectiveness to Greatness. Free Press Web. 10 Feb Capitalizing on Effective Communication: How Courage, Innovation and Discipline Drive Business Results in Challenges Times. Towers Watson Web. Feb Harvard Business Review The Impact of Employee Engagement on Performance, ibid 12 Garr, Stacia. High-impact Performance Management: Five Best Practices to Make Recognition and Rewards Meaningful. Bersin by Deloitte Web. Feb Moore, Tara. Investing in the 100 Best Beats the Market, Hands Down. CNN Money. Jan Web. Feb Haydon, Reese. Show Me the Money: the Bottom Line Impact of Employee Engagement. TLNT: the business of HR. 11 Jun Web. 10 Feb What Makes a Company a Best Employer? Hewitt Associates Web. 10 Feb Towers Watson. Engagement at Risk: Driving Strong Performance in a Volatile Global Environment. Towers Watson Global Workforce Study Web. Feb Achievers customer base retention for FY Average survey rating by Achievers customer program members, Q Q BambooHR. Reward and Recognition: What s Really Driving Employee Engagement and Career Advancement. Web. 20 Apr Average employee activation rate across all Achievers customer programs, 2015