Incentive vs. Recognition - What to use when - and why
It’s a phone call you probably get a few times a year. A potential client is on the line, and they’re looking for help with their annual recognition trip. When asked about the criteria for the trip, they respond, “it’s to reward our top performers for a great year.”
Your alarm bells start to go off. A few questions into your call, you learn that employees who hit specific benchmarks are invited to the company’s annual trip. What the client thinks is a “recognition” program, is in fact, an “incentive” programme.
What is the difference between incentive and recognition? Over the past decade, industry leaders have come to develope a more sophisticated understanding of how these tools can and should be used. Clients don’t always keep pace, creating an opportunity to educate them on the right strategies and tactics required to engage and motivate employees to achieve desired results
This primer offers an at-a-glance understanding of key terms, best practices and common misconceptions.
Incentive – defined before the preferred behaviour happens
Do this, get that – incentive fulfills a promise. If an employee reaches a pre-defined benchmark, they receive a pre-defined incentive, such as a physical or travel reward.
Incentive is an excellent way to drive behaviours, performance or results over a specific term – such as a promotional period, quarter or year. It’s a powerful way to get a team focused on new products, initiatives or strategies within the organization.
Like any sound business investment the use of incentive programmes to achieve critical business objectives must have proven value to the organisation. While “Return on Investment” continues to be a buzzword within the industry, the 2017 SITE Index found that fewer than 25% of buyers consistently measure the effectiveness of their programme – pointing to a significant growth opportunity.
The term “incentive” often gets tangled with “recognition.” Although there is a clear difference between the two, they are not mutually exclusive. Increasingly, organisations are embedding recognition within incentive programs as a way of reinforcing behaviors or performance that lead to better results.
Recognition – given after the preferred behavior has been demonstrated
The key characteristic of recognition is that it’s a surprise – whether that surprise comes in the form of announcing a name during an annual awards ceremony or recognizing an outstanding performance during everyday operations.
Leading organisations continue to build a “culture of recognition” with the development of a range of strategies and tactics. These include formal recognition through awards programs, informal peer-to-peer recognition through social platforms, and day-to-day reinforcement through verbal coaching and acknowledgement.
Organisations increasingly embrace the potential for recognition to build brands and grow business. A SHRM/Globoforce study found that companies that invest more than 1% of payroll on recognition 79% more likely to see better financial results. Recognition also has the opportunity to retain top employees. A study by Bersin & Associates reported 31% lower voluntary turnover in companies with recognition programs focused on improving employee engagement.
In organisations where recognition is a way of life, effective measurement that links recognition to employee engagement and performance has long been an aspiration. As tools to measure emotional health or recognition effectiveness are becoming more pervasive and sophisticated, so too is the ability to apply recognition solutions to every employee.
Recognition has commonly been bundled with “reward” to demonstrate appreciation for employees, but research shows that it’s often the “recognition” that serves as the key driver for performance. This is particularly true with millennial employees, who seek validation and relevance in work. In a Psychometrics study of employee engagement in the Canadian workplace, 58% of respondents replied, “Give recognition,” when asked what leaders could do more of to improve engagement.
Reward – A component of incentive and recognition.
Rewards are tangible things – from trips, to merchandise awards and gift cards. Rewards are commonly tied to incentive and recognition programs, serving as a reminder of an accomplishment.
Different rewards drive different behaviors and outcomes. Tailor reward selections to your audience. Make a point of selecting rewards that reflect the lifestyles and demographics of your audience so that participants feel a personal connection.
Rewards were once the standard for programs, but research is emerging that shows that recognition is in fact the preferred tactic. A study of 1,200 U.S. employees by Badgeville found that 83% of respondents found more fulfillment in recognition than rewards. A McKinsey study backs up the finding, reporting formal praise and commendation by a manager as a top motivator for performance, more so than financial incentives.
While rewards can still play an important role within incentive and recognition – don’t allow them to obscure the accomplishment itself. Employees remember a specific moment of recognition. Physical rewards can be forgotten over time. People want to work at an organization that values its employees. They want to feel appreciated. And it’s understandable because that’s a part of human nature: the need to feel validated for our hard work.