The annual study from the Incentive Research Foundation reveals an optimistic outlook for rewards and recognition in 2024.
By Debbie Bolla
Organizations understand the value that incentive and recognition programs bring to company culture and workforce engagement. According to the Incentive Research Foundation’s new Industry Outlook for 2024, budgets are expected to increase this year even with challenging market forces, including economic uncertainty, inflation, and a tight labor market.
“Companies are recognizing the shift that’s happened in the market and the impact that’s had on their ability to attract and retain good talent,” explains Stephanie Harris, president of the Incentive Research Foundation. “A high percentage of workplaces have gone hybrid, so employees are in the office far less than they were a few years ago. Resignation rates remain high and there’s a lot of competition for good talent.”
So now is the time for HR to double down on the employee experience. “It’s really challenging to build and maintain a culture of engagement but it’s more important than ever. Employers are using all the tools in their arsenals, and rewards and recognition are a great way to motivate and engage employees,” she says.
Even with an uncertain economic environment, 37% of North American respondents say their budgets will go up across all spend categories, with gift card and program technology seeing the biggest bump, according to 41% respectively. Organizations are also anticipating additional investment in merchandise rewards this year, driven by an increase in budget with 42% of North American and 43% of European respondents agreeing. For gift card budgets, it’s even higher, with 52% of North American respondents and 51% of Europeans forecasting an increase.
“Employers are using a lot of different types of incentives and tailoring them to their audience and context,” says Harris. “What we see in the market is that organizations are using multiple types of incentives to engage their employees, and tailoring their approaches based on the context and audience.”
It’s not surprising that gift card budgets have the largest anticipated increase since they provide both flexibility and that immediate gratification that employees crave. “For everyday rewards, gift cards and awards programs are better options. They’re immediate and effective engagement tools,” she explains. “Gift cards and award points encourage people to splurge, guilt-free, on something they may not be ready to buy otherwise, which creates that memorability we’re looking for. Employees have a strong preference for these types of rewards because they provide flexibility and choice, allowing them to use those rewards in the way that’s most appealing and meaningful to them.”
What do stakeholders consider when designing non-cash reward and recognition programs? Topping the list is company financial forecast with 88% of North American and 84% of European respondents in agreement. Competitor programs also influence design considerations, according to 66% U.S. and 71% European respondents.
The desired result is also a critical consideration to design and creation. “It’s also important to talk about the design and management of these reward and recognition programs – that’s crucial to driving engagement and achieving the anticipated result,” says Harris.
And much of this comes from having a good handle on employee needs and drivers of motivation. “Companies need to design the program to be relevant and compelling to the target audience, so understanding your employees is critical. Then you’ll need ongoing communication to keep attention and enthusiasm high. The most successful programs are imbedded into the day-to-day work of the company and reinforced by leaders, managers, and teams until it becomes just part of the way they work,” she says.
The Industry Outlook for 2024 shows that both North America and Europe are trending toward optimism for their incentives programs in the upcoming year.
“There’s a reason so many organizations are trying to create a ‘culture of recognition.’ It’s so important that employees feel seen, that their contribution has value to the company,” explains Harris. “Recognition and rewards are highly effective way to create that experience for all employees and helps them understand their efforts are noticed and appreciated by leadership, their teams, and their peers.”
The IRF’s survey, which for the third year included both North American and European respondents, was conducted in October 2023.