Four CEOs share their vision for the future of employee rewards and recognition.
By Elliot Clark
As I wrote this feature article on the rewards and recognition portion of the HR services and technology industry, I was reminded of a college seminar I took on geology and ecology. I remember the professor talking about change and comparing the terraforming effects of glaciers that move, well, glacially, to volcanos that make change happen violently. The COVID-19 pandemic is the metaphorical volcano in the world of HR policy. I wonder what the outcome would have been if organizations had gradually adopted a more flexible approach to remote working instead of the violent upheaval caused by COVID-19 that continues to the start of this new year.
When we first planned this article, the intent was to show the value of spending on recognition programs and demonstrate their importance in turbulent times. But the value is already being seen in the HR community, with executive leadership teams of many global companies increasing spend on rewards and recognition even as their budgets are reduced. After all, most HR budgets are viewed as a general and administrative expense and are subject to cost cutting in “Ye Old Playbook of Managing Economic Downturns.” There seems to an overwhelming “recognition” that these aspects of HR policy and programming are integral to engaging, retaining, motivating, and acculturating workers in both congregate and remote work settings.
What is the future of this important part of the employee experience? I asked four CEOs what changes they predict and what they envision for the future of their industry. Each CEO leads a highly-rated firm on our Baker’s Dozen Customer Satisfaction Ratings for recognition, and all are among the largest market leaders.
Our experts include:
- Jeffrey Cates, CEO of Achievers;
- Alex Alaminos, CEO of Madison Performance Group;
- David Petersen, CEO of O.C. Tanner; and
- Eric Mosley, CEO of Workhuman.
I want to thank each of these industry leaders for taking the time to share their wisdom, their perspectives on the challenges facing HR and society, and their vision of the role that employee recognition plays in managing culture and motivating and engaging the workforce. While there were some differences in viewpoints which are reflected in their product offerings, there was convergence around several topics.
HRO Today: Do you think that HR and executive groups are becoming more sophisticated in their approach to rewards and recognition? Is the market changing at all from the HR perspective?
Cates: The category itself is, I think, maturing. It moved from a rewards-based system between 2013 and 2015 to more of a recognition-based system. You can see that companies are starting to recognize that rewards matter, but frequent recognition is a game changer.
A lot of our work with our current customers is doing data analytics projects to show that recognition equals higher productivity or higher likelihood of showing up for your shift. But it has to have that nuance that it’s not your old recognition system—it’s not your rewards system. You have to embrace full-on recognition systems that drive top-down, peer-to-peer engagement.
Alaminos: Within our client base, which ranges anywhere from 5,000 employees all the way to half a million, we do see some organizations that want to be more strategic; that want to think out of the box; that like to make sure that the tools that they’re offering their employees are intuitive, state-of-the-art, and personalized for their experiences and how they themselves navigate the web.
We are starting to see a larger client base looking at the software as a service (SaaS) product as something that needs to continue to evolve—needs to offer its employees a better experience—and as a result of that, we have drawn our road map to accommodate our clients’ changing needs. The issue that I see is that talent management teams, while they have their minds in the right place, are sometimes governed by organizations that are not ready to make that move, and it makes the program feel like an afterthought.
But I’ve seen a couple really positive signs that have come out of the negative experience that we’re going through with COVID. I’ve seen most of the companies we work with today not decrease but increase their funding to make sure that their employees are supported as they transition to 100% remote and scenarios that put them in a less than favorable work environment at home with family and kids.
Petersen: I think there’s a continuum. Companies, like people, are aspirational, and on one end of the continuum are companies that are very tuned in to their corporate culture and their employee engagement. So, they’re very strategic with their mindset and they’re very high-level focused in terms of what they want to accomplish with their culture strategy and their recognition strategy.
In the middle of the spectrum would be companies that have a mandate or a goal from leadership to solve a problem or make some progress in an area, and they attend a conference or bring on board a new HR leader and realize they can do better in the area of culture and recognition.
And then at the far, far end of that spectrum might be companies that are a little more transactional. I think those are fewer today than ever. More and more companies are much more strategic in what they’re trying to accomplish.
Mosley: Well, there are definitely different categories of companies in how they approach recognition. What we’re seeing is a trend towards a more sophisticated, data-driven view of recognition. There’s a number of trends happening out there, and there’s this overall move towards a more social enterprise—a more human workplace that’s putting the human at the center of needs in a company. Leaders are trying to motivate and inspire their employees, but also get them to motivate and inspire each other. And that’s something that we’re seeing develop more and more. There’ll always be the laggards who are very much focused on a checkbox type program, but they’re becoming less and less as each year passes.
This is driven by the education of the market around the power of recognition programs but also because of the data that comes from these recognition programs—how recognition can fuel other business decisions and practices. We’ve seen that companies who’ve increased their investment in recognition by 10% will show a higher productivity of over $3,000 per employee per year. So, if you’re a 15,000-employee company, that’s an annual increase in productivity between $50 and $60 million.
HRO Today: How can reward and recognition programs help manage the attitude and behaviors of remote workers?
Cates: What we’re seeing among customers who are on our platform is that overall recognition from management is up 10% and “boost,” which is the ability to pile onto somebody else’s recognition, is up close to 15%. That’s usually executives piling on to a manager’s recognition. So, you can really see managers have embraced the platform to augment or replace whatever they were doing before remote work.
What we’re hearing from customers is they now understand the power of doing it on a platform. One, because you’re anchoring it back to values, which has a long-term effect. And two, because it has high impressions. When somebody else sees their colleague got rewarded or recognized for a particular behavior, not only have you reinforced it with that individual, you have reinforced it with many people because you have high impressions on that recognition. And so, the feedback we’re getting from managers is that this is even more impactful. It started with them having to really shift their paradigms of how they would recognize people in the past.
Alaminos: There are more eyes on data and there is a larger appetite to invest in rewards and recognition instead of canceling or reducing it, which we typically see in a downturn economic environment. We are already starting to see organizations that have made significant changes quickly and also communicated those changes to their management to make sure that recognition is happening in a timely manner, that people are being recognized for new behaviors, and that they’re driving their internal strategy for their talent while they’re working in a very different environment.
I originally thought that COVID would have a negative impact in the rewards and recognition space, and it’s been quite the opposite.
Petersen: The journey we had already been on has prepared us well for this, and it’s going to be a continuation. We tend to think of employees as being at work in an office, but that’s really not the case. Many times, we have flight attendants at work 30,000 feet above us. We have skilled workers on an oil rig out in the middle of the Gulf. We have people in the service industry and the way they are tethered to their company is through a mobile device. And so, much of our technology work in the years leading up to COVID has been focused on how to leverage that mobile technology to make recognition very personal, very real-time, very immediate, and to really expand and improve the employee experience through that technology. I think that’s probably going to continue with this transition to remote work.
Mosley: First of all, there’s been so much change in the last eight months, it’s just been unbelievable. In the initial stages, everybody was talking about working from home forever because now, people know how flexible it is. Productivity did go up initially.
But what happened over the summer months and into September and October is people realized that productivity started dropping, and also, culture started to ebb away in these companies because the interaction of employees was so much more superficial and transactional in a work-from-home world.
That’s one of the reasons why we saw a surge over the summer in our business. Leadership in these companies wanted employees to interact emotionally and in a way that deepened relationships. When somebody gives somebody an award or a thank you for some work, they’re both uplifted and the relationship between them is deepened. When you do that tens of thousands of times across a company in a year, the social fabric and infrastructure of relationships in a company grows deeper.
HRO Today: What do you see is the future role of rewards and recognition for contingent workers?
Cates: In general, you don’t see a lot of companies with contingent talent on monetary rewards, but they will potentially put them on a non-monetary, social recognition program. And I think that’s really important. You have to decide what’s right for you in your particular state or country, but just because you can’t give contingent workers monetary recognition (because that would be perceived as a benefit) doesn’t mean you shouldn’t do behavior-changing recognition. And so, I think it matters even more that they’re embracing a recognition system that drives consistent behaviors across the organization and they’re able to unite employees together under that system.
Alaminos: We have one case study that has addressed this recently. One client has a large contingent contract labor force on top of their enormous employee force. Company policy has always prohibited contract labor from being part of the recognition program, but in the last two months, they’ve actually opened that up. We’ve now structured and configured a solution that allows contract labor to receive recognitions monetarily and non-monetarily, and they can contribute to non-monetary recognitions within the solution.
In the future, we are likely going to see more and more organizations leverage contract or contingent labor. We’re seeing an increase in discretionary funding for recognition programs and we are seeing signs of contingent workers coming into the mix and being part of the recognition strategy. This is almost uncharted territory, but more accurately reflects the modern workforce and I think the trend will continue.
Petersen: I think that we’re going to see, not just in the gig economy space but elsewhere, opportunities for recognition and appreciation from the customer towards the gig provider. I think it’s going to be a little more like some of the loyalty programs that banks and retail establishments have with their customers, only it might go the other direction where there will be ubiquitous recognition opportunities for people to appreciate their server or their Lyft or Uber driver or the musician they hired to perform at an event.
Mosley: It’s a big topic. In the last 10 years, it’s always been more of a legal topic than anything else because of litigation issues. But these days, I find that it’s purely an administrative challenge. It’s difficult—a lot of times, companies don’t even have a central database of their employees, so it’s a technical and administrative barrier to include gig workers in a recognition program.
But more and more companies are, and the reason why they do is because they might legally be contractors, but they’re part of the team. From a social perspective, they’re the same colleagues as everybody else. They are part of the culture and they need to be motivated and inspired just like everybody else. Their legal and financial ties to the company are just under a different framework.
HRO Today: Many HR executives see recognition as a budget item that can be cut or canceled, while workers see rewards as a form of variable, performance-based compensation. Why doesn’t HR see rewards as compensation?
Cates: In our system, although people can choose what they want in terms of dollars or points, we normally execute at small dollar amounts so it doesn’t overpower the recognition or feel like a bonus. At the beginning of the pandemic, we saw that a lot of companies that were furloughing employees or were in dire straits turned off points and went to social recognition only. Then in the third quarter, they all turned points back on again, and in the fourth quarter, they did major points uploads to offset the holiday party and things like that.
Fundamentally, HR leaders need to make sure that they don’t cross the lines here. Be careful not to use your recognition system and turn it into a large comp system, because you’ve lost the power of influencing behavior every day if you’re using it to dole out large amounts of money once a year. If you use it that way, you will lose the power of the day-to-day, behavior-influencing recognition system.
Alaminos: Interestingly enough, they do. But they don’t see it as part of everyday compensation. They may cut recognition programs as a strategy to avoid having to lay off more workers and retain a higher level of headcount, but any HR executive still sees rewards and recognition as part of compensation—it’s just not to the level of base pay, variable pay, and health benefits. It has never been, and I don’t see that as the case even in the future.
Employers who cut recognition programs are speaking out of both sides of their mouth—they say that that rewards are absolutely compensation as part of the total cash and non-cash payments that they give employees, but it’s the first thing that goes away. It’s unfortunate but that’s what we see happen time and time again. But we believe that in the wake of this pandemic, many companies have a more enlightened understanding of the importance of these programs that bodes well for the future.
Petersen: I think there’s a good understanding between employers and employees about the financial rewards, whether it’s year-end bonuses or project completion bonuses. I think that’s very much seen as compensation.
The accumulation of points for terrific work, however it’s measured and rewarded over time, where people save up their points and redeem them for something significant—I could see that being viewed as a form of compensation, especially if it’s taken away.
There are, however, some limits to that in most states—and I don’t know if this is an international application. Once points are awarded, they’re owned by the employee and they can’t be taken away.
Mosley: How a lot of our customers budget for recognition is they earmark 1% of total payroll. That’s quite different from just having a million-dollar budget. When you start to view it as a percentage of your payroll strategy, basically what you’re saying is that for an employee, 99% of what they earn will come from their company and the manager deciding what they get, but 1% of the value they receive will come from their colleagues and peers. It’s a very modern approach to recognition. Basically, you’re delegating some of the decisions about pay and value to the employee base and you’re saying, here’s 1% of our payroll—give it to each other. It is a more social approach to payroll. And we definitely see that trend accelerating.
HRO Today: There are some recognition providers that are platform, software-driven companies while others are more driven on traditional rewards catalogs. Which model of recognition will be the future of the industry, or will both continue to exist?
Cates: I’d say the industry is in evolution. We are largely focused on active usage by our clients’ employees and driving outcomes for clients.
There’s a reason why our active usage is so high. It’s not just because we’re constantly innovating on how we solve more problems for the employee and manager, it’s also because our whole service model is about driving active usage. Fundamentally, what matters is the business outcomes. Engagement scores have a high affiliation with stock prices, profit, revenue, and attrition—things that are linked to the behaviors that recognition drives. As companies really focus on their business outcomes, they should partner with service providers that also care about driving outcomes, driving active usage, and innovating to drive usage.
The area that I believe will grow is the one that anchors around high active usage driving business outcomes rather than finding unique ways to give away pins, pens, and trophies on an anniversary date. That doesn’t really drive behavior. It does make you feel gratitude, but what you really want to drive is behavior, and behavior is driven through frequent recognition that’s specific and tailored to the individual. Anniversary awards aren’t bad things, but if you have a budget and you’re putting all your budget into a low impact anniversary award instead of a solution that drives behavior every day, then I’d say you’re making the wrong choice.
Alaminos: Software as a service is not just software. If you’re looking for a provider that is heavily reliant on one and not the other, this will fail. And all things considered, the gift cards and trophies and merchandise are really secondary—that’s what we’ve been doing for four decades. Most of these organizations do it very easily. It goes back to what the buyer is interested in—the level of sophistication of the buyer. If the buyer wants to focus on gift card offerings or trophies and certificates, that’s a buyer that still exists in the market and there is still a place to sell to that type of buyer.
But the reality today is organizations that really want to change their employee base and drive significant value have to leverage SaaS, have to leverage a provider that offers the level of dedicated service, and all the other things come through there. So, it’s still a fragmented market. Some organizations have driven a lot of change in this industry, focusing on the need to decouple the focus of rewards and instead, focus on recognition to drive profits, to retain talent, and to engage employees—and I would love to say that organizations that are still selling gifts and merchandise and trophies are going to go by the wayside. Buyers should be looking at this as a business-changing tool to drive analytics, model what you need to do in the future, and understand how your employees are perceiving and driving the changes you want in the organization.
Petersen: I think it’s moving more toward ever-greater use of the technology to enhance the user experience. There’s an emotional moment where an employee either really feels or doesn’t feel noticed and recognized. That is inspiring, that is encouraging, that is human, that is cultural. You can do that in a way where it feels like a transaction with no real meaning or real feeling—just sort of a check-the-box approach—or you can do it in a way where it is really impactful and it causes the person to really feel a part of something bigger and makes them want to do it again.
We think the technology has made it possible for there to be more of those emotional touchpoints along the way. We see the technology as becoming more and more important, but not for the sake of technology—for the sake of doing the job better, for accomplishing the purpose of the strategy even more regularly and more completely.
There are still companies out there that really strongly want to have something tangible to present, and there are those who rely on the technology to really make the emotion and messaging pop. And I think both will be with us for quite some time, and it is somewhat industry dependent.
Mosley: What we see developing is that companies just want a vibrant program with a lot of choice and a lot of different options in terms of not only merchandise, but also different experiences and vehicles, like charitable donations or travel. You have to meet employees where they are. The modern consumer is used to a certain level of service and a certain level of experience, and that’s what they will ultimately want to redeem their points for.
I think those older style programs that offer things like plaques and pins are mostly done. They’ve mostly been replaced by tangible experiences where people can bank awards to build up credit so they can have even bigger experiences with their family. And I think that’s where it’s starting to evolve to.
The choice of model is going to have to reflect the move from command-and-control style management to a more social, democratized form of employee motivation where it’s less about a manager saying, “if you do x, I’ll give you y,” and it’s more about a focused, motivated team of people moving towards a singular mission and them being inspired by each other and making sure that they feel appreciated along that path.
HRO Today: How will the gravitation toward data science, analytics, and artificial intelligence (AI) impact the rewards and recognition industry? What are you doing to prepare for these changes?
Cates: There is conversational user interface (UI) and advanced analytics to drive insights across platforms, there is natural language processing (NLP) to actually influence real-time coaching, and there is behavioral science to hyper-personalize recognition for impact.
Regarding conversational UI, I think that’s far out in terms of being mainstream, but you’ll see us innovate so that if you’re driving a car and you want to be able to send a recognition, you’ll be able to do something light relatively easily.
On the data analytics side, we’re very much focused on connecting to other platforms so that we can leverage their data and they can leverage ours. We also have to find ways to give organizations insights into different cuts of employee data to understand the full experience of the different segments of their workforce.
And, the last one is how do you bring behavioral data into the application to actually be able to identify an employee’s behavioral style and preferred recognition method? If you know what an employee’s behavioral style is, you can actually be more impactful in how you’re recognizing or rewarding them. Now, we can actually coach real time on the employee experience platform based on that data. I think that’s a real game changer for building better people leaders in the interest of helping create better connectedness and belonging.
Alaminos: I think our solution and what’s available in the marketplace has all the bells and whistles that are required from an employee and manager perspective. We have AI items on our road map that enable the user to be able to speak to our solution through an app. We’ve looked into robotics that allow an easier user experience, but that’s not the direction I think the industry needs to go in.
There is a lot of data that we’re mining for companies and most of our larger clients take that data to model internally versus using even our own reporting solutions. Larger organizations have everything at their disposal—they’re looking for dumps of data that they can analyze internally and then come back and say, “these are the things we’re seeing and these are the changes we want to make.”
I love the concept of social recognition; however, unfortunately, I can tell you that many of our clients, depending on where they are located around the world, can’t use it. They are turning it off every day in Europe because of data privacy. So, while social recognition is wonderful and it becomes a great selling tool for all organizations that leverage it and have it in their solution, there are governing laws in the world that will prevent certain countries from using it because of data privacy concerns. That has to be fixed in the regulations to allow the full potential of some of these innovations to be of maximum benefit.
Petersen: Well, it is influencing our strategy. We do have data scientists and experts in the field of AI as part of our technology teams. You might be surprised to know that the majority of our revenues come from non-traditional rewards rather than the old school catalog. Whether it’s use of bots or AI or data scientific-related activities, these are all going to find their place in impacting and improving the products and solutions that we’re providing in the marketplace in our industry—all of us.
So, I think there’s an exciting new frontier to watch for there. We have a Ph.D on our team who’s very much involved in measuring and watching and researching those fields. We have a number of initiatives around that area.
Mosley: As recognition has evolved to become more strategic and as the data has proven the business case and infiltrated other HR aspects and initiatives, it’s naturally risen to higher levels in the organization. Over time, as recognition has become more sophisticated, as the data has become more useful, the natural strategic view of what it is has risen and the higher levels of HR and the CEO have gotten more involved. For example, we have our Workhuman IQ division which is a pure data science division. What we’ve found over the last few years is that more companies are strategic in their approach because they can see and prove internally to the CFO the value of investing in recognition.
It used to be that companies would want a recognition culture, but now people want a more human culture that gets to the heart of what it means to be satisfied as a human being at work. These new technologies have to help build appreciation and recognition and gratitude in the company, but they also want to build connections and deeper relationships between employees. And when you build deeper relationships between employees, they motivate each other. And so, that can help with all the other initiatives that an HR leadership team would have.