Incentives vs Recognition

In a world where companies must extract the best from their employees, or fall behind, which method of motivation leads them along a quicker path to engagement? Sabrina Zolkifi speaks to HR leaders to find out whether incentives or recognition comes out on top.

It’s easy to put a carrot at the end of the stick, but then you end up a bit stuck when employees decide a carrot is no longer enough, or desirable in the first place.

Over the past few years, particularly with younger and more opinionated employees entering the workforce, companies have been forced to re-evaluate what works and what doesn’t when it comes to employee motivators.

And in doing so, leaders have had to distinguish between the merits of providing employees with incentives and recognition.

“HR experts have generally differentiated the two by timeline, classifying incentive as the pre-achievement reward wherein employees are given an incentive (normally additional pay for performance) to motivate them to perform better going forward and recognition as the post-achievement reward where employees are given prizes, be it monetary or non-monetary,” Phan Yoke Fei, group head of HR at Auric Pacific Group, says.

Both strategies have worked well for organisations thus far, but Phan says in order for either to be successful, HR has to be able to “recommend the correct reward strategies in line with the business strategies to drive correct motivation and behaviour among different groups of employees”.

This is a sentiment shared by Regina Koh, head of HR at 3M, who says the company has an incentive programme called the Sales Performance Club, which rewards outstanding sales performers based on the percentage of their sales achievement.

“In contrast, recognition programmes are a form of appreciation and acknowledgement of a person’s achievement. This typically applies to a wider group,” she says.

“The 3M Merlion Awards, for instance, recognises employees from different functions in the company for having gone beyond their call of duty.”

The art of communication

A survey by Towers Watson of 1,066 employers in the APAC region found a positive correlation between the perceived value of benefits and effective communication.

In fact, 91% of employers who believe they have succeeded in communicating effectively in this aspect believe their benefits were sufficiently or highly valued by staff.

Therefore, it seems clear the first step in identifying which will be more effective for an organisation lies in understanding the employee demographic.

“Experienced employees may be more motivated by recognition of their seniority and may prefer to be rewarded with formal mentorship or coaching responsibilities to develop and help young and upcoming employee progress and help them succeed in the organisation,” Phan says.

On the other hand, Millennial employees may prefer developmental opportunities, or even simpler rewards like travelling and project opportunities within the geographical presence of the organisation they work for, he says.

Organisations also need to make sure they are effectively communicating these rewards to their staff.

Pauline Chua, general manager of human capital and corporate social responsibility at Fuji Xerox, says employees are usually informed in advance of the kinds of rewards, be it monetary or otherwise, they will receive upon reaching a predetermined goal.

“As such, incentives are effective in getting results, especially in instances where the goal is specific in nature,” she says.

Chua adds the same is done for its staff recognition efforts, where the reward is usually in the form of a public display of appreciation of an individual or team effort well done.

“A proper recognition programme helps to improve employee morale, creates more pride in their work and promotes a positive work environment,” she says. “Every employee can use some affirmation.”

The perks of recognition

The highest accolade an employee at Fuji Xerox could receive is the annual MD Award, “where we recognise individuals or teams who have displayed exceptional performance or contributed significantly to the success of Fuji Xerox Singapore,” Chua says.

“There is no upper limit to this award as this is the company’s way of saying ‘thank you’ to each deserving employee.”

This culture of providing recognition to employees is also applied at Heinz ASEAN, where Laurent Low, the company’s director of HR for Asia, Middle East and Africa, says “in some situations, recognition goes a very long way”.

“For example, in Heinz we select top performers and talent and provide them special one-on-one time with our global CEO and his senior leadership to share ideas on the business. For CEO to know these employees personally, it is a big recognition,” he says.

However, Low is quick to point out he believes both incentives and recognition have to “work hand-in-hand to retain talent, amidst all things”.

“Incentives are almost essential and necessary to drive employees and teams towards their objectives and performance while recognition builds on Incentives for further enhance the ‘reward and recognition’ power of both,” he says.

Another important consideration when implementing both incentives and recognition programmes is tracking.

“It is definitely important to have clearly defined objectives and metrics,” Koh says. “This is to ensure that we are rewarding the right kind of behaviours for the results.”

Chua adds it is also critical to remember gaining feedback from employees of the programme’s effectiveness is “key to keeping the programmes relevant to the organisation”.

“This is journey and over the next few years, I see incentive and recognition programmes gaining prominence over the traditional methods of rewarding and motivating employees as organisations gain sophistication in employing these programmes successfully,” she says.

Phan says he sees incentives which are perceived to be diluting in value over a period of time will become less preferred, unless organisation can assure their employees of their long term commitment and continuity as a growing business.

“It is quite entrenched in many Asian cultures where tradition and reputation are highly valued,” he says.

“As organisations strengthen themselves and build solid footprints in their businesses, one may find increasingly, achieving milestones and being recognised as successful in such organisations to be cherished and valued by employees, far superseding any form of monetary incentives required in ordinary circumstances.”

Game on

Addressing the Asian context, Low says managers have to also continue being less hesitant to use recognition more frequently.

“Some of them are just too busy, while others are not aware,” he says.

Does that mean recognition will be a more effective staff motivator than incentives in the workplace of the future?

“I’m afraid there is not a clear answer as to who the winner will be in a contest between incentive and recognition, but it is safe to say both are normally present in organisations I’ve worked with to ensure the organisation can thrive as a whole,” Phan says.

Chua agrees, saying at the end of the day, for the most powerful connection between positive reinforcement and the action that is required to earn it, it is important to be able to reward and recognise quickly.

“Empowered managers and employees who are supported in their efforts to acknowledge a job well done greatly enhance an organisation’s ability to attract, engage and retain talent that is critical in today’s workplace,” she says.

“Finding new ways to inspire our people, move them to action and make seemingly impossible goals attainable are what makes incentive and recognition programmes all worthwhile.”

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