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Reward Your Staff and Reap the Benefits
By Jamelle Wells
Allen & UnwinCopyright © 2004 Jamelle Wells
All rights reserved.
How to choose the right rewards
The idea of rewarding staff is not a new one. The most successful companies in Australia have been doing it for years, because they know that recognising the efforts of their employees gets results that range from increased productivity to higher profits. Employees who are rewarded for their efforts are more willing to go the extra mile for a company, to contribute their intellectual capital, and to stay around for longer. Staff who feel valued and appreciated are motivated and that's good news for any company because motivated people can do a lot to contribute to growth and productivity.
Whereas once a big pay packet was thought of as the only way to reward employees, that perception has changed. So too has the notion that only large companies have the resources to reward their staff. Companies of all sizes have come up with ways to reward their employees that extend well outside the realm of salaries and cash bonuses. Many rewards don't involve money at all, and if a reward is used the right way, it can achieve results, regardless of whether you employ 10 people, 100 or 1000.
There's no one right way to reward a staff member because different rewards work for different people, according to their age and their individual interests. What particular rewards work for employees is likely to change throughout their life, and also throughout their career. However, the sorts of rewards employers are using are mostly tied to company culture. They are rewards that are influenced by the particular industry a company is part of, or by the ages and interests of employees. There are the rewards that are given for specific achievements or behaviours, such as meeting sales targets, coming up with a cost saving idea or attracting a new client. Then there are more general rewards given to say 'thank you for working for this company, we value you as an employee'. These might include flexible work hours, time off to work on a community project or setting up a special work environment for employees. There are also workplaces that provide intrinsic rewards for people — that is, the good feelings they get from the work they do.
Rewards can be material or non material. Material rewards might very well include cash bonuses, profit share, gifts, tickets to events, holidays, prizes or superannuation top ups. Non material rewards might be time off to pursue personal interests, or organising a staff function or a special theme day once a month to boost morale.
Non material rewards might also include giving staff special training or projects to help keep their job challenging, broaden their experience and boost their worth in the job market. This is important because unlike our parents and grandparents, we no longer stay in the one job until we retire. Young Australians just making their way out into the workforce have witnessed a spate of company collapses and mass retrenchments both here and overseas. At home these collapses have included Ansett airlines, communications group One. Tel, HIH and FAI Insurance. Overseas there's been the collapse of companies such as Enron. So young workers have a very different perception of company loyalty than that held by their parents and grandparents. While the younger age group is prepared to be loyal to their employer for a period of time, they're increasingly asking 'What's in this job for me?' and 'What can I get out of it that will take me on somewhere else in a few years?'. Both men and women from this generation, sometimes referred to as generation X, are now choosing a more flexible lifestyle. Many new employees see their tenure as brief and want maximum return for a very short time. This view is a quantum leap from twenty years ago. There is even a perception held by some that if you're in a job for too long, other prospective employers see you as stale, and not able to easily adapt to a new work environment or accept change.
Many Australians are changing careers quite late in life because they've been retrenched or they plan to retire much later than their parents did. Government think-tanks are constantly trying to come up with contingency plans for our aging workforce of the future. This aging workforce is also changing the perception of what a reward is. Employees are now asking for salary packaging which often involves an employer paying superannuation above statutory requirements, paying for income protection insurance policies for staff and contributing to health fund premiums.
Another big change in the Australian workforce is the large number of women who are leaving large organisations for smaller ones because they can't break through the management glass ceiling of larger companies in some industries, or because they need greater flexibility to balance their work life with their family life. There's also been a huge influx of employees from different cultural backgrounds, bringing new expectations about what a reward is.
Finding ways to keep good employees has become more important over the past two decades with people changing jobs more frequently. An employer is expected to pay employees a fair wage and to provide them with safe working conditions, and in return that employer is entitled to expect a fair day's work. But to encourage people to more than just go through the motions, they need to feel respected and valued. Employees who take pride in what they do will not only contribute their ideas to the running of the business, but can also be an invaluable marketing tool. They can either enhance the image of the service or product your business provides, or they can discredit it. The saying 'people like to do business with people' rings true.
How many times have you not gone back to a shop or restaurant because you've received appalling service? We live in a society of choice, where many companies are vying for our business. Personally I don't go back to restaurants where I have to trip a waiter over to get a menu, to shops where staff have no product knowledge, or to organisations where the person on the other end of the phone makes me feel as if my call is a huge inconvenience. Why should I, when just down the road there'll be another organisation that also has a great product but can back it up with pleasant competent staff who provide fantastic service. Staff who feel recognised and rewarded can boost your reputation as a good employer, because they talk to other people in their industry about their job. Equally, staff who feel they're being unfairly treated or never recognised for their efforts also talk, and news about bad employers travels just as fast.
Successful companies are also rewarding their employees because of the high cost of replacing them, and not just in monetary terms. When someone leaves, there's the cost of advertising their job or going through a recruitment agency, the down time while interviews are being held and while the new person's being trained. Not to mention the fact that staff who leave to work for one of your competitors usually take some of your customers with them. Then there are the indirect costs such as the stress it places on your other employees. If you end up putting the wrong person into the job, you usually have to live with them for a three-month trial period and this can create even more stress on co-workers.
Despite the many good employers in Australia, there are also those who expect staff to perform well, no matter how badly they treat them. There are also those who fail to pay award wages, those who break the law in relation to sick pay, holiday pay and maternity leave, and those who break anti-discrimination laws. Then there are companies who are simply petty in their treatment of people. I once had an employee phone me to report that their employer docked their pay by $4 every time they took a toilet break. An employee at another organisation claimed their pay was docked for having personal photos on a work desk. Yet the very same companies expect staff to turn up to work with buckets of enthusiasm.
By the same token there are other companies in Australia who have, over the years, retrenched large numbers of people due to restructuring, and have asked senior managers to take pay cuts, but have had initiatives in place to treat staff fairly and with respect in doing so. While money is important, it's the day-to-day experiences people encounter at work that shape their perception of whether or not they are valued.
Most of the surveys conducted on the best companies to work for in Australia reveal some sort of link between preferred employers or 'employers of choice' and a healthy financial performance. One of the most comprehensive surveys has been conducted by Human Resource consultants Hewitt Associates in conjunction with the Austral ian Graduate School of Management and the Australian Financial Review's BOSS magazine. For the past three years Hewitt Associates has sought feedback from hundreds of companies in Australia to come up with the results of the annual 'Best Companies to Work for in Australia' survey. The survey released in 2003 found that the best employers had 13 per cent revenue growth between 2000 and 2002 compared with only 7 per cent for other companies. The best employers also posted an average profit growth of 21 per cent in the same time period, in comparison to minus 44 per cent for other companies (Hewitt Associates 2003).
Over the three years the survey has been conducted, the researchers have also found some of the best companies to work for were often more likely to offer bonuses such as cash, shares, vouchers, or other forms of recognition for meeting solo or team goals, reaching anniversaries of service with the company, or coming up with innovative ideas.
When it comes to what rewards companies are choosing for employees, the Australian Institute of Management's annual salary survey for 2002 found that the most common material rewards offered to executives were mobile phones, company cars, professional subscriptions, laptop computers and airline club memberships, whereas the most common material rewards offered to wages staff (employees not in executive positions) were discounts on company services or products, self education expenses, income protection insurance, life insurance and car parking. The survey found that the most common type of cash incentives offered to staff were company bonus schemes followed by performance based pay, profit sharing, hiring and retention incentives, and sales commissions. The Institute says this result varied from the 2001 survey which found performance based pay the most common type of variable reward offered to staff. The survey also found that staff given the chance to take part in variable cash reward schemes were in certain jobs, while the length of time an employee had been with a company had very little influence on whether or not they could be eligible for the cash incentives.
Another finding was that more senior employees were offered greater flexibility with salary packaging and a wider choice of benefits, while many less senior staff were offered less flexible packages incorporating salary and superannuation only. Profit sharing was most often connected to overall company performance, while sales commissions and performance pay were associated with individual performance. Share options were offered to 6.9 per cent of employees across all levels of employment (AIM 2002).
Whatever reward system you put in place will depend on the particular culture of your company, but what most companies who have successful reward programs in place do have in common, is that they've set up their benefits and rewards after consultation with staff and they regularly solicit staff feedback. The most successful reward schemes come from redesigning the workplace culture, or they are set up to reinforce an existing culture. A staff rewards budget for a company might be several thousand dollars a year; it might be a few hundred. It doesn't really matter, as long as it works for you.
It also seems that material rewards aren't the only ones that motivate people at work. Employees also get intrinsic rewards from work that is meaningful to them and a job they feel they have some sort of control over. Study after study of workplaces in Australia has revealed that while material job perks might be attractive, having a sense of control over their work and good management are what's most important to employees. For example, a survey of 2300 decision makers and employees from over 400 organisations across Australia was commissioned by Leadership Management Australia. The survey found that when asked which five factors would have the most positive influence on their performance at work, 45 per cent of employees rated being given responsibility and independence as being the most important factor in job satisfaction, along with having interesting and challenging work, which also rated 45 per cent. These were followed by having a reasonable salary or pay on 41 per cent, having a good working relationship with the boss on 39 per cent and having a good relationship with other staff on 37 per cent (LEAD 2001).
Melanie O'Connor, Director of consulting group Strategic Human Resource Solutions, and lecturer at the Macquarie Graduate School of Management, says in the past few years in Australia, there's been a much more stringent linking of rewards with performance and a tightening up at all levels as companies become more professional with their management techniques. 'Large companies are increasingly trying to cut costs and increase productivity, and because payroll associated costs are huge, business owners are taking steps to get more for their investment.' Melanie says reward systems used by smaller companies in Australia are often more unstructured, with non costed perks and without systems of performance evaluation in place. However, she insists this is not necessarily a bad thing because it allows greater flexibility and a more individual approach to staff rewards, although small companies sometimes struggle with the measurement aspect of staff rewards.
This lack of performance appraisal has also been attributed to larger companies. In 2002, human resource leaders from 64 organisations in Australasia took part in a global survey of more than 1000 organisations in 47 countries. The survey was conducted by Pricewaterhouse Coopers who distributed the questionnaire between June and August 2002. Only 14 per cent of survey participants from Australasia have all employees completing performance reviews, compared to 40 per cent of organisations globally. In addition, only 42 per cent of Australasian survey participants have all senior management completing performance reviews (Pricewaterhouse Coopers 2002).
One trend in rewarding staff by companies in Australia over the past few years has centred on family and work strategies. Flexible work hours, time in lieu and parental leave have been used to try to give employees flexibility to balance their work and family life. As a reward system, family friendly practices engender a great deal of staff loyalty.
Compared to the US, there's a smaller emphasis in Australia on cash rewards such as profit share and stock options, and again this probably isn't a bad thing because the failure of poorly designed profit share schemes has contributed to the collapse of a number of major companies. The lesson to be learned from all of this seems to be to avoid rewards that focus on short term profitability only — that is, rewards that encourage staff to earn a quick buck, regardless of longer term outcomes. Short term rewards usually only benefit a handful of staff and quite often mean that funding for things that would be of long term benefit to the company, such as training budgets, go out the door.
The notion of rewarding staff can be particularly challenging for small to medium sized companies who don't necessarily have a large budget to spend on reward programs. However, the advantage they do have over bigger companies when it comes to rewarding staff is flexibility. The companies mentioned in this book have been chosen to illustrate particular staff rewards, but chances are the rewards are part of an overall package, and reflect a management style that tries to do the best thing by employees while at the same time remaining focused on the needs and goals of the company. If a company provides one great way of rewarding staff, it's also probably introduced a host of others. And most of the employees interviewed by me say that without solid management and a job they find interesting and empowering, all the perks in the world won't keep them loyal to their employer.
How rewarding employees can benefit your business
* Staff who feel valued are more productive and take pride in what they do.
* Staff who feel valued are the best staff to have as ambassadors for your company.
* Staff who feel valued will contribute their intellectual capital to the running of your company.
Excerpted from Just Rewards by Jamelle Wells. Copyright © 2004 Jamelle Wells. Excerpted by permission of Allen & Unwin.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Table of Contents
1 How to choose the right rewards,
2 Health and fitness initiatives,
3 Family friendly practices,
4 Cash bonuses and profit share,
5 Community projects,
6 Professional and personal development,
7 Management style,
8 Special events,
9 Gifts and other non-cash benefits,
10 A great work space,