Recognition and Reward Paper

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CORPORATE LEADERSHIP COUNCIL®

MARCH 2006
www.clc.executiveboard.com

LITERATURE KEY FINDINGS

Creating an Effective Reward and Recognition Program
Key Finding 1: Approximately 90% of companies maintain some type of reward and recognition program. The majority of companies use these programs to create a positive work environment, improve employee morale, and motivate high performance. Research suggests that when designed and implemented properly, reward and recognition positively affects an organization’s bottom line. The Majority of Companies Maintain a Reward and Recognition Program According to a 2003 survey conducted by WorldatWork and the National Association for Employee Recognition (NAER), the majority of companies maintain formal and informal reward and recognition programs and their use is becoming increasingly prevalent. The frequency with which companies use reward and 1,2,3,4 recognition programs breaks down as follows: PREVALENCE OF REWARD AND RECOGNITION PROGRAMS IN 2003 Overall Prevalence: Of 413 responding companies, 87% maintain some type of reward and recognition program. Formal Programs: 60% of companies have written guidelines regarding employee rewards. Sales Programs: 51% of companies reward employees for achieving sales goals. Increase in Utilization: Of the companies with a reward and recognition program, 90% report using employee recognition more frequently in 2003 than in 2002. Program Expansion Projections: 40% of surveyed companies anticipate expanding their program in 2004. In 2002, only 64% of companies had reward and recognition programs

Companies Use Reward and Recognition to Create a Positive Work Environment and Drive Performance The WorldatWork and NAER survey found that companies use reward and recognition programs to achieve strategic goals; of the 65% of companies with formally documented programs, 97% directly align their reward and recognition program with the organization’s business strategy. Additionally, the study identified the following driving forces for implementing and maintaining reward 5,6,7,8,9 and recognition programs: Figure 1: Key Goals of Reward and Recognition Programs

Support culture change Encourage loyalty Increase retention Support organization's mission Increase employee morale Reinforce desired behaviors 24% 40% 51% 66% 71% 75% 75% 76% 80% 0% 50% 100%

In 2002, only 17% of companies rewarded sales performance

Motivate high performance Create a culture of recognition Create a positive work environment

Improving Employee Morale A study conducted by IOMA in 2004 found that 91% of companies cite “boosting employee morale” as the main objective of their reward and recognition program

Effective Reward and Recognition Programs Produce a Positive Return on Investment Reward and recognition programs can be a cost-effective and valuable tool to increase employee morale, productivity, revenue, and profits as well as lower turnover, absenteeism, and stress. In fact, as detailed below, studies have found that effective reward and 10,11,12,13 recognition programs have the following benefits:

INCREASED RETURN TO SHAREHOLDERS A 2005 Watson Wyatt Worldwide study found that companies with an effective recognition program realized a median return to shareholders that is nearly double that of companies without such programs.

BOOSTS EMPLOYEE PERFORMANCE A recent study conducted by the Society for Incentive and Travel Executives found that properly constructed rewards and incentive programs can boost employee performance by up to 44%.

 2006 Corporate Executive Board. All Rights Reserved. Catalog Number: CLC15AEYS5

CORPORATE LEADERSHIP COUNCIL® CREATING AN EFFECTIVE REWARD AND RECOGNITION PROGRAM

PAGE 2 KEY FINDINGS

Key Finding 2: Although reward and recognition programs have the potential to produce positive returns to shareholders, research demonstrates that such benefits will only be achieved through an effective program that reinforces an...
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