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The Theory and Practice of Employee Recognition
Recognition programs take time to implement and perfect

By Brooks Carder and James D. Clark
Reprinted from Quality Progress

Today, many Chief Executives Officers (CEO's) are faced with the challenge of changing their corporate cultures. The demand for quality improvement is causing more companies, large and small, to begin moving away from a structure dominated by centralized control and a short-term focus on the bottom line toward employee empowerment and process improvement.

CEOs can alter their companies' cultures by recognizing employees. Many companies have recognition programs designed to support the old management system; in other words, the kind of programs that reward the top salespeople with cash, trips, gifts, and public accolades.

These programs are not appropriate for the new culture that many businesses are trying to create. Like many other management systems, the recognition must be revised in light of what is known about quality.

Many managers who use recognition systems view them as a source of extrinsic motivation: people who are not working up to their potential in sales, quality and productivity will do so if they receive some small gift or cash incentive for their work. This view assumes that these incentives provide substantial motivation. Given the other forces at work in most corporations, this is not plausible. In fact, one could argue that extrinsic motivation in the form of a recognition program could interfere with intrinsic motivation such as pride of workmanship.

The reason recognition systems are important is not that they improve work by providing incentives for achievement. Rather, they make a statement about what is important in the company. Analyzing an employee's recognition system provides a powerful insight into the company's values in action. These are the values that are actually driving employee behavior. They are not necessarily the same as management's stated values. For example, a company that claims to value customer satisfaction but recognizes only sales achievements probably does not have customer satisfaction as one of its values in action.

Just as the analysis of current recognition practices can give top management insight into values in action, the establishment of new recognition practices can alter the company's values and thereby positively change the company culture.

Theory of recognition

Recognition is a form of employee motivation in which the company identifies and thanks employees who have made positive contributions to the company's success. In an ideal company, motivation flows from the employees' pride of workmanship. When employees are enabled by management to do their jobs and produce a product or service of excellent quality, they will be motivated.

In this context, recognition can be an important form of feedback on the results of individual or team efforts. Recognition can make a positive contribution to pride of workmanship. Feedback in the form of recognition is especially important in large organizations, where it is often difficult to see the impact of a particular, isolated activity on the overall business.

Recognition can be public or private. Public recognition is often better for two reasons:

  1. Some (but not all) people enjoy being recognized in front of their colleagues.
  2. Public recognition communicates a message to all employees about the priorities and function of the organization.

The form of recognition can range from a pat on the back to a small gift to a substantial amount of cash. When substantial cash awards become an established pattern, however, it signals two potential problems:

  1. It suggests that several top priorities are competing for the employee's attention, so that a large cash award is required to control the employee's choice.
  2. Regular, large cash awards tend to be viewed by the recipients as part of the compensation structure, rather than as a mechanism for recognizing support of key corporate values.

Recognition is not a method by which management can manipulate employees. If workers are not performing certain kinds of tasks, establishing a recognition program to raise the priority of those tasks might be inappropriate. Recognition should not be used to get workers to do something they are not currently doing because of conflicting messages from management.

For example, consider a manufacturing site in which workers, working under high-production quotas, often cut corners to produce and ship products. This practice results in quality problems. What will happen if management refuses to alter the production quotas but attempts to remedy the situation by recognizing workers who do not cut corners and therefore produce higher quality products? The result will be workers who now have a conflict between quality and quantity. The conflict will be difficult to resolve. The outcome will be difficult to predict, but the workers will certainly be placed under more stress.

A more effective approach is for management to first examine the current system of priorities. Only by working on the system can management help resolve the conflict. If workers can get a plaque or a small cash ward for improving quality but will get fired for failing to meet a production quota, the problem cannot be fixed by improving the recognition program.

The workers should understand how to choose between quantity and quality. Only after management resolves the conflict in priorities is it appropriate to establish a recognition program to promote quality.

Recognition is not compensation. In this case, the award must represent a significant portion of the employee's regular compensation to have the significant impact. Recognition and compensation differ in a variety of ways:

  • Compensation levels should be based on long-term considerations such as the employee's tenure of service, education, skills, and level of responsibility. Recognition is based on the specific accomplishments of individuals or groups.
  • Recognition is flexible. It is virtually impossible to reduce pay levels once they are set, and it is difficult and expensive to change compensation plans.
  • Recognition is more immediate. It can be given in timely fashion and therefore relate to specific accomplishments.
  • Recognition is personal. It represents a direct and personal contact between employee and manager.

Recognition should be personal. Recognition should not be carried out in such a manner that implies that people of more importance (managers) are giving something to people of less importance (workers). This situation can be avoided by making recognition personal rather than bureaucratic and by having employees participate in developing the recognition program and selecting the individuals and teams to be recognized. Recognition should be a joint celebration of the accomplishments that benefit the organization.

Positive reinforcement is not always a good model for recognition. From the standpoint of fundamental psychological theory, recognition is often viewed as a form of positive reinforcement. The theory says that positive reinforcers (money or gifts) strengthen behaviors that are associated with their presentation. If employees are recognized for doing something, they will do more of it.

One difficulty in the application of reinforcement theory is the employee's perception of the relationship between the behavior and the receipt of reinforcement (recognition). Just because the manager is using a certain behavioral criterion for providing the recognition, it doesn't mean that the recipient will perceive the same relationship between behavior and recognition. For example, the manager might feel he is giving recognition for team participation. The recipient (and his or her peers) might conclude that recognition is given to those whom the manager likes.

In a similar vein, a manager might frequently recognize members of his or her own staff or favorite department. He or she might feel that recognition is based on the achievements of the recipients. Employees might believe, in this case correctly, that recognition depends a great deal on having the right job.

Employees should not believe that recognition is based primarily on luck. One of the worst possible circumstances exists when individuals perceive that obtaining recognition is unrelated to what they do (i.e., is based on luck). In his work on learned helplessness, Martin E.P. Seligman provided a variety of demonstrations showing that, when people judge that important outcomes (such as recognition) depend on luck rather than their own efforts, people will cease to try and will become demoralized or depressed.1

Within a corporation, the early sign of this is cynicism. Employees will tell you that management says one thing but does another. For example, consider the company that has a mission statement with four goals: total customer satisfaction, improvement of every business process, respect for employees, and revenue attainment. If recognition is given only for revenue attainment, what is the inevitable conclusion of employees? It is likely that the employees will decide that the other three goals are less important. What management says (the mission statement) is not what management does (recognizes only revenue achievement).

As cynicism develops, employees become lethargic and develop a we/they attitude. Once these conditions are present, they are difficult to eliminate. Each action of management is viewed with a jaundiced eye. Each new program is met with an expectation that management's promises will not be fulfilled. This can be a self-fulfilling prophecy.

Recognition meets a basic human need. An alternative to the view of recognition as a form of positive reinforcement is the theory of Abraham Maslow.2 Maslow proposes that human needs are organized in a hierarchy. Basic needs such as food, shelter and safety are at the bottom. Above them, in order, are needs for belonging, self-esteem, and self-actualization. Needs at the higher levels of the hierarchy do not control behavior until the lower needs are met. Thus, the hungry individual does not focus on self-esteem.

Maslow points out that theories of reinforcement are based on the view that the dominant motive is a deficiency in lower-order needs. In this context, using positive reinforcement as a model for recognition assumes that the state of employees in the organization is basically one of deficiency. As long as this deficiency persists, self-actualizing needs such as pride of workmanship, will have limited control.

Recognition, certainly public recognition, meets the needs for belonging and self-esteem. In this way, recognition can play an important function in the workplace. According to Maslow's theory, until these needs for belonging and self-esteem are satisfied, self-actualizing needs such as pride in work, feelings of accomplishment, personal growth, and learning new skills will not come into play.

Recognition programs should not create winners and losers. Recognition programs should not recognize one group of individuals time after time while never recognizing another group. This creates a static rating system. The people who get recognized will feel good, and the people who don't get recognized will feel bad. Even worse, however, is the potential influence of this circumstance on the work of those who do not get recognized.

Robert Rosenthal has written extensively about the Pygmalion effect.3 If, year after year, one group is regularly recognized when another is not, everyone's evaluations and expectations will begin to change. Not only will the members of the unrecognized group be perceived as worse by themselves and others, but evidence indicates that their actual performance will become worse.

Recognition should be given for efforts, not just for goal attainment. Many companies tend to recognize only what is easy to measure. It is relatively easy to measure sales dollars or revenue. It is often possible (if not misguided) to measure dollars saved. It is more difficult to define and measure behavior that contributes to customer satisfaction, employee morale, teamwork and process improvement. However, such activities are essential to the good health of the company and must be recognized if they are to flourish. A story in Masaaki Imai's book, KAIZEN: The Key to Japan's Competitive Success, provides an excellent example of recognizing achievement other than increased revenue or significant cost savings.4 Imai describes the efforts of a group of dining room employees at one Matsushita plant. The employees noticed that, during the lunch period, some people at tables consumed more tea than others. They studied the phenomenon and found that higher consumption was consistently related to the same tables.

The end result of the effort was that they were able to cut down on the use of tea leaves by 50%. The result was financially insignificant to the company. What was important was the effort that went into the project. The effort led to the Presidential Gold Medal for the year. The obvious effect of this recognition was to provide powerful incentives for everyone to become involved in quality improvement.

According to Imai, a manager who understands that a wide variety of behaviors are essential to the company will be interested in the criteria of discipline, time management, skill development, participation, morale, and communication, as well as in direct revenue production. To be able to effectively use recognition to achieve business goals, a manager must develop the ability to measure and recognize such process accomplishments.

Employee involvement is essential in planning and executing a recognition program. It is essential to engage in extensive planning before instituting a recognition program or before changing a bad one. The perceptions and expectations of employees must be surveyed. (Often this must be done by someone outside your company to avoid bias.) Extreme care must be taken to ensure that what management wants to recognize is what employees think is being recognized, that the recognition program fairly represents what management says are its priorities, and that the program is fair to all.

A cross-section of employees should be involved in planning the recognition program. This not only adds valuable information to the planning process, but it also decreases the chance that employees will think management is manipulating them.

Some findings at IBM

In February 1991, IBM hired AdGap to study the recognition programs at a marketing branch office. The objectives in this study were to obtain the employees' general perception of the recognition program at the branch, including its strengths and weaknesses; their perception of the relationship between what they do and what recognition they receive; and their opinion on how effective the recognition program is in improving the work performance of the branch employees. In addition, there was a need to evaluate how effective the current recognition system was at motivating quality improvement efforts. To obtain the necessary information, several methods were used, including a questionnaire, individual interviews, and group sessions.

A 14-item questionnaire on recognition practices was presented to the entire employee population of the branch. From a population of 130 employees, 80 completed questionnaires were received for analysis. In addition to the questionnaires, 20-minute individual interviews were conducted with eight employees. Two 60-minute group sessions were conducted with groups of about 10 employees each. Finally, an interview with the senior executive was conducted for about 60 minutes.

Results and discussion

Following are some of the questions from the survey and a discussion of the results. Only the questions that yielded results germane to this discussion have been listed.

  1. Do employees feel they receive adequate recognition for their accomplishments?

    Sixty percent of the employees surveyed felt they had received adequate recognition for their accomplishments. Sixty-seven percent said they had received some form of recognition in the past year. This ranged from 85% of the systems engineers to 44% of the administrative employees. When asked whether the number of people recognized was too many, about right, or too few, only 3% of all respondents said too many and 45% said about right. Fifty-nine percent of the administrators said that the number of people from all departments thought that administrators received too little recognition. Two administrators mentioned that it was difficult to go to meeting after meeting where marketing reps received a great deal of recognition and administrators received little or none. A marketing manager pointed out that, if administrators received more recognition, the marketing reps would treat them better. He said that when a good person makes a mistake it is perceived as a result of the system, and when a bad person makes a mistake it is the fault of the person. Good and bad are perceptions based partly on public recognition.

    In the personal and group interviews, marketing reps, system engineers, and administrators were asked to evaluate the contribution of their three groups to total customer satisfaction. The average contribution of the administrators was estimated to be about 21%. Several marketing reps noted that poor administrative performance, especially improper billing, could severely damage customer relations.

    It appeared that the allocation of formal recognition to the administrative department was not in proportion to the perceived contributions to customer satisfaction. The system was creating winners (marketing representatives) and losers (administrative personnel).

  2. Do employees feel that IBM's recognition program is effective in improving work performance?

    Seventy-seven percent of the respondents said that IBM's recognition efforts improved the performance of employees. When asked whether the recognition efforts improved their own performance, however, only 51% said yes. This difference is statistically significant and suggests that people are more willing to admit that others are motivated by recognition than to admit their own responses to the program.

  3. Is recognition clearly related to the accomplishments of individuals or groups? When asked whether recognition was a result of luck or of true accomplishment, a substantial number of employees-more than half-said that luck played more of a role than true accomplishment did. Managers were less likely to feel that luck is involved. This could be predicted because they are the only people involved in the selection process. There is no employee involvement in the development or operation of recognition programs in the branch.

    The implications of these findings are important. To the extent that the employees feel luck plays a role in recognition, the recognition is not an effective motivator. In fact, this perception can lead eventually to cynicism and demoralization. Although these were present to a minor extent, the general tone was positive. When asked whether recognition was ever given for team play, 40% of employees surveyed said it frequently was, while 52% said it seldom was. Among systems engineers, however, 63% said recognition was frequently given for team play; only 33% of the other employees agreed. This could be because the systems engineers feel that a great deal of their recognition results from the success of the marketing reps with whom they are teamed.

    One systems engineer pointed out that recognition often depends on the sales territory of each rep. He works with three or four marketing reps who have tough accounts. He says that, for this reason, he has been unable to get a significant award in four years. Thus, he perceives that recognition is based not on a lack of accomplishment but on the luck of his assignment.

  4. Is recognition timely?

    Thirty-four percent of the employees surveyed said recognition was timely, 57% said it was slightly delayed, and 9% said it was very much delayed. When asked if there was too much bureaucracy in the process, 58% of the employees said there was.

  5. Is the form of recognition appropriate?

    In the group sessions, there was considerable discussion of the Effectiveness of certain noncash awards. Many remembered a briefcase stuffed with dollar bills. Others cited merchandise as effective, especially if the item conveyed prestige (such as a special briefcase). The general problem identified was a lack of creativity in the system.

    In interviews, it was clear that most recognition for marketing reps was in the form of cash awards tied to the achievement of revenue goals. In fact, they viewed this as part of their compensation. These awards were expected and described as routine.

  6. What do employees think they have to do to get recognized?

    There was consistent agreement among marketing reps and systems engineers that most recognition was provided for achieving revenue goals. In the administrative area, some recognition was provided for achieving production and cost goals. There was no evidence of any recognition for process improvement or innovation.

What was learned

Based on the results and discussions, the following conclusions were drawn:

  1. Allocation of recognition to the administrative function of the branch is not in proportion to its perceived contribution to customer satisfaction.
  2. Almost all recognition is in the form of cash and is viewed, particularly by marketing reps, as compensation tied to sales.
  3. The current recognition program doesn't give employees an increased sense of dignity, self-worth, belonging, and value to the company. Rather, it fosters a competitive environment in which there are winners and losers. The winners feel good, the losers often feel bad, and the direction of the company is not changed for the better.
  4. The current recognition process recognizes only end results, not the processes necessary to achieve them.
  5. Employees and customers are not involved in the current recognition process.
  6. There is only management-to-employee recognition-there is no peer-to-peer recognition.
  7. People like cash, but personalized noncash awards are also appropriate.
  8. Employees don't clearly understand what IBM's current recognition program is.
  9. Many employees do not clearly understand what they have to do to obtain recognition.
  10. Recognition is seldom tied to teamwork or customer satisfaction.
  11. Recognition is often not timely. Most recognition comes at the end of the year.
  12. Winners in the current program are not documented, and their model behavior is not well-publicized.
  13. Managers aren't trained in the theory and practice of recognition.

IBM action plan

The findings and conclusions of the IBM committee led to the following four-part plan:

  1. The development and circulation of a recognition workbook and video to educate IBM managers and employees.
  2. A program to make existing cash awards more effective.
  3. The development of a peer-to-peer award.
  4. The development of an award for quality improvement teams.

Education-the video and workbook

To address the committee's concerns about education and skills, an IBM recognition workbook and video were created. The materials describe how a business unit can evaluate and modify its recognition process. The package was made available, on request, to all IBM branches worldwide. The materials were publicized throughout IBM via electronic mail. To date, more than 500 packages have been distributed within IBM, and another 50 workbooks have been shared with IBM customers.

The package was followed by a survey to evaluate its effectiveness. The plan is to revise and improve the package based on the survey results.

How to make cash more powerful

The IBM team concluded that existing cash recognition programs should be continued. Withdrawal would be viewed by employees as a pay cut. Therefore, the team developed a concept entitled "Trifecta" to improve the effectiveness of these cash awards. Borrowed from the trifecta concept in horseracing, it consists of a three-part process to make cash more effective:

  1. The employee receives the cash, as before.
  2. A gift (flowers, steaks, etc.) is sent to the home to surprise the recipient.
  3. The recipient is provided with an experience to remember the award by: show tickets, a dinner, or something else that would be enjoyable for that particular individual. This allows the award to be personal but retains the benefits and flexibility of cash.

Peer-to-peer award

One approach to some of the problems in IBM's recognition process was to establish a peer-to-peer award. To quote IBM's internal memo announcing the award:

"In order to drive customer satisfaction with our customers, IBM employees need to be satisfied within the organization and strive to exceed their own internal customer expectations. This award is based upon our goal to exceed the expectations of our customers.

"When someone exceeds your expectations and you want to recognize him/her with an award, you fill out the IBM Midwestern Area form and give it to the process administrator. You receive the envelope and card that contains $20 that you use to purchase a gift for the person who exceeded your expectations. You purchase the gift, personalize it, and present it to the award winner with the envelope and card to say thank you."

The peer-to-peer, or ETHYL (Encourage the Heart with Your Leadership), award addresses several of the observed deficiencies in the recognition process, including:

  • Recognition of too few employees due to a process that is too bureaucratic.
  • Opportunities for awards not extended fairly to all employees.
  • Desire to have awards other than cash.
  • The relationship between recognition and customer satisfaction.

This form of recognition is tied to the process rather than to end results. It involves employees in the recognition process by increasing the sense of belonging in all employees. This process is not a competition; it does not have winners and losers.

Testing of the ETHYL award in the Midwestern area has given initial indications of success. Based on feedback from the initial testing, a number of business units have adopted the process. Since July 1991, more than 4,000 ETHYL awards have been given. More than 85 business units across the United States and worldwide use the award.

MDQ Professional Process Award

The Market-Driven Quality (MDQ) Professional Process Award has been developed as a response to observations that:

  • Only individual efforts are recognized, not team efforts.
  • Recognition is given for end results, not for the processes that are necessary to achieve them.
  • Employees are not sufficiently involved in the current recognition process.

To quote from the memo describing the award: "Traditionally, business awards have been based on 'most' numbers: most revenue brought in or most profitable new product. IBM, of course, recognizes those individuals who drive bottom-line numbers; profit is a significant reason why IBM is in business. But, since continuous quality improvement is also crucial to long-term success, IBM also singles out those who demonstrate excellence with regard to the processes and behavior of quality.

"The MDQ Process Professional Award is given to IBM teams in recognition of their using quality tools in the work efforts for the Midwestern area. Recipients are selected by a cross-trading area council of MDQ professionals based on nominations by separate process teams. A team can be nominated only by another team. All teams reaching the status of certification are awarded a custom-designed medallion, box, and letter from IBM's vice president and general manager."

Criteria for the award include teamwork, use of quality tools and processes, and use of measurements to capture results.

Tread carefully

While recognition programs might be an excellent way to promote new values in a business culture, the installation of an appropriate program requires a knowledge of theory, a careful assessment of the current state of the culture, extensive planning, and testing of new ideas. Different cultures will require different actions. However, the stages of learning the theory, assessing the culture, planning, and testing are appropriate and necessary for all businesses.

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