Employee Recognition-Typical Budgeting Practices
I'm interested in learning how companies manage employee recognition programs (other than bonus and incentive pay) in terms of allocating budgeted dollars.
Does your company provide budgeted dollars as a percentage of payroll or is it a per person allocation? Typically, what percent of payroll or per person is set aside?
Answers (10)
For simple accounting purposes what I do is allocate a certain percentage of each sale to a "employee account" so that I know what money I have to work with. Then I look for creative ways to let the employees earn that money. I try to base the incentives in various ways so one person, say the top seller, does not always have the advantage. This way I keep it fair for all employee and they enjoy the competition.
Ray M
Energy expert, educator, award winning sculptor
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Where ever I have worked there has always been at a lest a token budget for acknowledgement of employees.
In my experience it has not been a percentage of payroll or by employee but an arbitrary number.
For example when I worked at GE Aircraft Engines we had reached a mjor safety milestone of 3 million manhours without a lost time injury. A great accomplishment with a plant of about 8000 people at the time.
To recognize the accomplishment The EHS office decided to pass out ice cream sandwiches. We had 8000 people working there and they bought...............2000 ice cream sandwiches at 50 cents a piece........
It irritated people more than if they had only just made an annoucement and congratulated everyone.
If you are going to do it, do it right or do not do it at all.
Sandrine B
Vice President, Compensation & Benefits at Majid Al Futtaim Group
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Hi Anita,
Only one of my previous companies had an official, budgeted recognition scheme. (All other companies managed "ad hoc" ie very rarely.... and in my opinion were therefore missing opportunities to maintain motivation and commitment).
The payout was about 10% of annual base salaries for those employees that were awarded a recognition bonus (could be more, and HR ensured it was not less than 7% so that it was meaningful).
Eligible employees were employees from a certain level up (I'd say senior individual contributors, not your junior employee with 2 years of experience. But it was not restricted to managers only, it was open for a large portion of the population, about 70% of all employees were eligible).
The budget was calculated as 10% of 5 to 7% of the wages of the eligible population.
There was an online tool for submitting a recognition request, with approval from the manager's manager and HR to ensure consistency.
The whole principle was to use the budget throughout the year for "spot" or instant recognition upon reaching important milestones or specific achievements. We did not wait for the end of the year or anything like that.
On top of that the company had other recognition tools, non financial ones such as managers granting vouchers for dinner cruises, celebration parties, "congratulations" notes, special awards ceremonies etc....
A fairly comprehensive system that ensured that in a highly competitive environment, employees remained committed to the organisation.
Kind regards,
Sandrine
Many ways! But as Ray Miller says don't ever get to that cheap model. It only aggravates people. You might tink what I started in one company, sales sharing. Sales and marketing, with their big bonuses, were of course against it but after a while because everyone was thinking how to sell more they found out that it was actually nice. It depends of the company but for us it did work, customers were happy because they didn't have to deal with a (sleazy) sales person, they were apple to to start the process with professionals, sales was happy because they had more time for new opportunities and of course the company was happy with more sales. It seems so win, win that I'm wondering why it it isn't done more often? Everybody feels connected to what the company is doing.
Anita,
Good questions. I am going to have to do some internal networking on this one for Pfizer. I can tell you that while I was at Office Depot it was a percentage of the overall budget. Over the last 2 years Pfizer has experienced a major restructuring and a reduction in workforce with a very decentralized budget and planning system. I would not be supprised if we have a combination of things going on. I will look into it ASAP. When do you need to get a reply.
Sam
According to extensive research by recognition experts Adrian Gostick and Chster Elton, authors of "The Carrot Principle", many organizations budget 2 percent of payroll or about $1000 per employee per year for all types of recognition programs combined (day-to-day, informal, and formal programs). They go on to say that spending can vary, but that this is a good basic starting point to improve employee performance, engagement, and satisfaction.
Think of recognition programs alongside a pyramid. At the bottom of the pyramid you have the broadest-reaching programs that impact most, if not all, employees in the organization (e.g., day-to-day informal recognition, onboarding, service awards, etc). At the top end of the pyramid you have the most prestigious award programs that impact the least number of employees in the organization and represent the most significant accomplishments rewarded (e.g., President's Awards, Chariman's Circle, sales achievement, etc.). The idea is that, whatever the budget, recognition dollars are best spent when they are aligned with the recognition pyramid concept. If the general recognition concept "Praise effort. Reward results." is followed, then one would expect the greatest amount of dollars to be delivered at the top of the pyramid where the effort expended to accomplish the most is the greatest. One could also utilize many low or no-cost recognition ideas at the bottom of the pyramid on a more frequent basis.
Check out the websites below for many great ideas around recognition practices and administration.
Links:
Patrick A
Branding and Employee Performance Expert, Professional Speaker - Partner, Brand Integrity, Inc.
Hi Anita -
In addition to understanding what the $ is per employee from a payroll perspective, it is also important to understand the mindset of where the dollars should come from. Most organizations allocate the dollars solely out of the HR budget and I believe this is a mistake. Employee recognition should be a full organizational commitment where all functional units (marketing, ops, sales, etc) should allocate dollars to a total employee recognition budget. The budget shouldn't come from or live in any one function. Recognition should be a strategic, leadership-driven process for acknowledging others in the workplace for good work that is aligned with the overall business objectives and strategies for the organization. If you believe in this philosophy of recognition then budgeting discussion should be fairly straightforward.
Take and reallocate from traditional budgets that already exist:
Marketing
Sales
Human Resources
Operations
Recruitment
Training
CEO secret budget (they all have it!)
Company Bonus Pool
Tom A
Sr. Contract Recruiter at Life Technologies
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Tom A suggests this expert on this topic:
Eugene R
CEO
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Anita,
there is an excellent book on this, I can highly recommend:
http://www.amazon.com/1001-Ways-Reward-Employees-Nelson/dp/0761136819/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1199724545&sr=8-1
Links:
Barbara W
Recruiter at Management Recruiters of Albuquerque bwiley@mrialbq.com (505) 346-4700
Hi Anita!
We are a very small company so we don't allocate other than established commissions, etc. We spent approximately 12% on annual bonuses -- some were based on pre-established criteria and some were arbitrary end-of-year thanks.
