When times are tough and profits are low, budget lines for things like education, employee events, and recognition, often get cut.
It’s easy to blame leadership – either for the financial failings of the company or for the budget fallout. But not all financial issues come from poor leadership.
Leaders have a difficult position to fill when it comes to prioritizing how company monies are spent.
While you are the defender of employee recognition practices and programs, you must also be transparent about the success and impact of your recognition and rewards programs. Are your programs producing their intended results? Is there a positive ROI? What is your program’s impact on people and performance?
On your leader’s behalf: Is there ever a right reason to cut a recognition and rewards program?
Rewards and Recognition Produce Different Outcomes
First off, you had better understand the differences between a rewards program versus a recognition program. Each has very distinct benefits and pitfalls that you should consider before cutting a program.
Rewards are tangible, monetary, or experiential items, given to a person or team, in return for reaching a pre-set goal, a significant achievement or some service performed.
The purpose of rewards is to drive someone to perform specific tasks through extrinsic motivation, or positive reinforcement, and to hopefully see the same behaviors repeated.
Recognition, on the other hand, is mostly an intangible expression of acknowledgment and valuing of an individual or team, for their positive behaviors, their personal effort, or the contributions they’ve made.
The goal of recognition is to transfer positive emotions or feelings felt by one person to another, for what they’ve done, observed or heard about, and thereby motivate them on an intrinsic level.
Remember, you recognize attitudes and behaviors and you reward results, accompanied by recognition.
With rewards being tangible or monetary in nature, they are used to incent a specific action to happen. They are associated with the occurrence of some action or performance completed. Rewards are given in a transactional and conditional way. You’ve likely heard the formula associated with rewards. If you do X behavior or achieve Y results, then you’ll receive Z reward or incentive.
Rewards reinforce the desired results. The behavioral science theories suggest that what gets rewarded gets repeated.
But for how long? As long as you keep giving people the rewards. When the rewards stop, so do the results. Therein lies the problem with rewards. Rewards help maintain compliance on an extrinsic level for the short-term. When you remove rewards there is a tendency to stop producing the results.
Recognition, on the other hand, encourages and reinforces desired behaviors. Your specific feedback helps identify and acknowledge the positive behavior for each employee. Your recognition can be spoken or written words and need not have tangible gifts or rewards associated with it.
When you remove recognition there is a tendency for employees to disengage with their work and disconnect with their immediate supervisor or manager. If an employee actively disengages they are twice as likely to start looking for employment at another company. They also stop behaving as positively.
Reasons You Might Cut Recognition and Reward Budgets
Here are some justifiable reasons I have observed for why a leader might cut a recognition budget.
1. There’s a need to consolidate your recognition and reward programs. Too often, well-intentioned leaders started a recognition and reward program years ago. These programs can go rogue and become too independent of the company direction. They fall off the radar screen, as far as HR is concerned, or whoever manages recognition. Centralizing all of your recognition and reward programs makes sense strategically, administratively, and financially.
2. Reallocating of existing funds from reward and award programs in order to start a more purposeful or strategic recognition program. You know that peer-to-peer recognition is growing need. You have wanted to initiate a social recognition program to allow colleagues to acknowledge one another. I have seen budgets reduced in certain programs, such as with certain year levels of milestone recognition. This allowed the recognition manager to acquire a more strategic recognition program such as social recognition.
3. When there’s a desperate need to save funds to save the company. Harsh times can call for drastic measures. This is where I say you may have to cut programs that have higher costs associated with them. However, this does not mean you immediately stop doing everyday recognition practices. Not at all. In fact, even with higher budget programs being cut, like milestone recognition, you can still recognize their anniversaries in simpler and more personal ways.
As a recognition professional, you must learn how to make sense of corporate budgeting and spending. Find out how recognition can impact business goals and key results. Understand how to protect and advocate for the ideal recognition program budget. Yet, at the same time empathize with what your leaders must go through to defend your recognition budget.
Recognition Reflection: Where might you need to change your thinking with respect to your future recognition program budget?
Roy is no longer writing new content for this site (he has retired!), but you can subscribe to Engage2Excel’s blog as Engage2Excel will be taking Roy’s place writing about similar topics on employee recognition and retention, leadership and strategy.