What’s All the Recognition Fuss About?

Quite a lot, actually. The news headlines around the world in the last couple of weeks have been nailing bailed-out banks to the wall for trying to continue with traditional employee recognition junkets, senior executive bonuses and other schemes that are ill-conceived in the best of times but in this economy show how truly out of touch these executives have become.

A quick listing of just some of the latest headlines:

• Major U.S. bank Wells Fargo CEO John Stumpf actually took out a full-page advert in several major U.S. newspapers (text available here) to justify its since cancelled Las Vegas junket
• A bank in Wisconsin, USA, planned a trip (since cancelled) for 100 employees to a Puerto Rican resort after receiving half a billion dollar in federal stimulus funds.
• The Royal Bank of Scotland “bowing to government demands” to reduce investment banker bonuses from £1 billion to £175 million and cancel future bonus schemes.

Do hard working, dedicated and productive employees deserve to be recognized for their efforts? Of course, but firms must be more judicious in their use of recognition. Massive junkets offered in the name of recognition, regardless of tradition, are not wise in the current environment and, I would argue, are not wise at any time. For truly effective recognition, employees should be recognized when they do something worthy of recognition, not months later. This is critically important to driving home fundamentals such as company values or strategic objectives that you need to reinforce through recognition of behaviors that reflect those values and objectives. This must be done in the moment for full impact.

And employees should be given a choice of how they want to be rewarded for that recognition. Public acknowledgment is anathema to some, desired by others. Some may prefer to choose a vacation with family over a glorified business trip with colleagues. Others may not choose travel at all. My point is, to be meaningful, recognition should be personal.

And in regards to bonuses for bankers and financiers who oversaw mass failure in 2008, I like how John Hollon, editor at Workforce Management, put it:

"Regular Americans believe that Wall Street bankers are largely responsible for the financial mess the country is in right now. Whether that perception is right or wrong, Stumpf and his CEO friends need to buck up, shut up and be more sensitive to how their business practices might be perceived by the folks on Main Street. This is hardly the time to defend business as usual, no matter how legitimate it might ultimately be."

Let’s look at a couple of examples of those who got it right.

First, there’s the Miami banker that gave $60 million of his own money to his employees and even former employees. “After selling a majority stake in Miami-based City National Bancshares last November, all [Leonard Abess Jr.] did was take $60 million of the proceeds -- $60 million out of his own pocket -- and hand it to his tellers, bookkeepers, clerks, everyone on the payroll. All 399 workers on the staff received bonuses, and he even tracked down 72 former employees so they could share in the windfall.”

While I typically advocate against cash-based bonuses, this is entirely different. This is a man who looked at the profits of his business and realized he could have never realized that value without the effort of all his employees. This is more a profit-sharing plan, albeit a surprise, than a cash bonus. And it’s that surprise factor – a reward in recognition of years of dedication, loyalty and hard work – that sets this story of banking bonuses far apart from those I discussed above and elsewhere.

And second, there’s our client, Nortel Networks, who fought in bankruptcy court to keep its strategic recognition program for its employees. As reported in the Globe and Mail:

“The company has asked for court permission to keep the recognition program, known as Excellence@Nortel. In court filings, Nortel argues that these programs are critical to boosting morale and making sure its 26,000 employees don't spend their time looking for work elsewhere. Nortel and its subsidiaries ‘believe that in this difficult time it is essential that they be permitted to continue their practice of providing limited awards in recognition of the exceptional and outstanding work of their employees,’ the company said in a filing in the Delaware bankruptcy court last week.”

Employee recognition has proven to be so strategic to Nortel, it is specifically requesting funding to continue the program. This shows beyond a doubt Nortel understands it can recover under bankruptcy protection and emerge to again lead its industry, but it cannot do so without the commitment and hard work of its employees. This is also true for many companies struggling in today’s tough economy.

Our CEO at Globoforce, Eric Mosley, recently wrote an article in Chief Executive magazine that concluded with this observation and challenge:

“In today’s challenging economy, companies are looking for new and creative ways to enhance performance within the organization. Realizing employee engagement through strategic recognition efforts holds the potential to be the next significant ROI opportunity. These programs empower companies to create a unified, global workforce, aligning employees from multiple generations and multiple cultures around the very essence of the company, its core goals and values. What was once relegated to a tactical task that usually sat at the bottom of a priority list now sits squarely on the desk of the CEO. Are you ready to heed the call?”

I ask you, the readers of this blog – are you ready? Are you ready to get recognition right? What steps are you taking to keeping your employees engaged, motivated, and focused on your critical tasks? Join the discussion.