And what they can teach us about reward and recognition.
If you’re familiar with the employee recognition space at all, you will be familiar with the ‘cash vs. tangible reward’ argument.
For those of you that are not familiar, the argument goes something like this. If a company formally recognizes an employee for whatever reason – great attitude, team player, sales targets met, innovation, and so on – the reward should be tangible rather than cash. Cash, it is claimed, will just be subsumed into the employees’ personal cash flow and when they spend it, be it on a Starbucks coffee, gas for the car or the weekly groceries, they are unlikely to associate the purchase with being recognized. If they receive something tangible – and the definition of tangible becomes very stretched in the incentive world – such as an item of merchandise from a catalog, a gift card to choose something of their own choice or even a ticket to a concert, they are more likely to associate it with being recognized.
There are other more practical arguments as well. Administering cash payments in large organizations is all but impossible for security and audit trail reasons. If the payroll is used, the approval processes in most companies is so tedious that it will probably take 2 or 3 months for the payment to hit the employees bank balance. That destroys the concept that recognition is most effective as a motivator when given as close as possible to the behavior being recognized, or as one motivation guru used to put it; ‘reward whilst the brow is still wet!”. Secondly, the payment will probably arrive as part of a larger salary credit – percentage wise the value of the recognition reward is likely to be small compared to the total payment. The chances of the employee acknowledging the additional payment is slim. In this case I would say the rewarding company has almost certainly wasted its money as it has received no benefit whatsoever from the reward.
Let’s be candid here, companies don’t run employee recognition programs just to be nice. They should be run on a commercial basis. We want our employees to be more engaged, perform better and behave in the appropriate way.
With all this in mind, I was fascinated when I read an article recently on the Somali pirates operating off the east coast of Africa. Apparently, they operate a hierarchy of payments for the first pirate to board a ship. One example was given where the first pirate to board received an additional $25,000 above and beyond their share of the spoils, the second $15,000 and so on. Over time, theses payments were found to be less and less of an effective. Think about it. If my share of the spoils is going to be $500,000, why would I risk my life by being first on the boat for a paltry $25,000 that I probably won’t get for months anyway when the ransom has been negotiated and paid!
So what did they do? They switched to a tangible reward!
The first pirate to board was offered a Toyota Land Cruiser to be collected when they hit land. For anyone who has travelled to Africa, they will know that the Land Cruiser is the ultimate status symbol.
The result is that the pirates are now being more effective. Pirates are more engaged, pirate performance has improved and pirate behaviors are aligned. The pirates are running a commercial operation and the recognition program is totally aligned to delivering results.
In 2010, pirate attacks of the coast of Somalia doubled to 445 with 50% of these being successful. The average ransom paid now stands at $5.4 million.
I’m not condoning piracy for one minute but it proves a point. The next challenge for the pirates will mirror the challenges of most corporate recognition programs. How do you keep the audience engaged and excited by your program? After all, how many Land Cruisers does a man need!
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Pretty! You describe the topic very well. Thanks once again for the push!