Right align your rewards & recognition system

Rewards and recognition is an important organizational element that used wisely can hasten the pace of business transformation and bring about the desired change in behavior and outcomes at various levels. Rewards and recognition come in many forms: monetary, prize, gifts, awards, empowerment, etc. A common fallacy in many organizations is that they tend to use the rewards & recognition programs without any consideration of life-cycle of the organization, or the stages of any change management program or the intended role of R&R systems. Role of right rewards and recognition in organizational development and change management is highly researched topic. Accordingly, in the initial stages of the company, the focus is on getting things right. For example, in a software product company the R&R must focus on “do” part. CTO would have broadly identified a product/service to develop, a software developer role is to develop the code in time without any bugs and within the accepted or budgeted number of revisions. In the initial phase, the rewards and recognition systems must be more on “directing” the required outcomes. R&R at this stage may include proficiency based pay, performance based incentives, feedback, appreciation letters, initiative to complete the work faster, extending beyond role, recognition and interdepartmental coordination.   As the organization grows the focus is on improvements that can be initiated within the teams and at individual levels to gain from efficiency, effectiveness and knowledge management. Appropriate R&R at this juncture must emphasize individual incentives to encourage incremental innovations, public recognition, town hall appreciations, employee of the year/month, sponsorship for conferences, training and higher education keeping in mind the developmental path of the employee. As organization matures, the emphasis of R&R must shift to encourage innovation as conscious efforts must be encouraged and attempted at all levels of the organization to ensure it does not become a victim of “Core rigidity”. Many successful organizations and family led businesses fail to survive longer because they tend to adhere to their core competencies and do not invest enough to diversify and de-risk the organization from technology and market changes. Hence, while continuing with some of the earlier R&R measures, more focus should be on designing measures such as gain and risk sharing incentives, team goal sharing incentives, new product or process application awards, hall of fame awards, high-priority skunk team awards,  nominations to benchmarking tours,  suggestion over-the wall award, etc.   

Analysis of successful long term change management programs also indicate the R&R scheme must change with the stages of change management. While there are many frameworks describing the change management process, most models have three common stages. First stage “Initiate”, is the preparatory stage, where the new directions are discussed to obtain buy-in across the organization, and change leaders are identified.  Few fundamental initiatives that can showcase positive outcomes in short time are rolled out to win over nay says and increase the adoption rate of change management activities. In the second stage,  “extend”, more departmental and sub-departmental level changes in line with the major changes attempted in initiate stage are deployed. Departmental integration and managing outcome becomes the focus at this stage. In the third stage, “sustain”, continued efforts are made with the changes adopted in the previous stages to gain efficiencies and productivity. Scaling up of business operations to benefit from both economies of scale and scope gains are pursued. In this stage change management focus also must shift to identification of activities to improve profitability, new revenues streams and products/services to de-risk the business. Consistent with the above stages, we argue R&R systems and their focus must vary across the change process. In the initial stage, the R&R must be a heavy mix of extrinsic measures like skill based incentives, performance based incentives, written and town hall awards. In the extend stage, the focus would be on mix of individual recognition, financial awards and appreciations to  encourage the employees to own and drive changes. In the sustain stage, the R&R measures must be a heavy mix of monetary awards, individual and group recognition and development support (training, professional development, college education, specialized courses, etc).  Such alignment of R&R systems with focus on evolutionary stage of the firm and change management will help in designing appropriate R&R systems that can be goal directive, supporting and reinforcing the behavioral changes.  

S Indupriya

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