Investing in employee rewards, recognition, and benefits: How to measure success
As another financial year rolls around, it’s time to evaluate how well you spent your budget over the past 12 months. Taking into account that the last time yearly budgets were prepared Australia was in the peak of our COVID19 experience, it is an interesting exercise to measure success in investments since then.
HR teams were one of the hardest hit in terms of needing to react fast — and react well — during the pandemic. One major concern for HR teams was ensuring that employees were supported but still productive even with all the disruption going on. Amongst all the strategies that could be used to achieve those outcomes, introducing or enhancing employee recognition, rewards, and benefits was a popular one in 2020.
One such HR team was lead by Jodi Paton, Director of People, Performance and Culture at HOYTS, said all employees at the organisation had “taken a reduced salary of some sort throughout the year,” and as a result she “wanted to look at ways to offer rewards to our employees across the spectrum."
This approach stems from their company values, says Jodi. “We talk a lot about our values underpinning the way we work and interact with each other. We want our team to feel valued.”
HOYTS are leading the industry in this thinking — research has shown that reward and recognition programs pay off. IBM uses a measurement called the Employee Experience Index, a higher score is linked to higher performance, financial outcomes, and resilience in employees. They found that employees who report their organisations offering reward and recognition programs that were tied to their values had considerably higher employee experience index scores than organisations without a formal program.
Knowing that there are ways to measure abstract initiatives in hard numbers, how do you go about measuring what you’ve done over the past 12 months?
How to measure the success of your work
To measure the outcomes of rewarding, recognising, and increasing the benefits available to employees is difficult in a normal year, let alone a year where you don’t know what the baseline is. To get around this, have a look at your organisation’s results for the following areas, and ask yourself ‘would this number have been worse if our employees were less supported, focused, resilient, and productive? Can I point to any of my own work that explicitly aimed to provide that support, focus, resilience and productivity?’ If the answer to both questions is ‘yes’, then you’ve got a good foundation to call your work a success. Keep in mind that those four points (support, focus, resilience, productivity) are a small number of examples. Your work may have focused on other areas, which are equally valid.
Organisations with more frequent recognition see a 41% increase in employee retention. Did you see high retention throughout the 20-21 financial year? If yes you can point to your initiatives as a contributing factor! 63% of business owners say retention is more of a challenge than hiring, so it’s high impact to any business.
This IBM report found that organisations scoring in the top 25% of their Employee Experience Index had a 3x greater Return on Assets (RoA, which means your employees are making better use of the tools available to them), and 2x Return on Sales (RoS, or amount of profit per dollar of sales).
Customer and supplier satisfaction
Businesses with high Employee Experience Indexes also report reduced customer complaints and improved supplier relationships. This is really easy to measure, as you’ll likely have hard numbers to compare. How many customer complaints did you receive this year? Is it less or more than the previous year?
Include rewards and benefits in your FY21-22 budget
When you’re getting ready to implement a new initiative, it’s important to get your ‘start’ measurements in place. This can be done with an employee survey, and it’s important to ask questions that relate back to your organisational goals. For example, if you want to maintain a healthy workforce, then ask them to rate how healthy they feel their lifestyle is.
Other common goals include bringing the whole team together with a sense of unity, standardising recognition and rewards, improving communication across teams, and introducing peer-to-peer recognition to reduce the strain on managers.
How much should you budget for rewards and benefits?
A riddle for the ages, and a tough one to solve to satisfy employees and the finance team. There are a few ways to come to a conclusion. One of them is to review salaries and see where your average salary is against industry and seniority averages.
If you’re slightly under the average, you can look at how much it would cost you to bring everyone up to standard. This is then a ‘maximum’ and you can use that as a benchmark to measure reward and benefits budgets against. In this case, you need to make sure that the value of your benefits and rewards equals or exceeds the total value of the hypothetical pay increases, even if those rewards and benefits don’t cost as much.
Another way is to look at your sales targets and use them to work backwards to how much you need to invest to get that as a return. For this method, you’ll need to look at things like how much you’re spending on recruitment and set a goal for a reduction to cover the cost of your rewards and benefits. Other costs you can look to reduce include the number of sick days, and potentially even reducing salaries —21% of Australian workers are open to sacrificing promotions in exchange for greater wellbeing at work.
You can also think in abstract terms about how much you’re willing to spend. Can you increase every employee’s take home pay by $10 a month, or would hosting a team lunch once a month give more value per dollar? Would you like to get each of them a coffee on their way to work once a month?
Those values are much easier to factor in, especially when you’re likely already doing team lunches and getting a round of coffee here and there. Rather than running it on an ad hoc basis, putting structure around it can lead to huge returns you were missing out on.