Bob is the program administrator for his manufacturing company’s 1000+ employees and distribution channel. Bob’s typical day is spent reviewing gift card purchase redemptions for multiple “spot award” programs of $100 or less, as well as planning for the end of year trip (with meeting) held concurrently to honor their top distributor reps and internal sales people (budget: approximately $2,500 per participant).

Although fictional, “Bob” puts a face on how a majority of 170 designers and managers of reward and recognition programs responded in our recent study entitled “The Use of Reward and Recognition Awards In Organizations.”  Relating to the use of cash, travel, merchandise and pre-paid gift cards in reward and recognition programs, we looked for answers to these six questions:

  1. What is the current usage of these award types?
  2. What is your basis for award type selection?
  3. What is the targeted value of the award (dollar/award) by award type?
  4. How do you determine the value of the award to offer?
  5. How effective is the award in achieving your objectives?
  6. How do you determine award effectiveness?

The following was developed in joint-cooperation between the IRF and the Incentive Federation and provides highlights of this valuable study.

WHO USES THESE AWARD TYPES

Our survey’s participants manage recognition and rewards programs focused on achieving specific performance outcomes. Not to be confused with normal sales commission bases, stock options, or other types of cash payment arrangements, these programs can be considered “Classic Incentive Programs” in the truest sense. Survey participants came from the industries shown below:

The Use of Awards in Organizations

As one might expect from a classic incentive program, respondents overwhelmingly cited sales personnel as their most frequent program targets. Note the low involvement of people from executive management and other support functions as indicated in table 2 below.

True to the classic denition, table 3 below shows that a majority of the programs are for internal company employees and people within the company’s distribution or sales channels.

The award types they use are widely dispersed. Note the Use Only This Award amounts in table 3.  26% of the respondents said they use pre-paid cards exclusively, more than double what they said about cash, travel or merchandise.

As shown in table 4, the budgets for cash, merchandise and pre-paid cards are fairly similar. It is not until budgets reach the $100,000 - $250,000 range and beyond that travel takes over in terms of largest budget amount.

As shown in table 5, a Median Amount of $2,500 for travel awards was reported -- much higher than cash ($250), merchandise ($100), or pre-paid gift cards ($50). Average Per Award Amounts by type (table 5) suggest that cash, merchandise and gift cards are used for spot awards (such as weekly behaviors) while travel ($2,500 Median and $3,115 Average) relates to annualized goal attainment, hence requiring a larger budget outlay. The full report provides insights as to why cash is triple the amount of merchandise and gift cards.

Program administrators cite gift cards as being “easy to provide rewards efficiently.” Award recipients can use them to purchase what they would like. When it is highly desirable to provide a unique experience, build loyalty to the brand and establish an emotional connection, travel gets the nod. Given that spot awards occur frequently and are usually at lower dollarized amounts, something that is easy to administer is preferred.  Pre-paid gift cards meet this need well from an administrative standpoint.  Merchandise is viewed as the best tangible reminder, supporting previous study findings (Jeffrey & Shaffer, 2007) on the ease in which people can discuss receiving merchandise awards with colleagues, family, and friends.

 

When asked to report how they determined the optimal amounts to budget for their reward and recognition programs, the percentage responding Intuition or Experience was over 50% across all four award categories.  Given that award expenditures range from 3%-5% of salaries, this is an important area for future research, especially when considering how respondents answered our questions regarding award eectiveness.  As shown below, the majority of respondents do not have what they consider good measures to determine the optimal award value on which to base their programs.

The good news is that almost no respondents indicated that their reward and recognition programs were having a negative effect; further, a large number of respondents said their programs garnered from somewhat positive to signficantly positive results.