A WorldatWork Survey Brief. Trends in Employee Recognition 2005

A WorldatWork Survey Brief Trends in Employee Recognition 2005 A Survey of Members of WorldatWork and the National Association of Employee Recognition (NAER) May, 2005

About WorldatWork and WorldatWork Membership Surveys WorldatWork is the world's leading not-for-profit professional association dedicated to knowledge leadership in compensation, benefits and total rewards. Founded in 1955, WorldatWork focuses on human resources disciplines associated with attracting, retaining and motivating employees. Besides serving as the membership association of the professions, the WorldatWork family of organizations provides education, certification (Certified Compensation Professional CCP, Certified Benefits Professional CBP and Global Remuneration Professional GRP ), publications, knowledge resources, surveys, conferences, research and networking. WorldatWork Society of Certified Professionals and Alliance for Work-Life Progress (AWLP) are part of the WorldatWork family. WorldatWork regularly surveys its membership of compensation, benefits and total rewards practitioners regarding current issues and topics, best practices and common professional practices. The majority of WorldatWork members are at the manager responsibility level or higher, have more than 10 years of experience in the human resources profession, and work in the corporate headquarters of a company based in North America with more than 1,000 employees. The association routinely receives a voluntary response rate from members in the 15 percent to 20 percent range, a response rate that generally ensures the respondents are representative of the WorldatWork membership as a whole. WorldatWork 14040 N. Northsight Blvd. Scottsdale, Arizona 85260-3601 480/922-2020 Toll free: 877/951-9191 Fax: 480/483-8352 Toll-free fax: 866/816-2962 www.worldatwork.org About the National Association for Employee Recognition The National Association for Employee Recognition (NAER) is dedicated to the enhancement of employee performance through recognition, including its strategies and related initiatives. The mission of NAER is to make employee recognition an integral part of every organizations business and people strategy. The association, based in Naperville, Ill., provides a forum for information and best practices sharing as well as education to foster the use, excitement, effectiveness and enthusiasm of recognition. For more information on NAER, please visit www.recognition.org. Copyright 2005 WorldatWork. This content is licensed for use by purchasers solely for their own use and not for resale or redistribution. No part of this article may be reproduced, excerpted or redistributed in any form without express written permission of WorldatWork and appropriate attribution.

Trends in Employee Recognition 2005 Survey Brief May 2005 A Survey of Members of WorldatWork and the National Association for Employee Recognition (NAER) Introduction and Methodology This report summarizes the results of a survey conducted jointly by WorldatWork and the National Association for Employee Recognition (NAER) in February 2005 to identify and track trends in employee recognition. A similar WorldatWork and NAER member survey was conducted in both September 2003 and October 2002, providing a baseline of information about recognition program types, strategies, measures, administration, communication and training. In February 2005, an updated survey instrument was sent electronically to 2,708 WorldatWork members and 599 NAER members. A total of 614 responses were received, a response rate of 19 percent. With this sample size and response rate, at a 95-percent confidence interval, the margin of error (or confidence interval) is +/- 4 percent. The demographic profile of the survey s respondents is similar to that of the WorldatWork membership as a whole. The typical WorldatWork member works at the managerial level or higher in the headquarters of a large company in North America. Ninety-five percent of the Fortune 1000 companies have an employee who is a WorldatWork member. Summary of Key Findings The report is divided into five sections: I. Screening Questions II. Strategy, Goals and Measures of Recognition III. Structure and Types of Recognition Programs IV. Program Administration and Support V. Recognition Program Communication and Training Highlights from each of the sections follow: I. Screening Questions Recognition remains important to organizations; 92 percent of organizations say employee recognition is occurring more often today within their organization versus 12 months ago. Nearly half of all respondents (48 percent), regardless of whether they have employee recognition programs in place, are considering adding new recognition programs in the next 12 months. II. Strategy, Goals and Measures of Recognition 1

Sixty percent of organizations with an employee recognition program have a written program strategy. The established objectives/goals of recognition programs have not changed much since the 2003 survey: Creating a positive work environment remains the most common goal at 81 percent of organizations. Motivating high performance, reinforcing desired behavior and creating a culture of recognition continue to drive recognition programs. Seventy-six percent of respondents believe their recognition programs are meeting outlined objectives and goals. Employee satisfaction surveys (used by 45 percent) are still the most common way organizations gauge the success of recognition programs, but participation rates and the number of employee recognition nominations received also are increasingly used as measures. III. Structure and Types of Recognition Programs Length of service programs continue to be the most common type of recognition program offered (89 percent of organizations), with 87 percent of those companies having offered the program for more than five years. Almost seven in 10 organizations (69 percent) report they have a specific budget for recognition programs. IV. Program Administration and Support The human resources department has primary responsibility for recognition program administration in the majority of organizations (57 percent). Fifty-five percent of respondents believe that senior management views recognition programs as an investment, while 13 percent think management views it as an expense. V. Recognition Program Communication and Training Only 23 percent of respondents say that a formal training program for recognition programs exists within their organizations. Among the organizations that do have formal training, 69 percent rely on in-person training sessions. 2

Detailed Survey Results Section I. Screening Questions The first four questions of the survey (reported in this section) were asked of all respondents, regardless of whether they indicated their organization has an employee recognition program. The 11 percent who said they do not currently have a recognition program in response to question 1 (Figure 1) were asked to skip from question 4 to the end, the demographic section of the survey. Most Respondents Have Recognition Programs An overwhelming majority (89 percent) of survey respondents have recognition programs in place in their organizations. This compares to 87 percent of respondents in the 2003 survey and 84 percent in the 2002 survey. Figure 1. Does your organization currently have recognition programs in place? (n=614) 2005 2003 2002 Yes 89% 87% 84% No 11% 13% 16% Most Respondents Have Not Eliminated Any Recognition Programs in Past 12 Months Most organizations (89 percent) reported that they have not eliminated any recognition programs in the past year. Only about one in 10 respondents said their organization eliminated one or more recognition program(s) in the past 12 months. In the 2002 survey, an identical 89 percent of respondents who reported having a recognition program said they had not eliminated any programs during the previous 12 months. Figure 2. Have you eliminated any recognition programs in the past 12 months? (n=599) Yes 11% No 89% 3

About Half Are Looking at Starting New Recognition Programs in Next 12 Months Almost half of respondents indicated that their organization is considering or planning to add new or expanded recognition programs in the next 12 months. In the 2003 survey, only about 40 percent of organizations reported that they were considering adding new or additional recognition programs in the near future. Figure 3. Are you considering implementing any new or additional recognition programs in the next 12 months? (n=601) No 52% Yes 48% Ninety Percent Believe the Same Amount or More Recognition Is Occurring Today vs. 12 Months Ago Survey respondents perception of the number of employee recognition incidents occurring within their organization seems mostly stable, with a combined 92 percent of respondents saying that there is about the same (52 percent) or more (40 percent) recognition occurring today versus 12 months ago in their organization. 1 Figure 4. Is there more or less recognition occurring (either formally or informally) in your organization today versus 12 months ago? (n=599) 40% More than 12 months ago 52% Less than 12 months ago 8% About the same as 12 months ago Section II. Strategy, Goals and Measures of Recognition After the first four questions, only those with employee recognition programs continued through the body of the survey. Those without recognition programs were asked to skip to the end, complete the demographic section and submit. Sixty Percent Have a Written Recognition Strategy Sixty percent of organizations have a written strategy regarding their employee recognition program(s), and 95 percent of those with a written strategy believe that it aligns with the overall 1 Although this is similar to a question asked previously, it has been made more specific and thus, comparison to previous surveys is not possible. 4

organizational strategy. However, about two in five respondents (40 percent) report no written strategy behind their organization s recognition programs. Figure 5. Is there a written strategy behind your organization s recognition programs? (Why they were created, the goals, etc.) (n=532) No 40% Yes 60% Figure 6. Does your recognition strategy align with your organization s strategy? (n=319) No 5% Yes 95% The Number One Goal of Recognition Programs (Again): Create a Positive Work Environment When asked to select all of the goals of their organization s recognition programs, the top three answers for all three surveys (2002, 2003 and 2005) have been creating a positive work environment, motivating high performance and reinforcing desired behavior. In 2005, a newly added response creating a culture of recognition, was the fourth most common goal selected by respondents. Respondents that selected other in 2005 included comments such as: to recognize years of service, to support becoming or remaining an employer of choice, and to provide line of sight to company goals for employees. Responses in both 2003 and 2002 were very similar, with only a few exceptions slightly outside of the margin of error of the 2005 survey (+/-4%). 5

Figure 7. What are the objectives/goals of your organization's recognition program? (Check all that apply) (n=528 in 2005 survey) 2005 2003 2002 Create a positive work environment 81% 80% 84% Motivate high performance 75% 75% 73% Reinforce desired behavior 71% 75% 76% Create a culture of recognition 70% n/a n/a Increase morale 65% 71% 69% Support organizational mission/values 62% 66% 68% Increase retention or decrease turnover 49% 51% 51% Encourage loyalty 38% 40% 45% Support a culture change 23% 24% 23% Other (please specify) 3% 5% 9% Three in Four Believe Recognition Programs are Meeting Goals More than three-fourths (76 percent) of respondents feel that the recognition programs are meeting the established objectives and goals of those programs. In the 2002 survey, a similar 78 percent answered in the affirmative. Only 24 percent in 2005 believe that their programs are not meeting goals. Figure 8. Do you feel your programs are meeting the objectives/goals? (n=529) No 24% Yes 76% Employee Satisfaction Survey Is Top Success Measure for Recognition Programs More than a third of respondents (36 percent) in 2005 said their organization does not measure the success of their recognition programs. For those that are measuring success, employee satisfaction surveys are used most commonly, with about 45 percent of companies using this gauge. Usage and/or participation rates and the number of nominations made to recognition program(s) also are commonly used indicators of the success by companies in 2005. Figure 9. What measurements for success do you use in your recognition programs? (Check all that apply) (n=530) 2005 Employee satisfaction surveys 45% Usage and/or participation rates 32% 6

Number of nominations 31% Turnover 20% Customer surveys 15% Productivity 15% Return on investment (ROI) 9% We do not measure success of the program(s) 36% Section III. Structure and Types of Recognition Programs Most Organizations Have Both Formal and Informal Recognition Programs Most respondents (71 percent) indicated in 2005 that their organization offers both formal and informal recognition programs similar to percentages in the previous two surveys. In the survey, formal programs are defined as planned recognition programs (e.g., attendance, performance, safety, years of service, etc.), while informal programs are spontaneous gestures of appreciation (non-monetary or of small monetary value). Figure 10. What types of recognition programs are included in your recognition strategy? (n=535) 2005 2003 2002 Formal Only 19% 16% 17% Informal Only 9% 9% 10% Both 71% 72% 70% Other 1% 3% 3% Most Organizations Have Both Organization-Wide and Department-Specific Recognition Programs Just over half (52 percent) of respondents reported recognition programs that are both organizationwide and department-specific, while another 38 percent indicated that their recognition programs are company-wide only. Just 7 percent stated that their recognition programs are department-specific. A handful of respondents selected other and indicated that their programs vary greatly among different subsidiaries or by type of employee. Data from the 2003 survey is nearly identical to Figure 11, with 43 percent saying companywide, 5 percent reporting department specific, 49 percent both and a 3- percent other response. 7

Figure 11. Are your recognition programs (n=537) 3% Company-wide 38% Department-specific 52% Both company-wide and department-specific 7% Other (Please specify) Length of Service Is the Most Common Recognition Program; Above and Beyond Is Second As in both 2002 and 2003, the most prevalent type of recognition program offered by organizations in 2005 is for length of service. Of the 89 percent that offer this program today, 87 percent have offered it for at least five years so this program is very common and established. Most of the recognition programs listed in Figure 11 were reported by respondents to have been offered for longer than one year and, for many programs, respondents say their organization has been offering them for more than five years. For example, of the 51 percent of organizations that have an established retirement recognition program, 91 percent have been offering the program for more than five years. Similar frequencies were revealed in the previous two surveys. Respondents whose companies offer other various programs were asked to share the types of programs. Below are both the most common among the other responses and some of the most unique and innovative programs mentioned: Major family event (birth, adoption, marriage, etc.) Thank You President s award Programs to motivate specific behaviors (customer service, production, etc.) Patent or invention Peer-to-peer or employee-to-employee Cost reduction or savings Educational achievement 8

Figure 12. What types of formal recognition programs do you offer, and how long have they been in place? Length of service (n=500) Above and beyond performance (n=474) Sales performance (n=413) Retirement (n=427) Suggestion/ideas (n=394) Employee of the year, month, etc. (n=439) Safety performance (n=399) Attendance (n=437) Other (please specify) (n=55) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percent of Respondents If offered, for how long? More than 5 Less than 12 1 to 5 years years months Retirement 91% 8% 1% Length of service 87% 11% 2% Sales performance 70% 22% 8% Attendance 66% 30% 4% Employee of the year, month, etc. 57% 33% 10% Safety performance 53% 35% 12% Suggestion/ideas 46% 42% 12% Above and beyond performance 46% 43% 11% Other, if applicable (please specify) 46% 38% 16% Length of Service Is Most Frequently-Awarded Recognition Consistent with their status as the most commonly offered recognition programs in 2005, length of service and above and beyond performance also recorded the highest percentage of employees who were recognized during the past 12 months. The number of employees recognized under each of the programs is related to the type of plan and subsequent employee eligibility, but the responses in Figure 13 indicate under which programs the most employee recognition is occurring. Respondents in the other category revealed the same types of programs reflected in Figure 12. Figure 13. For the programs your organization offers, what percentage of your employees were recognized in the past 12 months within each program? 2005 2003 2002 Length of service 25% 28% 29% Above and beyond performance 19% 21% 21% Safety performance 16% 21% 24% Attendance 16% 26% 19% 9

Sales performance 14% 22% 13% Retirement 11% n/a n/a Suggestion/ideas 7% 11% 10% Employee of the year, month, etc. 6% 10% 6% Other (please specify) 18% n/a 22% Special Events, One-On-One and Staff Meetings Are Most Common Recognition Venues It is not surprising that companies are using a variety of different methods to present recognition awards. Depending on the type of recognition or award, most companies are recognizing employees at special events (70 percent), one-on-one meetings with managers (67 percent), and in staff meetings (60 percent). Another 36 percent said their organization also presents recognition awards in companywide meetings. Among the other answers: intranet announcements, newsletter articles and presentations during trainings or board meetings. Figure 14. Where are recognition awards presented? (Check all that apply) (n=528) 2005 2003 2002 Special event 70% 63% 65% One-on-one with manager 67% 69% 63% Staff meeting 60% 59% 59% Company-wide meeting 36% 37% 33% Not presented 10% 7% n/a Other (please specify) 3% 10% 11% Certificates/Plaques and Cash Are Still Top Recognition Items Organizations are using a variety of tangible items to recognize employees. (See Figure 26.) The most common tangible awards are certificates and plaques, followed by cash, company logo merchandise and gift certificates. The dispersion of responses in Figure 15 demonstrates that companies are offering multiple or different awards for different programs. This variety of award types gives employees an opportunity to earn rewards that meet their wants and needs, which, in turn, increases the motivation to meet the goals of any given recognition program. Respondents also were able to provide examples of other types of items that are being presented as recognition awards. Food (breakfast, lunch, steak/crab feeds, pizza parties, etc.) Stock Paid time off/holidays Employee drawings Figure 15. What types of items are presented as recognition awards? (Check all that apply) (n=535) 2005 2003 2002 Certificates and/or plaques 81% 75% n/a Cash 58% 63% 58% Company logo merchandise 57% 51% n/a Gift certificates for products/items 57% 57% 63% Jewelry 44% 43% 40% Office accessories 38% 41% 41% 10

Household items 38% 34% 35% Recreational items/sporting goods 29% n/a n/a Electronics 28% 24% 24% Gift certificates for personal services 25% 26% n/a Travel 21% 17% 14% Timepieces 21% 33% 28% Other (please specify) 8% 23% 31% Section IV. Program Administration and Support In Most Organizations, HR Administers Recognition Programs More than half of all respondents (57 percent) said that the human resource department is primarily responsible for administering recognition programs. Among the remaining 43 percent of respondents, 15 percent said that each department in the organization is responsible for its own recognition program administration and another 11 percent reported that the compensation department has responsibility for all recognition programs. Most of the 8 percent that selected other revealed that recognition program administration is handled through cross-functional teams. Figure 16. What department is responsible for administering the majority of your organization s recognition programs? (n=506) 2005 2003 Human resources 57% 48% Each department in the organization is responsible for own program administration 15% 15% Compensation 11% 12% Benefits 3% 3% Organizational development 3% n/a Corporate communications 2% 3% Training 1% n/a Other (please specify) 8% 19% Most Organizations Do Not have a Full-Time Position Dedicated to Recognition While human resource departments most commonly have administrative responsibility for recognition programs, the vast majority of organizations do not have a full-time, dedicated position responsible for recognition administration. The 16 percent that do have a full-time position indicated having an average of 2.6 full-time equivalent (FTE) employees dedicated to recognition. Twenty-six percent of respondents indicated that their organization dedicates portions of employee time on average about 20 percent of the week is spent on recognition programs. There were a handful of respondents who selected other and indicated that the position responsible for program administration varies by program and/or type of employees. 11

Figure 17. What position is responsible for administering the recognition program(s)? (n=523) 6% 16% Full-time dedicated position(s) Position within department above dedicated part-time 52% 26% No one position is responsible for the program, it is a shared repsonsibility among the department personnel Other (Please specify) Respondents were asked to identify the job title(s) of the position(s) primarily responsible for recognition program administration. There were a variety of responses, however most could be categorized within one of the following groups and tended to have human resources or compensation and benefits in the title: VP of human resources, total rewards, or compensation and benefits Senior level within HR, compensation and/or benefits but not VP Manager (operational or corporate/administrative) Recognition coordinator Analyst (typically compensation or benefits analyst) Most Organizations Have a Specific Budget for Recognition Programs Sixty-nine percent of respondents indicated that their organization has a specific budget for recognition programs. Among this group, the average sets aside roughly 3.8 percent of their payroll budget for recognition programs. When respondents who indicated their organization has a specific recognition budget were asked whether the budget is centralized (entire organization), specific to each department budget, or a combination of both, significant dispersion was revealed. Forty percent said their budget is for the entire organization, 37 percent said it was both centralized and department specific, and about 23 percent said it is up to departments. Figure 18. Is there a budget for your recognition programs? (n=528) 2005 2003 2002 Yes 69% 71% 62% No 31% 29% 38% 12

Figure 19. Is the recognition budget: (n=399) 37% 40% Centralized for the entire organization Held in each specific departmental budget 23% Centralized or departmentspecific Most Believe Management Shows Better Than Moderate Support for Recognition Respondents were asked to provide an opinion about the degree to which their organization s senior management team supports recognition programs (1-7 scale with 1 defined as showing no support at all and 7 as showing a high level of support ). The vast majority (84 percent) believes management shows moderate support or better, with almost half of all respondents giving either a 6 or 7 rating. The overall average rating (mean) rating among all respondents was 5.1. Figure 20. What level of support do you feel your organization s senior management team shows for your recognition programs? (n=534) 7 (High level of support) 19% 6 30% 5 19% 4 (Moderate support) 17% 3 10% 2 5% 1 (No support at all) 1% Most Believe Management Views Recognition as an Investment, Not an Expense Consistent with the results in Figure 23, the majority of respondents (55 percent) believe senior management views recognition programs as an investment, not an expense. Slightly less than a third of respondents are unsure of senior management s viewpoint on recognition programs, perhaps an indication that staff working on recognition need to do a better job of communicating and providing positive information proactively to senior management. 13

Figure 21. Which of the following best describes how senior management in your organization views employee recognition programs? (n=534) Unsure 32% As an investment 55% As an expense 13% Wide Disparity of Practices for Recognition of International Employees Among the 38 percent of respondents whose organizations have employees outside of North America, 92 percent say that their international employees participate in recognition programs that are either North America-based or foreign-based. The largest percentage of respondents (34 percent) said their programs allow international employees to participate in the same recognition programs as North America-based employees. Another 30 percent have recognition programs that are exclusive to international employees and not based on North America. Figure 22. (If your organization has employees outside of N. America ) Which of the following best describes the recognition programs for those employees? (n=197) International employees participate in all or most of the same recognition programs as North America-based employees 8% 34% International employees participate in a few of the same recognition programs as North America-based employees 30% International employees participate in some of their own programs and some of the same programs as North America-based employees 18% 10% International employees have their own recognition programs International employees do not currently participate in any recognition programs 14

Section V. Recognition Program Communication and Training Company Newsletter and Employee Orientation Are Most Common Communication Tools Companies use a variety of methods to communicate and promote recognition programs to employees. The organizational newsletter is the most common method (53 percent), with employee orientation (46 percent) and posters, flyers, etc. (34 percent) also being prominent vehicles for communication. Another 10 percent selected other and indicated that their organization communicates recognition programs in staff meetings, special events (luncheons, etc.) and department-specific newsletters. Although it may be difficult to believe, one in 10 (10%) indicated that the organization does not have a communication plan for recognition programs. Figure 23. What media do you use to communicate your recognition programs? (Check all that apply) (n=537) Company newsletter 53% Employee orientation 46% Posters, flyers and/or table tents 36% Employee handbook 30% Other (please specify) 10% We do not have a communications plan 10% Few Have a Formal Training Program for Recognition; But Most Often it is In-Person Training While the majority of organizations have communication plans for their recognition programs, formal training programs for managers are much less common. Only 23 percent of respondents reported that a formal training program for recognition programs exists within their organizations. The organizations that are committed to formal training programs for managers typically rely on in-person training sessions (69 percent). Other formal training is delivered through online education and handbooks are used by more than a third of respondents organizations. For respondents organizations using other methods, common responses included training in management meetings, through email, and/or added to group training on other topics. Figure 24. Do you have a formal training program for managers about your recognition programs? (n=535) Yes 23% No 77% 15

Figure 25. If yes, what formal training methods do you use to train your managers? (Check all that apply) (n=124) In-person training session 69% Online education 36% Handbook 36% Video 8% Other (please specify) 17% Most Organizations Use Intranet or Internet for Program Communication More than ever, organizations are relying more on electronic media and technology to communicate and administer many of their total rewards programs. Indeed, this is also true with recognition programs. More than half of all respondents (54 percent) indicated using electronic means to communicate recognition programs, and a strong 43 percent have come to rely on the ease of online award ordering systems that allow employees to choose their reward and minimize administration efforts. Internet and intranet capabilities also allow nomination processes, general administration, reporting and tracking of awards to be handled with ease; more than a third are using electronic media to administer these components. Figure 26. Do any of your recognition programs utilize electronic media or communications (e.g., Internet/intranet) for any of the following? (Check all that apply) (n=518) 2005 2003 2002 Program communication 54% 40% 72% Award ordering 43% 35% 61% Award nomination 42% 29% 49% Program administration 36% 24% 38% Program reporting and/or tracking 33% 19% 32% Program training 12% 10% n/a None of our programs utilize the Internet/intranet 27% n/a 53% 16

Respondent Demographics Number of Employees: Industry: Affiliation: Less than 100 13% 100-499 15% 500-999 6% 1,000-2,499 17% 2,500-4,999 16% 5,000-9,999 12% 10,000-19,999 6% 20,000 or more 16% Services 35% Manufacturing 24% Finance and Insurance 18% Transportation and Utility 7% Public Administration 6% Retail 4% Wholesale 2% Other 5% NAER member 15% Both a WorldatWork member and a NAER member 5% WorldatWork member 80% Responsibility Level: Senior Executive/Director/Vice President 33% Manager/Assistant Director 33% Senior Analyst/Analyst 22% Supervisor 5% Consultant 5% Educator 0% Other 2% 17