Symbolic messages in Reward
Reward carries strong messages. If you want to see what an organization values, look at what it pays for, not what it says. Words are cheap and it is easy to make statements about what is important in an organization. However, if you say one thing, but pay for something quite different you can guess which message will have the greater effect on what people will actually do.
That is not to say you should pay for everything; far from it. But if you are to take a strategic approach to reward, you need to consider very carefully the alignment between what the reward system is saying and what is the stated culture and values of the business. As Tyson (1995) says, ‘Monetary rewards may not motivate in the long term, but they certainly symbolise the value corporations attach to specific behaviours – for example rewarding long service, interpreted as loyalty, or rewarding performance above other attributes.’
Let’s take a couple of examples – long service awards and sales bonuses.
Long service awards
It is fairly common for employers to use some form of long service award. Typically, they provide a gift or cash and some degree of celebration to acknowledge a period of service with the employer. Long service awards have been around for a very long time. Go to a local museum and you are likely to find a piece of silverware engraved with a date in the 19th century awarded to an employee by some company or institution for 25 years plus service. Her Majesty’s Revenue and Customs (HMRC) have a specific tax concession to allow certain long service awards (for at least 20 years) to be made tax free. The concession was introduced in the mid–1970s when a career in a single employer was still the norm.
But whilst such awards are still very common, we need to question their fit in a modern organisation in this fast moving technology driven society where many of the largest companies in the world are only a few years old. Young people joining the job market today would be horrified at the idea of staying 40 years with the same employer. Jobs for life are dead, and have been for many years. Values in organisations are around effectiveness, commitment, engagement, challenge etc. How many organizations reflect long service as a core value? Almost none.
The value may not be high, but the message of a long service award is clear: we value long service. Of higher cost and carrying similar messages are service related benefits such as holiday and defined benefit pension plans. There are some professions – mostly in the public sector – where long service is valued highly.If you really do value long service for itself, fine; it may be appropriate to use awards to recognise it. But most organisations do not. So I suggest that long service awards are, for the most part, a throwback to a bygone age where they were simply mile stones in a 40 year career. If really thought through, they are unlikely to reflect the values of most organisations, so they carry the wrong message. Therefore, most organisations should review if their long service awards should be part of their reward strategy.
It is no surprise that sales bonuses or commissions are generally designed to increase sales. If a bonus works well as an incentive, the recipient is likely to try to achieve the result that the bonus is incentivising. If valued by the recipient, the incentive value of the bonus is likely to be the key driver of behaviours in pursuance of the incentive.
But as we know, over recent years there have been very many examples, primarily in financial services, of miss-selling. Typically, this has been due to sales being made to people for whom the service or product is unsuitable. A good deal of this has been blamed on the role of incentive bonuses. This should not come as a surprise as the reward carries a strong message.
In many cases the company will have given training and guidelines on the suitability of what is being sold. But the bonus plan does not discriminate – a sale is a sale and the bonus gets paid. So whilst the company may, somewhat naively, believe that the salespeople’s behaviour will be modified by what is taught or said, the simple sales message carried by the bonus is too strong. If you want to use financial incentives you need to incentivise the right things.
The rhetoric reality gap
The two examples above illustrate the same point – you should examine carefully what message each element of reward is carrying and ensure it is what you want. If it is not, where there is a rhetoric reality gap, change it. You have to make sure that the desired message and the reward are aligned.
You can find these sorts of conflicts between the messages that the reward system carries and the desired or stated aims or values everywhere. Here are some more examples; are any of these familiar?
Extract from Reward Management, to be published by Kogan Page, April 2014