Recognition Program Administration – How much do companies spend on it?

For large companies, designing, launching and administering a global employee recognition program is a big task. Whether companies do it themselves by assigning internal resources to run the program or find an external partner (outsourced Recognition service provider) to help them with it, there is a cost for administering the program. Though I would love to get some specific research around this, the figures below have been derived from typical administrative costs budgeted by large companies, whenever they outsource a HR process/program in its entirety.

1) In India – 6 to 8% of overall budget
2) In South Asia – 4 to 6% of overall budget
3) In the Middle east – 12-18% of overall budget
4) In North America – 15-18% of overall budget

A linked feature I have noticed in India and South Asia is the difficulty, companies have in paying anything for program administration. They seem very comfortable paying for “Stuff” (Reward products) and want everything else to be free. Instinctively, they also tend to assign a very low cost to manpower/resources required for the administration.

There is also the concept of “Landed Cost”, I have noticed very often. Clients want to know upfront how much they will be billed for products (including the cost of the product, taxes and shipping) and want to contract at this “Total Price” or the “Landed Cost”. Even if you visit a B2C online store such as Infibeam (www.infibeam.com), you will notice that the price they show on the website for a product typically includes taxes and shipping.

Why the Spend on Recognition Events needs to be a part of your Annual Recognition Budget?

When it comes to Recognition Programs, I have been really stunned to see how much of focus the HR folks have around Recognition initiatives & more specifically the events that involve the “C” level executives in their companies – e.g. an event where the CEO presents awards to employees.

When you add up the costs of these events – travel expenses for a lot of people (the CEO is coming – so the event must be important, we should also attend), venue costs (the CEO is participating, so we need a good location – a Taj hotel maybe), food costs, support costs, non-measurable time costs of all the people who attend the event, the actual awards being presented (if the CEO is giving it, the award needs to be nice a.k.a expensive), the numbers turn out to be sizeable. Now when you compare this number to the overall recognition spend in the company, that is when you realize that in many cases 30-40% of the Recognition spend (in some case 60%+) is for a few of these events.

I dived a little deeper into why this is the case and based on a reasonable sample set of conversations, the reason this happens can best be explained using the following analogy – when buying a house, almost everyone spends extraordinary time and effort in making sure we get the best possible deal at the lowest possible price – in most cases the measure used is the cost per square foot. After getting this figure down to a minimum (say Rs. 2000 per sft), say for a 1500 sft apartment, we end up spending the following:

Basic Cost of the Apartment: INR 30,00,000
1)Electricity & Water deposits: INR 200,000
2)Car Parking: INR 150,000
3)Service Tax: INR 80,000
4)VAT: INR 150,000
5)Stamp Duty & Registration Charges: INR 200,000
Total Additional Costs: INR 780,000
Total Cost of the Apartment: INR 37,80,000
Now this is a 26% increase over the basic cost.

Now we need to add the following:
1)Wardrobes: INR 100,000
2)Modular Kitchen: INR 100,000
3)Electrical Fittings: INR 50,000
4)Furniture: INR 100,000
5)Miscellaneous Interior works: INR 50,000
Additional Costs: INR 400,000
Final Cost of the Apartments: INR 41,80,000
This is a 40% increase over the basic cost.

Recognition seems to be working the same way – The HR folks fight hard to get a budget for the program – end up getting a number “x” – typically a low figure. Now this figure “x”, in most cases does not include the cost of the events. So in reality, the money for the events gets spent from “another budget/line item” – the CEO wants to do the event – so the finance folks will figure out where to place the expense. Travel gets booked under “Business Travel Expenses” etc.

This model is fine if the additional item is a small component of the overall Recognition budget (therefore negligible). But if the spend on the event turns out to be 40%-60% of the Annual Recognition budget of the company, isn’t there a problem – or Am I only one seeing it as a problem?

EuroAble - CSR in Action

In the Sunday Times of India yesterday, I saw a bright display ad titled "EuroAble". Now Eureka Forbes (http://www.eurekaforbes.com/) is a company I have been fascinated with for a few years now, more so after interacting with their leadership team over the last few months and understanding a little bit about their values, cultures and how they run their business. It looks like Eureka Forbes has done something spectacular yet again - they have set up a 80 seater call centre that is manned by handicapped individuals.

Whenever I have interacted with charities, I constantly hear that the people in need of help and support want something that will give them dignity, want opportunities where they can earn their living, rather than simply get free money/goods. A call centre job is something that is ideally suited for someone with physical disability that prevents them from moving around easily. I have often wondered why call centres don't make an extra effort to employ handicapped individuals - with the amount of investment & effort that goes into training in call centres, I was sure that companies could put in a little extra bit to train these individuals (even if it meant teaching them English from scratch). I also believed that this could have significant business benefits for call centre companies - managing attrition a little better. A CSR initiative to actively employ disabled individuals would be great - business benefit plus a tangible measurable benefit to a section of society that needs a little extra help.

What EuroAble has done with this ad in the newspaper and a Facebook page to its credit (www.facebook.com/eurekaforbes), is to ask everyone involved in call centers the question - Why haven't you done something like this? Even if some people wonder why Eureka Forbes placed this ad - for publicity sake maybe. If you don't tell anyone the good work you are doing, how will others be able to role model you? I think that the ripple effect the initiative and the publicising of it will have, should be significant. Way to go - Eureka Forbes.

Real Leader - Mahendra Singh Dhoni

MS Dhoni, Captain of the Indian Cricket team, has always been considered a good leader. Now that India has won the Cricket World Cup, he is being hailed as an all-time great leader and probably one of the best captains the game has ever seen worldwide. I believe that this victory is a manifestation of Dhoni's great leadership over the last several years. As many have indicated, this victory is the culmination of a number of years of great work in the back-end and building a team that is capable & confident and one, that can deliver the goods when it matters in crucial matches. India has always had a talented bunch of players, but invariably they have floundered as a team. Under Dhoni's leadership, they have won the World T20 Cup, are the No. 1 Test team in the world and now have won the ODI World Cup. No one will refute the fact that all this achievement has something more to do than just luck. I believe Dhoni's leadership has played a critical role in all this.

What are some of the key qualities he has consistently displayed over the last several years:

1) Humility - He is willing to accept this mistakes. Even in the recent post match interview of the semi-finals against Pakistan, he was quick to admit that he misread the pitch and played 3 seamers, instead of playing an extra spinner (Ashwin).

2) Staying Grounded and in touch with his Roots - I read an article in the Times of India, where there is a nice story about Dhoni desperately looking for a job when he was 20, and eventually getting a job in the Indian Railways in Kharagpur in the Sports quota. He made a few friends there and even now they claim that Dhoni always responds to their text messages and calls them. Apparently, whenever he visits Kharagpur, they get together and have a party in one of the empty rail coaches stationed at Kharagpur, like the old times.

3) Willingness to Trust his People - He seems to have this ability to identify players who in his assessment could be match winners and stay with them through difficult times. A classic example is Yuvraj Singh. When everyone (selectors, media, cricket experts) were pushing to remove Yuvraj Singh from the team due to lack of performance, Dhoni stuck his neck out and supported Yuvraj. For the trust Dhoni showed in him, Yuvraj returned several match winning performances during the world cup. This is also the reason India was able to pull off a victory yesterday against Sri Lanka, after the superstars (Sachin and Sehwag) failed to score - the youngsters (Gambhir & Virat) are the ones who did it for India in the finals.

4) Composure under Pressure - Nicknamed "Captain Cool", Dhoni has always carried himself in a very calm and composed manner on the field, even under high pressure situations in matches. His coolness shows his confidence in the team and their abilities and in several occasions, someone in the team has done something outstanding to turn the match around for India. e.g. Zaheer Khan taking Michael Hussey and Cameron White's wicket in the quarterfinals of the world cup.

5) Willingness to do what the team needs him to do - Dhoni has an outstanding record as a No.3 batsman, yet he has been playing at No. 6 and No. 7 in the last few years because he wanted to take the pressure on himself. In the World cup finals, Dhoni came in at No. 5, ahead of Yuvraj Singh who has been in great form, primarily to maintain a left-right combination at the crease and delivered a match winning performance with his bat, when Indian needed it.

It is obviously easy to do this analysis post mortem (after India won the world cup) - what if India had lost the match yesterday (Malinga taking a wicket or two in the middle overs would have rattled India)? Even then, I would argue that Dhoni has been a great leader. While a leader cannot always control the results, I believe that a great leader's true role is to create consistent and repeated opportunities for his team to win and invariably, just by the law of averages, they will end up winning a few. Dhoni has been able to do that for Team India.