Too much of Recognition

Over the last few months, I have been asked one question by a few clients/prospective clients - "If we do so much Recognition, won't it backfire on us? Won't we set people's expectations too high in terms of appraisal ratings, bonuses etc.? "

In all the cases, my response or my team member's response was the classic one "Has anyone ever told you to stop giving them Recognition?" - we then talk about various definitive studies around this including Gallup's Q12 survey, where one of the questions is "Have you been recognized in the last 7 days?". Using this ammunition of strong responses, we handle the question deftly.

But in the last several weeks, I have asked myself this question, and intuitively feel that this needs to be researched more and thought through more - even though I cannot really argue about the merit of the responses we usually give.

In order to try and do this in a meaningful yet fun way, I met with a few people managers in our client organizations, who don't seem to believe too much in the Recognition stuff (Raw criteria I used was those managers who don't get excited to meet with me to talk about Recognition).

Here is the data I collected from 5 of them - stated verbatim with minor edits:

1) Boss, if I keep giving out Spot awards to my people, I am setting expectations that they will get good ratings - I am the one who will suffer at the end of the year when HR tells me that 30% of my people will have to get a below average rating.
2) We are paying these guys a salary for showing and doing work. Recognition has to be done only when the guy goes above and beyond what is expected of him. Saying Thank You for what is in his job description makes no sense to me.
3) If I keep recognizing my people, they will stop valuing any awards I give them. Unless you create scarcity of awards, the value of the awards will go down and render them useless.
4) Look - we are a fast growing company. I would rather focus on promoting the good guys than do all this Award stuff. Maybe in 10 years, when our growth slows down, I will be forced to do all this stuff.
5) Don't get me wrong - I like Recognition and believe that it will have a big impact on our people. But our management needs to believe in it and provide budgets to do good stuff - right now we are doling out peanuts. If you throw peanuts, monkeys will dance - you won;t get performance. Come to talk to me after you have convinced our management to spend on Recognition.

I am not even going to attempt to analyze the data, but will probably try and undertake a small project to study this perception around "Too much of Recognition" not being healthy.

What is Social Recognition?

Over the last few months, multiple HR folks have been asking me about Social Recognition. Given that I have generally been a late adopter of technology trends, I really didn't have a good answer for what Social Recognition was. So I spent a few weeks reading about Social Recognition, talking to folks who are experts in Social media with respect to businesses. Here is my short understanding of what Social Recognition really means and the business impact it can have for organizations.

1) Those who have seen the movie "The Social Network" would recall that "Facebook" was about taking the social experience of college and creating an internet equivalent of the in-person social experience. In the same way "Social Recognition" is the internet equivalent of broadcasting employee recognition stories and allowing anyone interested to Comment, Like and follow the activities/thread related to a Recognition story.

2) Should HR folks think about Social Recognition - YES in a big way. Outside of the small costs involved in a technology platform to enable Social Recognition, everything else is free. Depending on how the employees use the tool, it has potential to become a highly engaging & employee location independent website. Plus it creates a healthy competition among managers to do more recognition within their teams/groups. The ones who use Recognition and the ones who don't, become clearly visible on the portal.

3) Well! - Social Collaboration platforms within organizations made a lot of noise but have not really taken off - i.e. organizations are not yet ready to pay for these platforms, which means they don't see tangible value yet. In the case of Recognition, the Social Recognition platform sits on top of a tangible Recognition program, which means that activities are already happening in the organization and the platform is only used to broadcast and spread the news. So chances are - more people will actually logon to the portal for nominating, reviewing, redeeming etc. So Social Recognition is not a new destination employees need to visit, but an addition to the same place where employees were anyway visiting. So unless you have strong underlying Recognition platform in place, introducing just Social Recognition will be futile.

Summary: Focus on establishing a strong Employee Recognition program first and build a Social Recognition platform on top of it. Just like in the movie "The Social Network", Social Recognition is about taking the offline Recognition experience onto the internet to turbo-charge the impact of the program.

Tax Treatment of Awards

While I am no tax expert, I wanted to share common practices used by companies while dealing with the tax treatment of awards. Readers are kindly requested to consult their respective tax experts before making any decisions for your company. The information below is simply meant to be a guide.

Ask an HR person in an organization how they deal with taxation of employee awards, and the most typical response you would get is that we don't worry about it upto Rs.5,000. Post that the amount is taxed. What exactly is this exemption of Rs.5,000 and what is covered in this Rs.5,000?

According to the large accounting firms, the Rs.5,000 annual tax exemption amount is only for organization wide non-distinguished awards (e.g. Diwali gift for all employees, New year gift for all employees). Any other award based on performance or milestones that are given to individuals need to be taxed and do not fall under this Rs.5,000 limit. This means that every performance or milestone based award given to an employee is taxable. Any award given to the employee - vouchers, products, merchandise etc. fall under this category.

What about trophies, framed certificates, mementos?

Currently the common practice seems to be to not worry about these and simply ignore the value of the these awards from a taxation perspective. Plus, for the income tax authorities, tracking who has received a trophy etc. is not practically possible. But tax experts suggest that at some point of time, companies will need to include the cost value of these trophies as an employee benefit and provide for the tax amount appropriately.

With the usage of Award programs and the value of the awards being very low in India, and the process to monitor spends being very complex, these spends don't seem to be on the radar of income tax sleuths at this time.

From a company perspective, I would generate a report, on a financial year basis, by employee, listing the various awards he/she has received alongwith the value. I would then hand this over to the tax experts in the company and seek their advice on how to deal with this. From a budget perspective, I would also provide for a "Gross-Up" amount on the overall Award program - i.e. If I have budgeted INR 1 Crore for award products in a financial year, I would increase the budget to about 1.3 Crores to provide for tax payments.

2012 - The Year of Employee Recognition in India

My best wishes to all of you for a great 2012.

My Recognition Prediction for 2012: 2012 could be the YEAR for a large number of companies in India to launch a robust & structured Employee Recognition Program. We wish them all the best with their efforts.