Recognition for Contract Workers

I was recently advising a large global company with local manufacturing facilities in India on various Recognition programs they could adopt for their Sales, Support and Manufacturing organizations. I learnt that over 20% of the total number of employees in the company were contractors employed through a third party staffing company. The contractors were at the lowest levels in the organization – field sales, factory workers etc. A number of supervisors/managers were including these contractors in their Reward and Recognition programs and wanted my advice how they could do more for them. To some extent, they considered them equivalent to full time employees when it came to recognition and wanted to integrate them into every program we would design for them.

This poses some legal questions. Can you include contract workers in your Recognition programs? The answer varies by geography and the legal/labour rules applicable locally. I decided to speak to a labour lawyer to get his opinion on this. I managed to find a good lawyer who would give me some quick advice without sending me an invoice.

The lawyer’s advice was exceptionally clear – For contract workers, the company should NOT provide any benefit outside of the fees payable to their employer (i.e. the contract staffing firm). Ideally, you should exclude contractors even from company celebrations to the extent possible. Individual rewards and recognition are an absolute “NO-NO”. Why? Because anything done for contractors outside of the contract fees is tantamount to “Pseudo Employment”. Such practices done over a period of time coupled with a few tenured contractors, could put the company at risk – essentially, the company can face legal action and be forced to employ the contractors as full-time employees and extend all employee benefits to them, retro-actively. This would pose a short term financial burden, longer term HR implications and impact long term benefit plans. So his answer in short was "IF you employ contractors, treat them as contractors and stick to the contract document on what you can do and what you cannot do – do not try to integrate them into the company and extend any employee benefits to them”.

The Rewards Continuum!!

What kind of Rewards work best to drive employee engagement and motivate employees?

A colleague of mine “Jay Whitehead” (jaywhitehead@rideau.com) and I were recently at a client meeting, when the client asked “What kind of Rewards work best to drive employee engagement and motivate employees”? Jay answered the question very well and I thought his response will be useful to a lot of us. His response was the following:

Rewards work in a continuum. At one extreme, you have an investment banker working in Wall Street with 6 figure salaries - For him/her, merchandise awards, cash awards are nice, but not very significant. They crave for the softer Recognition – someone saying “Thank You” to them, getting a $20 plaque in front of the company employees, getting an email from the CEO congratulating him/her for a good job done etc. The Recognition for them is less dependent on the product/merchandise as it has very little value for them.

At the other end of the continuum, you can have a call center worker in India earning $300 per month, has a lot of unsatisfied basic needs and aspirations for a better life. So for them, dinner vouchers, household goods as awards, cash awards etc. mean a lot. Any recognition done without a product/material will be trivialized by them – e.g. an email from the CEO is nice, but I would love to get a TV from the company for the contributions I have made. For them the recognition experience must be matched with an appropriate product – the bigger the recognition, bigger the award value they inherently expect.

In between these 2 extremes, the balance between the recognition and the reward product changes in a linear manner.

So when you are looking at creating a Recognition program, you may want to design the mix between the recognition and the actual reward along this continuum. In most companies, this would mean that for the lower level/junior employees, merchandise/reward products would play a very important role and for the senior employees, the recognition experience would play a more critical role. This does not mean that we have no reward products for the senior employees, and no recognition experience for the junior employees. It is really about the balance between the two.

Recognition Program Design 101

I have consistently been receiving queries from HR folks about their company's recognition program. They typically send me their Recognition Policy document and ask me for feedback. Over a period of time, I figured out that I was getting these queries when the HR person was tasked with evaluating the company's Recognition programs and come up with a enhanced and better program. Based on what I have seen, I have given a very high level guidline you can use while designing a Recognition program.

The program you design needs to touch a large segment of the employee population i.e. around 60-70% of the organization should feel that they can actually get some of the awards/recognition. Recognition needs to be very pervasive within the organization - “Everyone likes to get Recognized – so Why are we stingy with this?”.

An ideal Recognition program should have a variety of initiatives/awards that can touch 100% of the employee population:
1) The Premier Corporate awards (for the best-of-the best): Touches about 10-15% of the employee population.
2) The BU/Department/Location level awards (Senior Manager driven awards): Touches about 25-30% of the employee population
3) Manager level awards: Spot rewards/low cost team level awards: Touches about 40-60% of the employee population
4) Standard Corporate Awards: Exhibiting corporate values, CSR, Long Service awards etc. (Touches 100% of the employee population).

In one of the following posts in the blog, I will try and provide a sample Recognition Program Design that you can readily use and customize for your organization.

NO ENTRY FOR MOST OF YOU. We Recognize only the Very Best!!

I have noticed that a very large number of companies do not have a well thought out Recognition Program that can offer a large number of employees in the organization an opportunity to win awards appropriate for their contribution levels and get recognized in a meaningful manner. The programs typically tend to be elitist in nature with only the very best getting the recognition and the rewards.

Imagine if in tennis, the only tournaments were the 4 grand slam events. Would there be the same kind of enthusiasm and interest in tennis from budding tennis players? There are a number of tournaments at the country level, state level, district level and even at the local club levels. Each of these tournaments offer opportunities for a large number of players to win and get recognition for their skills and efforts and gain the confidence to aspire for the bigger tournaments/awards.

In organizations, the HR leaders and the senior managers need to put in the effort to create opportunities for the non-superstars to get recognized and win awards at various levels. By doing this, if they can increase the confidence and engagement levels of the larger employee population, the business benefits from the increased value the larger employee population would add, will be sizable.

Meeting Rooms and Recognition

In most companies, you will notice that meeting rooms/conference rooms are named after countries, mountains, rivers, world famous personalities etc. The management and the facilities spend reasonable time in selecting the names/theme for the rooms.

During a visit to a large global organization a few weeks ago, I noticed something quite creative. Our meeting was in a room called “The Aditya Gupta” meeting room – Below the room name, they had Aditya Gupta’s photograph, a small write-up on Aditya Gupta’s profile, the work he had done for the company and why the room was named after him for the 6 month period, Jan to Jun 2011 – for an innovation he had delivered.

I learnt later that Aditya Gupta was a junior employee in the organization and as part of one of their recognition programs, the award was a framed certificate, a cash award of Rs. 5,000 and a meeting room named after him for 6 months. What a fantastic, low cost and highly effective way to recognize the employee.

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?