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Featuring research from

Improve Engagement With Recognition.

Welcome

Research from Gartner: Social Employee Recognition Systems Reward the Business With Results

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Triumph Over Disengagement

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Welcome

Today, 70 percent of North American employees feel indifferent or disengaged at work, costing the U.S. economy nearly $500 billion every year in lost productivity, substandard performance, and employee turnover. Globally pervasive trends have completely changed the way employees work and are motivated. Employers that don’t adapt are likely to fall victim to the same loss in productivity.

These are some of the most dramatic trends in the modern workforce:

• Millennials entering the workforce with higher expectations of their work lives

• Flattening of traditional hierarchical organizational structures

• Employee skills shortage

• Mobile, dispersed employees who work remotely – from just about anywhere

In the article that follows, you’ll find that Gartner offers valuable insight on how you can build and maintain a competitive advantage through your workforce by keeping them engaged, aligned, and recognized. It’s more important than ever that companies not only recruit, but retain top

talent to grow the businesses of the future. If employees are not engaged in the business, they will leave--especially the A-players. An employee success platform that is designed for today’s modern workplace can engage and, yes, empower employees, improving employee performance and driving business success.

I hope you’ll find this article helpful as you plan for and implement an employee success platform that’s right for your enterprise.

Sincerely,

Patrick D. QuirkPresident and Chief Executive Officer Achievers

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Research from Gartner

Social Employee Recognition Systems Reward the Business With Results

Analysis

Employee recognition and reward programs have a long history within the human capital management (HCM) industry. From the crystal clocks and gold watches awarded at service date milestones to recognition programs that reward employees for exemplary performance or innovative ideas, organizations have established a variety of programs aimed at recognizing and rewarding desired workforce behaviors. With the consumerization of technology, many current enterprise reward programs also include concepts derived from hotel and airline loyalty programs, rewarding points to individuals for certain actions and behaviors that can be accumulated on a reward card and redeemed for merchandise or services as desired by the recipient.

The latest transformation in employee recognition programs has come through the use of social networking, mobile accessibility and gamification, delivered through SaaS applications. As social employee recognition surfaces within HR applications, employee recognition has taken on more structure, often aligned with formal performance review processes, but more often is purposefully designed to drive recognition, engagement and alignment.

Such programs, when designed properly, can transform traditional siloed programs into a comprehensive strategy for engaging and inspiring employees. They augment traditional reward processes with informal recognition and feedback delivered via social networking tools, making it easy for employees to recognize each other publicly. Some applications provide automatic integration to internal performance reviews, while others take recognition beyond the enterprise, allowing posts to external social media sites such as Facebook. With many of the latest social recognition systems, recognition activity may be stored in the employees’ file to augment their internal reputation, thus leveraging extrinsic rewards to reinforce intrinsic motivations.

The fundamental shift driving these new social reward and recognition programs is the acknowledgment that regular recognition and

HR and business leaders worldwide are benefiting from migrating traditional employee reward and recognition programs to a new generation of social-enabled technologies that support pay-for-performance strategies and help align recognition and reward initiatives with company brand and culture.

Impacts

• HR and business leaders utilizing social recognition and reward systems report significant improvement in employee engagement and business outcomes.

• The use of social and gamification concepts by HR, IT and business leaders is transforming reward programs with accelerated adoption and sustained results, but inherent risks must be effectively monitored and managed.

• Social recognition and reward concepts enable HR leaders to re-evaluate traditional approaches to performance management, employee referrals and other talent management systems.

Recommendations

• Capture baseline metrics across critical employee, customer and business performance measures, and continually monitor for impact and improvement.

• Evaluate the organization’s cultural readiness, and plan for the impacts of increased transparency resulting from social technology deployment.

• Plan for and monitor the risks inherent in social-communications-based programs, and adopt an agile approach for risk mitigation.

• Look for design flexibility to meet different organizational objectives, including the ability to align all recognition programs — incentive, spot, milestone and others — under a unified program.

Strategic Planning Assumption

Social reward and recognition systems will see a 25% year-over-year increase in adoption rate from a base of 3% to 5% today, and will reach the early mainstream phase by 2016.

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feedback drive employee engagement and employee success, which in turn propels customer success and improved business outcomes (see Figure 1). As a result, the market for social recognition and reward systems is a rapidly growing technology category (see “Hype Cycle for Human Capital Management Software, 2013”).

Implemented as stand-alone programs, social reward and recognition programs deliver significant business value, as measured by performance across employee engagement, employee success, and customer and business success. As organizations explore opportunities to leverage the benefits from these programs into other talent management processes (such as performance, recruiting and onboarding), new benefits and process transformations surface to drive even greater business impact. There are, however, inherent risks to programs that incorporate gamification and social concepts, and organizations must plan accordingly and continuously monitor and adjust program components as necessary. Figure 2 lists the top impacts of social employee reward and recognition systems, and recommendations how HR and IT leaders can deal with them.

Impacts and Recommendations

HR and business leaders utilizing social employee recognition and reward systems report significant improvement in employee engagement and business outcomesEmployee recognition programs — initiatives centered on rewarding employees for service longevity, retirement, achievement, outstanding performance, suggestions/ideas, wellness milestones and other motivated behaviors — are almost ubiquitous, with 88% of U.S. organizations supporting an average of four types of recognition programs.1 The most common forms of recognition awards have traditionally included gifts of money, merchandise, gift cards, plaques and certificates. The costs of such programs are not insignificant. Organizations spend as much as 2% of payroll on recognition programs, much of it focused on programs that reward tenure. It is, therefore, no surprise that more than one-third of organizations report that these programs have little to no effect on employee engagement, motivation and satisfaction.2 There are several fundamental design flaws in these traditional approaches that can thwart getting full value from recognition investments, including:

Source: Gartner (December 2013)

FIGURE 1 The Engagement-to-Outcomes Value Chain

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Source: Gartner (December 2013)

• Recognition events are infrequent and often have limited visibility beyond the employee’s immediate manager, department or business unit.

• Rewarding longevity can have the negative effect of celebrating long-term employees even if performance is subpar, and can send the message that longevity is valued over creativity, service and other corporate values.

• Monetary rewards are functional, but are soon forgotten after being spent. Gift cards provide flexibility in award choice, but still may be of less value to some than a spontaneous gesture of appreciation from an esteemed colleague, a team celebration or another nonmonetary award. Rewards focus on recognizing extrinsically motivated behavior, not sustainable, intrinsic motivations.

New approaches in rewards and recognition have emerged during the past five years that take advantage of the Nexus of Forces — social, mobile, information and cloud delivery — to make recognition visible, sustainable and continuous across the enterprise. Some vendor solutions focus purely on recognition and reputation management to foster engagement and performance, often including gamification components, such as badges, likes, points and other features, to reinforce desired behaviors. Others also include the administration of actual reward programs for items including compensation, time off, services, gifts or gift cards, redeemable points, and other perks. When evaluating vendor solutions, buyers should look for technologies that incorporate a high degree of personalization, reflecting individuals’ personal preferences in communications and awards.

FIGURE 2 Impacts and Top Recommendations for Social Employee Reward and Recognition Systems

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Taking a social approach to reward and recognition programs drives significant advantages over traditional models by amplifying the reach of recognition events, increasing program participation, improving intrinsic motivation and sustaining workforce engagement. The emphasis on employee engagement is critical, because the relationship between engagement and business performance has been well-documented (see “CFO Advisory: Employee Engagement Impacts Financial Outcomes and Business Risk”). In its February 2013 meta-analysis spanning 263 research studies and over 1.3 million employees, Gallup found that companies in the top quartile of employee engagement, as compared with those in the bottom-quartile, exhibited:

• 21% higher productivity

• 22% higher profitability

• 41% higher quality

• 48% fewer safety incidents

• 37% reduced absenteeism

Gallup’s research also found that organizations scoring in the top half of employee engagement rankings nearly doubled their odds for success, compared with organizations scoring in the bottom half of workforce engagement scores. These findings are demonstrated across many clients implementing social recognition and reward programs:

• One of the largest credit unions in Canada had a long-established employee recognition system based on periodic service awards, ad hoc recognition of employee achievements and quarterly outstanding employee awards. Despite its longevity, it failed to reinforce company values. The organization implemented a social platform to manage recognition and rewards in a combined offering, and immediately achieved 98% employee participation — a level it has sustained for more than three years. It has measured a significant boost in employee engagement scores, improved retention levels, higher customer satisfaction and 3.5% improved brand awareness. It also found a correlation between low employee performance and low program participation, signaling managers to act proactively if participation levels drop.

• An international hotel chain consolidated its many different reward programs under a centralized, global, SaaS-based social recognition program, with a focus on promoting instant, daily recognition coupled with tangible rewards. The results were significantly higher employee engagement scores, reduced turnover, higher customer engagement levels and improved revenue for the hotel chain.

• Following several acquisitions, a leading high-tech provider launched a social recognition platform across 50 countries to consolidate its many acquired cultures. Within four months, it had doubled its recognition program participation. The organization increased employee engagement by 14% in less than one year, and enabled cross-functional peer-to-peer recognition across the globe.

Conversely, disengaged employees undermine morale, erode the bottom line and endanger the long-term success of the business. According to a Towers Watson study of 50 companies over a one-year period, organizations with low levels of engagement saw operating income drop more than 32% and earnings per share (EPS) decline 11% (compared to 28% growth in EPS within high-engagement companies).3

Authentic recognition and appreciation are proven aspects of motivation. The U.S. Department of Labor reports 64% of working Americans leave their jobs because they do not feel appreciated. According to Richard Florida in “The Rise of the Creative Class,” modern workers are motivated significantly by peer recognition. A 2010 Gallup report revealed that almost 80% of employees said recognition is a strong motivator of work performance, and 70% said they would work harder with ongoing recognition. Organizations should take baseline measures of key metrics — including employee engagement, turnover, absenteeism, customer engagement and retention — before launching social recognition programs, and should continue measuring and monitoring these and other values postimplementation. Most social recognition applications provide detailed program analysis, often making such insights available to managers and executives via mobile devices and through interactive dashboards.

Social recognition technologies enable continuous employee recognition and appreciation, and amplify their visibility throughout the organization. However, as discussed in detail below, they

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are not without elements of risk, including the potential for false-positive results, quid-pro-quo interactions and unsustainable participation levels. Yet, despite these concerns, social recognition systems represent a high-growth market that will reach early mainstream adoption by 2016, where demand for these solutions will be at their highest and solution proliferation will drive even greater levels of competition and innovation (see “IT Market Clock for Human Capital Management Software, 2013”).

Recommendations:

• Capture baseline metrics across critical employee, customer and business performance measures, and continually monitor for impact and improvement.

• Invest in solutions that enable mobile access to the recognition platform, as these tools have a proven effect on increasing program participation and helping drive improved business outcomes.4

• Look for social recognition tools that combine the benefits of intrinsic and extrinsic motivators. Extrinsic motivators (such as cash, gift cards, points and other rewards) can be important reinforcements of intrinsic motivators (such as achievement, purpose and mastery).

The use of social and gamification concepts by HR, IT and business leaders is transforming reward programs with accelerated adoption and sustained results, but inherent risks must be effectively monitored and managedModern recognition systems today are social — making it easy for any employee to recognize any other employee in the company. Mobile applications make recognition even easier to give — and receive — and companies incorporating mobile accessibility into their recognition strategies report higher levels of participation. In these new platforms, public kudos, thanks and awards are instantly communicated across social activity streams and visible on dashboards. As badges are granted, they become persistent attributes of an employee’s talent profile. Leader boards are monitored as they dynamically update with each new recognition event — an active demonstration of gamification in action.

Gamification concepts are inherent in today’s social technologies, and are well-suited for employee recognition programs. Gartner defines gamification as “the use of game mechanics in nonentertainment environments to motivate a change in user behavior.” Used within recognition and reward programs, gamification is intended to make these actions more fun and motivating to the participants. Badges, points and leader boards are all examples of gamification in social recognition and reward programs.

Gamification is not without some inherent risks. For example, you would not want to provide rewards to employees for being active nominators of others within the recognition program: a cascade of inauthentic kudos and overspend on the budget would ensue. Leader boards (showing those with the highest number of reward points and recognition events) can result in quid pro quo behavior — namely, employees agreeing to recognize each other to increase their positions on the board. The focus on accumulating recognition badges could leave some employees feeling isolated or frustrated if they have limited exposure to other people in the organization or if they are relatively new to the company. To offset these and other gaming shortcomings, plan designs often limit the number or value of points that may be awarded by individuals over a given period. A reward nomination may first require that a set of qualifying criteria be met, and approval workflows further ensure program design adherence. Reporting and analytics help managers and administrators regularly monitor these programs to minimize the unintended consequences of motivating the wrong behaviors (see “Best Practices for Harnessing Gamification’s Potential in the Workforce”).

The concept of social recognition itself has come under fire. Risks of false positives stem from the fact that most people will not criticize others in a public forum. An abundance of kudos and other recognition events throughout the year may not correlate with the annual performance review (although clients interviewed to date have found the opposite — high activity correlates with high performance). There may be disproportionately low participation within some teams, leaving its members feeling disenfranchised. Mitigation of such risks requires careful plan design and a regular review of the program metrics, including

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participation levels segmented by manager, division, region, job function and others; trends and deviations from norms; gaps in participation; and other critical success indicators.

Cultural readiness is another potential risk an organization faces when implementing social recognition programs. Introducing any social technology into the organization introduces an element of risk. Gartner predicts that, through 2015, 80% of social business efforts will not achieve their intended benefits due to inadequate leadership and an overemphasis on technology (see “Predicts 2013: Social and Collaboration Go Deeper and Wider”). Ensuring the alignment of executives and management to the success of these programs is critical. Without the proper upfront planning, training, communication and executive support, launching social-based programs can actually have a negative effect on employee engagement and program objectives. Executive support requires more than budget and lip service; within social scenarios, leadership needs to demonstrate active participation as well.

In fact, a new model of leadership is required in today’s workplace to achieve and maximize the effects of social technologies — one that highlights socially centered leaders. Gartner defines socially centered leaders as those “characterized by personal authenticity, community connectedness and daily expression. They foster the trust of a committed and self-propelled workforce of engaged employees.”

When these characteristics are present within leadership, workforce engagement, talent attraction and retention, innovation, and other key performance indicators follow (see “Maverick* Research: The Socially Centered Leader”).

Without a culture of transparent communication and socially centered leadership, social reward and recognition programs will not only fail to deliver on the promise of improved employee engagement, retention and performance, but they also will actually have an adverse impact on these and other business outcomes.

Recommendations:

• Evaluate the organization’s cultural readiness and plan for the impacts of new levels of transparency and immediacy from social technologies.

• Leverage gamification and social collaboration concepts to amplify participation and reach of recognition programs.

• Plan for and monitor the risks inherent in social-communications-based programs, and adopt an agile approach for risk mitigation.

Social recognition and reward concepts enable HR leaders to re-evaluate traditional approaches to performance management, employee referrals and other talent management systemsInformal social feedback and recognition are taking place most frequently outside of any formalized integration with talent management processes. However, Gartner is seeing an increased impact across other elements of talent management, resulting from the introduction and support of informal feedback and socialized reward programs across enterprises. For example:

• Performance and reward systems: The annual performance review is not going away anytime soon, at least within most organizations, but it is being reshaped by social recognition and reward programs. Peer recognition and feedback, provided in a social context, enable immediate feedback on employee impact and develop a better baseline for periodic performance review conversations. When employees have a regular pulse check of their actions and contributions from across the corporate community, performance coaching ensues and employees have a stronger connection to the mission, goals and values of the organization. Rewards granted through the social recognition program reshape the employee’s view of their total reward package.

• Succession planning and career development: Analysis of interactions across the social recognition platform makes top performers and influencers visible on a daily basis. It provides important insights for managers regarding mentoring and succession opportunities, and uncovers hidden talent wherever it exists. Analysis of the social thanks given to and feedback on individuals may also serve to informally establish or validate certain skills and competencies, further supporting future career and succession initiatives.

• Talent sourcing acquisition: Talent sourcing and recruiting efforts are bolstered by the use of social reward and recognition programs. As

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recognition moments take place every day, they provide demonstrable examples of the corporate culture being lived and celebrated across the globe. Employees themselves become more vocal brand ambassadors for companies, improving talent attraction and hiring initiatives in addition to retention and other processes.

• Employee referral programs: Innovative organizations are incorporating recruitment-based employee referrals within social recognition programs. In this way, as new hires enter the organization, the employee is publicly recognized for the referral (intrinsic motivation), is granted a monetary reward and perhaps a badge (extrinsic motivations), and the event is broadcast across the company via activity streams, dashboards or other publicly visible channels.

• Onboarding: Highly acquisitive organizations benefit from social feedback tools incorporated into their onboarding processes, where such transparency in communication is seen as a critical way to bridge the gap and foster cultural alignment between existing and newly acquired staff.

• Talent profiles and reputation management: Peer feedback and recognition are common components of enterprise social networking technologies, but often remain siloed and of limited use across broader talent initiatives. When social recognition becomes part of core talent management technologies, either directly or through integration, employees are able to develop their reputations and grow their internal brands as earned badges, kudos and feedback become part of the enterprise talent profile. The richer talent profile data helps managers better understand the contributions of their team members while providing a more complete view of the talent of the organization.

These and other impacts of social recognition and reward programs on talent management processes are summarized in Figure 3 below.

Different approaches to social recognition and rewards may be used at different organizational levels, in recognition that not one size fits all. For example, research conducted by the London School of Economics in 2009 found that pay-for-performance schemes worked well for motivating mechanical-based tasks, but actually reduced

FIGURE 3 Social Recognition and Reward Technologies Are Reshaping Traditional Talent Management Processes

Source: Gartner (December 2013)

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motivation of those performing cognitive-based tasks. As a result, one organization may choose to implement a recognition-only based program, while another will implement a series of programs internally with components of both rewards and recognition, varying across different locations and/or categories of employees. Organizations evaluating social recognition technologies should look to solutions that provide flexible design approaches across different business objectives and target audiences. Evaluate, also, the capability to run multiple programs under a consolidated master budget to better align overall recognition and incentive spend against organizational goals and values.

Gartner’s Engagement Initiative is a continuing program that provides a framework for a strategic response to consumerization-related workplace changes (see “Use the Engagement Initiative to Respond to Critical Challenges in the Workplace”). A well-designed social employee recognition and reward program can serve as a foundational element in the engagement initiative.

Every day, employees make a decision as to whether they will stay or leave their employer. Every day, when faced with a crossroads as to whether or not to put forth discretionary effort, employees will ask themselves if they feel appreciated and if it’s worth it. Designed and managed effectively, social reward and recognition systems can provide the daily evidence of the impact and appreciation of such efforts, and serve as an incentive to others to rise to higher levels of performance.

Recommendations:

• Identify areas within your talent processes where social recognition and rewards can augment and reshape traditional programs suffering from lackluster results. However, be aware that linkage with performance systems, even informally, can cause distrust in the recognition system.

• Look for design flexibility to meet different organizational objectives, including the ability to align all recognition programs — incentive, spot, milestone and others — under a unified program for the greatest impact and budgetary control.

• Consider including recruitment-based employee referral programs within the social recognition program as well. Advantages gained include a consolidated budget, improved program visibility through social channels and increased participation overall.

Evidence

Vendor briefings; end-user client inquiries; customer interviews.

1World at Work, “Trends in Employee Recognition, 2013.” Note that 46% of participating organizations reported that their non-U.S. employees largely participated in these programs as well.

2Ibid.

3Towers Perrin Global Workforce Study, 2007.

4Client case study.

Source: Gartner Research, G00255299, Yvette Cameron, 6 December 2013

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About Achievers

Achievers delivers the only true cloud-based Employee Success Platform™ that enables remarkable business success. Designed specifically to meet the complex needs of today’s changing, modern workplace, it is the most engaging software specifically designed to engage, align and recognize employees. It is software employees love to use every day in over 110 countries. Learn how your company can change the world works at www.achievers.com.

Triumph Over Disengagement is published by Achievers. Editorial content supplied by Achievers is independent of Gartner analysis. All Gartner research is used with Gartner’s permission, and was originally published as part of Gartner’s syndicated research service available to all entitled Gartner clients. © 2013 Gartner, Inc. and/or its affiliates. All rights reserved. The use of Gartner research in this publication does not indicate Gartner’s endorsement of Achievers’s products and/or strategies. Reproduction or distribution of this publication in any form without Gartner’s prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. The opinions expressed herein are subject to change without notice. Although Gartner research may include a discussion of related legal issues, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner is a public company, and its shareholders may include firms and funds that have financial interests in entities covered in Gartner research. Gartner’s Board of Directors may include senior managers of these firms or funds. Gartner research is produced independently by its research organization without input or influence from these firms, funds or their managers. For further information on the independence and integrity of Gartner research, see “Guiding Principles on Independence and Objectivity” on its website, http://www.gartner.com/technology/about/ombudsman/omb_guide2.jsp.