Breaking News: HR’s Newest Secret Weapon to Impact the Bottom Line

“For the first time in my 20 year HR career, I was able to tell my CFO that for every $1 we spent on this program, we’re getting $75 to $150 back by cutting our employee turnover expenses and helping increase sales per employee at the same time. I’ve never been able to say that about anything, even cash.”

From coast to coast, HR leaders are hailing a new weapon in the war for increasing retention and productivity: full-service, tech-enabled and training-supported employee recognition programs. This new-fangled flavor of employee recognition program is proving so effective that even CFOs are taking notice.

But make no mistake. These new programs are not yesterday’s mindless mountain of motivational medals or gobs of goofy gift cards. They involve the newest manager and employee self-service technologies, PhD-driven training for managers, and the state-of-the-art in employee communications in combo with field-proven tangible and intangible recognition deliverables. The new employee recognition is more complex than those old gift-and-go gimmicks. But their fans say the big payoff is worth the effort.

Creating Big Returns

Many of Rideau’s clients look for the same things in a partner to solve recognition’s major challenges. First, they need a fully automated solution that provides flexibility. Then they want a partner who focuses on broad recognition programming. And finally, they want a partner who can provide service awards as well as a total turnkey recognition system.

To meet these needs, Rideau Recognition Solutions, North America’s recognition leader, has proven its knowledge of the multiple challenges involved in an enterprise-level recognition solution. Second, it has a technology solution that enables the company’s recognition process. Third, Rideau is a recognized industry leader that ensures the ability to be at the forefront of recognition trends. And finally, it offers a flexible solution that allows companies to scale up.

An Aerospace Leader’s Best Bet

Recently, one of America’s aerospace leaders selected Rideau Recognition to be its provider. With its massive workforce and immense buying power, the Fortune 500 giant had its pick of the litter. It could have selected any of 50 different providers, which fall broadly into 3 categories.

The first and most traditional is the promotional incentive product-and-jewelry-supplier. Many are simply jewelry makers who found that selling rings and medals through an HR department is more efficient than setting up a bridal registry or a retail store. Some others in this group are logo-wear producers who have gigantic catalogs of stuff on which can be imprinted a corporate brand. While it has its adherents, this “tchachky” approach has recently fallen on hard times, especially among newer generations of employees who seek a deeper level of employer connection than logo-wear and bling can convey. The company’s conclusion: While diamonds may be a girl’s best friend, they fall short in creating a lasting connection between employers and employees.

The second is the gift card crowd, most of which work on a “breakage” model. Because gift certificates are essentially cash, they seem an ideally flexible vehicle for delivering kudos. And with over 5,000 brand-name retailers, manufacturers and service companies offering cards, the programs are easy to understand and globally available in dozens of currencies.

But here’s the catch: redemption or “breakage” rates of the gift cards are often 20% or -higher. While CFOs like their low cost, Chief HR Officers know that many people in the program care so little about the gift cards that they do not even bother to redeem them! Perversely, these “breakage”-based card programs also put vendors’ and their clients’ interests in conflict—employers often pay near-face-value for the cards, and the fewer that get redeemed, the more money the vendor makes. Bottom line for the company: Cards carry value well, but they’re weak at connecting employees to employers. And vendors often have a financial incentive to keep employee participation low.

The third is the full-service recognition platform: high-tech, high-training, high-accountability and high-effectiveness. Among all providers, the aerospace firm picked Rideau for displaying the most sophisticated combination of web-based employee self-services, manager training programs, on-site services, multinational fulfillment, and metrics-based performance tracking. Rideau CEO Peter Hart sums up the global aerospace giant’s pick this way:

“The research is in, and it’s conclusive that employees don’t leave companies, they leave managers. That’s due to a lack of a connection with the manager,” Hart says. “Employee recognition today is about completing that emotional connection between employees and their management, which then boosts productivity, retention and loyalty.”

“We now know that gifts and goods alone don’t do it,” Hart continues. “It’s about appreciation, recognition and respect, which are emotions that get conveyed human-to-human, and don’t always involve something tangible. Amazingly, even today a ‘thank you’ can have more impact than gold. But many managers don’t have the tools or training to know how to deliver recognition in a way that positively impacts employee behavior. That’s where full-service, training-intense, technology-forward recognition, the practice that Rideau perfected over the past 95 years, really answers the needs of large and complex employers.”

Fast Market Growth for Employee Recognition

The market for employee recognition solutions has evolved from its roots in rewards and incentives to include a full suite of recognition consulting and training services and web-based employee self-service solutions. In the 1990s, the market was made up merely of catalogs of merchandise and gift certificate-type incentives and rewards. Today, corporate employers are rapidly shifting their retention efforts from merchandise to use of innovative gift-agnostic, technology-driven, training-intensive recognition services like those offered by Rideau. By 2012, a leading HR industry magazine reports that as much as 65 percent of the multibillion-dollar recognition market will be in recognition-based technologies and services.

This technology-enabled service trend is especially strong among workforces that are heavily web-enabled. The role of the Web will only increase as industry analysts agree that more than 66 percent of all American workers have daily access to a Web-enabled PC at work or home, and this percentage is expected to hit the 85-percent range by 2015. This market trend is being driven largely by the proliferation of employer-sponsored Web-based services and software-as-a-service (SaaS) applications. Ironically, while SaaS is driving workforce mobility, which tends to erode employee loyalty, SaaS-based recognition services such as Rideau’s are critical for building loyalty and retention.

Hart’s company, which celebrates its 95th anniversary this year, has made significant investments in technology delivery that have enabled it to provide unique capabilities to large enterprises. “We saw the need for robust and flexible Web-based recognition delivery back in 2000,” Hart says. “At that time we started making significant investments that are now proving to be the weapon of choice for companies for whom workforce retention and performance improvement are critical success factors.”

Do the Math: HR Leaders and CFOs Calculate Returns on Full-Service Employee Recognition Investment

So what about that $150-to-$1 payoff that one HR leader said she found from a well-executed employee recognition program? As it turns out, the math proves that while this type of return-on-investment is possible in certain circumstances, achieving such results would be extraordinary. Let’s use the example of a 45,000-employee auto parts manufacturing workforce with average annual compensation and benefits cost of $45,000, average employee replacement cost of 40% of compensation, 15% annual employee turnover and sales-per-employee productivity of $250,000. If an employer spent $1,686,000, or $37 per employee on a recognition program that reduced turnover to 13% and increased productivity by 2%, the return would be $150-to-$1.

Few experts would be willing to suggest that such $150-to-$1 results can be expected routinely. Yet another look at the numbers shows that this hypothetical employer could more reasonably expect a one-year return of 22:1. Let’s look at the same theoretical example with only a 33% employee compensation replacement cost and a target of a 1% boost in annual retention and a 1% annual productivity increase:

Number of employees in workforce: 45,000
Replacement cost of a new employee: 33% of annual compensation
Annual employee turnover: 15%, reduced to 14% in one year
Annual sales-per-employee (productivity) increase: 1% ($250,000 to $252,500)
Amount spent on full-service employee recognition program: $5,000,000 ($111 per employee)
Return on recognition investment: $22-to-$1

Today, no providers are guaranteeing returns on recognition investment. But more HR leaders and CFOs are wrapping their heads around the math. As a result, the new frontier on enlightened human capital strategies lies in implementation of a full-service employee recognition program. And with leading companies are continuing to tell success stories with full-service recognition programs, the employee recognition revolution seems destined to roll on.

Peter Hart
President & CEO
Rideau Recognition Solutions
A little recognition goes a long way

Canada: 473 Deslauriers, Montréal, QC, H4N 1W2
USA: 40 West 57 Street, 20th Floor, New York, NY, 10019
Toll Free: 1.877.789.0449 Ext. 240
Fax: 1.800.667.5666
Web: www.Rideau.com
E-Mail: PeterHart@Rideau.com