Motivation schemes can seem extravagant when other HR resources are stretched by the recession, so how should they be adjusted to match more straitened circumstances?
Rewards for good performance are an obvious target for cutbacks, because their loss will be relatively painless to staff. But there are strong arguments for keeping such schemes during a downturn, particularly in a modified, less-costly form.
Steve Baker, sales and marketing director of performance improvement specialists Projectlink Motivation, argues that quality of service is often the only means left to differentiate a business from its competitors, once the price-cutting option has been exhausted.
"There's not a lot of discretionary income out there, so the service has got to be right, as well as the price," he says.
Baker believes rewards provide the necessary incentive to improve service and help to counter negative attitudes among staff.
But reward schemes may need to be adapted to match the changed economic climate.
"They may not be so much about driving sales and innovation as cutting costs and making things more efficient," explains Andy Philpott, marketing director of employee benefits provider Accor Services.
One obvious reaction to recession is to reduce spending on rewards. Philpott says this will be easier for firms that fail to measure what impact their reward scheme has on performance.
"If it's a well-structured reward package, you are only paying out what is effectively bringing financial benefit to the business," he says.
Ewan McCulloch, HR director at office supplies retailer Staples, warns that the impact of any core reduction in value may only become evident after the recession when the emotional contract between employer and employee is revealed. For Staples, the damage would extend well beyond its 4,500 staff.
"It doesn't take long for an organisation to be talked about in people's homes. The results of decisions you make now will stay with you for many years to come as you emerge from recession," he says.
Baker says some savings, such as replacing paper-based retail vouchers with an electronic alternative, have little impact on workforce morale, but he warns against cutting back on choice. Projectlink's Supercheque scheme offers 50 different vouchers, with Marks & Spencer the most popular brand. Yet this only accounts for 12% of total demand. For Baker, this highlights the danger of treating rewards purely in terms of monetary value. "Choice is one of the key factors in reward and recognition," he says.
Paul Bartlett, head of rewards and benefits for Grass Roots UK, says lower value rewards do work, provided they are communicated well and delivered frequently. "The key is to link it much more closely with the activity, giving it at the time someone does something special rather than waiting for an annual bonus."
Low-cost options include time off work, working from home, free meals from the canteen, and weekend use of cars from the company fleet. Share option schemes require no cash outlay from the business and encourage long-term commitment from staff. Bonus cards involve awarding points for achieving set goals which staff can convert into a wide range of gifts.
Sue Cooper, HR director of engineering consultancy Atkins, says a handwritten letter from someone senior within the organisation, perhaps with a small gift attached, works particularly well.
For Bartlett, the cost-neutral reward that delivers the biggest impact is simply saying 'thank you' in front of the peer group.
But saying 'thank you' may lose its currency if done too often. As Baker explains: "People will see they're adding value to the business, and will say: 'it would be quite nice for us to have a share of the spoils as well'."
Top tips on rewards during a recession
- "Be very clear about what you want people to do. Staff have to believe they can do it, and the offer has to be appropriate."
Steve Baker, Projectlink Motivation
- "Businesses should see if the reward structure is focused in the right way rather than decide whether to cut it."
Andy Philpott, Accor Services
- "You must have something that allows you to continually communicate with employees."
Paul Bartlett, Grass Roots UK
Case study: Ladbrokes
Bookmaker Ladbrokes changed its approach to rewards last year, reducing their value but increasing the number of staff receiving them.
"In this environment, you have to get value for money," says Sara Davies, HR director for rewards.
Staff from the best-performing shops were previously sent on a foreign holiday, but only about 40 people out of the 14,000-strong workforce benefited.
Davies also points out that not every winner would necessarily appreciate going abroad with colleagues.
The new scheme involves tying a mix of rewards more closely to specific performance targets. They cost about £70,000 and include retail vouchers, a choice of day trips, and entering a draw for an extra day's annual holiday. A further £20,000 is spent on an overnight awards ceremony in London. Sponsorship from suppliers helped to boost both budgets.
Davies says that although overall spending on rewards is unchanged, 700 people benefited last year and turnover in the targeted areas of business increased by up to 20%. This year, she aims to double the number of overall staff receiving rewards on roughly the same budget.