Better and cheaper ways to encourage employees

Recently I observed a large organization badly fumbling its change management efforts. In fact, its efforts were terrible. One of the key ways its management have let down employees is the way it fails to communicate with employees and doesn’t recognize their achievements in a meaningful way. This goes down badly with individuals and it has reminded me of the importance of employee recognition.

The recent recession created at least one benefit – it has forced organizations to review their approach to talent management. A recent revelation to McKinsey management consultants has been the fact that employee recognition is a much more effective way to motivate their key employees than relying on cash and monetary rewards.

A 2009 McKinsey survey found that three non-cash motivators were at least or more effective than the three highest-rated financial incentives. The results were:

It’s not about the money

* Respondents answering ‘extremely’ or ‘very effective’
+ Respondents answering ‘always’ or ‘most of the time’

The above table confirms that employee recognition is more effective, but used less than the tired old approach of financial motivation.

Why discuss recognition in this PR newsletter? Because recognition activities are overwhelmingly about communication and strengthened relationships – and that is very strongly our business.

I’m a strong believer in the value of employee recognition and have written articles at http://www.cuttingedgepr.com/free_articles.asp and an e-book on the subject at http://www.cuttingedgepr.com/ebooks/employee_recog.asp.

Source: Harvard Business Publishing, The Daily Stat, 30 November 2009. Harvard_business_publishing@post.hbsp.harvard.edu

Stakeholders, not shareholders

It’s a stakeholder world now. When this year’s Edelman Trust Barometer survey asked opinion influencers which stakeholders should be most important to a CEO’s decisions, the answers were: all stakeholders are equally important (64%), shareholders (14%), society at large (12%), customers (8%), employees (2%) and government (1%).

Similarly, a survey reported in the Harvard Business Review of December 2009 found if a CEO’s top focus is profit, employees tend to be less willing to sacrifice for the company than if the CEO makes it a priority to balance the needs of customers, employees, the community and the environment.

On the other hand, important Australian research in 2007 found that employees are the most vital stakeholder group by a long way. The research found that organisations positively engaging in stakeholder orientation activities achieved greater stakeholder satisfaction, which in turn led to stronger financial performance. In other words, organisations who adopted the stakeholder concept made more money.

In the research project, Nigel de Bussy measured how strongly orientation towards different stakeholder groups influences financial performance. The correlation for employee orientation was an impressive 0.84 compared with much lower but still substantial values for customers (0.36), suppliers (0.35) and communities (0.32). The correlation for shareholder orientation was minimal at 0.08.

The strong moral of this story is that every organisation should get its act together internally before turning to the perceived needs of external stakeholders.

Until next time,

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