More often than not the terms reward and recognition are
used interchangeably by reason of the similar meaning habitually attached to
the two different words. These expressions, notwithstanding, are actually
associated with two dissimilar concepts and are, or rather, should be used in
practice by employers to achieve two different objectives. Many employers are conceivably
not fully aware of these differences, but having crystal clear ideas about
their real meaning and aim can definitely help employers to design and introduce
in their organizations more effective and consistent total reward systems.
Limaye and Sharma (2012)
claim that recognition is mostly intended to thank employees for doing the “right
thing”, whereas rewards are basically offered to individuals to compensate them
“for their efforts and contribution” to organizational success. The Authors
also contend that whilst recognition is mostly expressed in the form of non-financial
means, reward is aimed at meeting individual financial expectations.
Rather different appears to be the definition of reward
provided by Stewart (2011), who defines reward as a financial or non-financial
item conferred to an employee for “completing/reaching an achievement/milestone.”
This definition is indeed evidently overlapping with the definition provided by
the same Author of recognition; the difference between the two terms apparently
being exclusively due to the different motive for the award, in both cases represented
by events occurring before the acknowledgment, to wit: the attainment of a
significant objective in case of reward; the behaviour exhibited, the efforts made
or the performance of a feat favouring the attainment of the organizational
objectives in the case of recognition. These definitions of reward and
recognition could have been indeed regarded as consistent in the event a further
definition, for instance, that of compensation or remuneration, would have been
considered to refer to base pay. In this case rewards and recognition would
have been provided by employers to award individual special achievements, deeds
and results, whereas compensation or remuneration, that is to say base pay, in
exchange for employee regular work. The definition provided by Stuart basically
omits to include the fixed component of financial reward, which should be
indeed regarded as unavoidable; reward appears to be thus entirely composed of
variable components. Adding a third element would have led to a classification
very similar to that used by British Airways, which makes a distinction between:
- Reward, which is associated with base, fixed pay;
- Incentives, which are offered when employees attain their
objectives;
- Recognition, whose purport is basically that to say “thank
you” to employees for their achievements (Rose, 2011).
Considering the term reward
as also including incentives at large, the difference between reward and
recognition would essentially result to be time-related. Rewards are promised
by employers to individuals from the outset of the working relationship, whereas
recognition arises as an after-the-fact award (Silverman, 2004). Yet, rewards
represent an important part of the working agreement; these are in fact agreed,
identified and included in detail in the written contract of employment,
whereas recognition is not usually part of any legal written contract. As aptly
summarized by Rosabeth Moss Kanter (Rose, 2011): “compensation is a right,
recognition is a gift.”
Inasmuch as employers regularly paying salaries and
financial rewards to their employees can be deemed legally compliant, those who
do not implement any recognition schemes and allow their employees to benefit
from its introduction can be considered as somewhat of breaching the
psychological contract. Nowadays, individuals are no longer expected to receive
from their employer the payment of the financial rewards contractually agreed
only, but also to be recognized and acknowledged for their efforts,
achievements and exceptional contribution.
An additional significant element underpinning the
differences actually existing between reward and recognition can be identified
in the definition provided by Juran (2003), who defines rewards as the money
paid by employers to individuals in the forms of salary increases, bonuses and
promotions, which are linked to the assessment of individual performance and
are habitually offered in private, and recognition as the appreciation of
commendable performance and remarkable achievements expressed by means of events
or ceremonies aiming at giving these publicity and visibility. Similarly, but
even more explicitly, Ostendorf (APQC, 2002) suggests that “recognition is more
than likely going to be public. Rewards don’t have to be.”
The reason for recognition
needing visibility is associated with the same scope justifying the
introduction of these schemes, that is to say thanking individuals for their
particular contribution and efforts. A public formal “thank you” is clearly likely
to produce much positive effects than a private one would and is also likely to
be remembered for a longer period of time by the individuals concerned. What
matters the most is the message which recognition in reality aim at conveying. Irrespective
of the incidence of the tangible, para-financial component of the identified form
of award, the main element of recognition invariably rests with the “thank you.”
Completely different is the case of rewards, these have been contractually
agreed and represent thus somewhat of a debt for the employer; these are hence practically
due to the employees, not negligibly, for the largest part regardless of their
performance and behaviour.
The establishment of recognition programmes within
organizations helps employers to differentiate salary from the other
initiatives (Rose, 2011). This process is basically enabled by a psychological
state which Jeffrey (2003) calls separability.
The tenet at the basis of this human attitude is that individuals essentially
tend to aggregate and separate things and phenomena according to their sources
and the way these are perceived. Employees who receive in addition to their base
pay cash supplements for their outstanding performance, efforts or achievements,
especially whether later consolidated into fixed pay, are likely to regard the
overall amount of money as deriving from their regular work and to disregard
the circumstance that part of the overall sum of money has been received by
virtue of a particular accomplishment, something special. Recognition
initiatives are, by contrast, much more likely to be remembered for a longer
period of time and are thus habitually appreciated by individuals the most. The
same perceptions are likely to be generated by the payment of non-consolidated
cash bonuses awards, keeping these amounts separated from salary will help individuals
to differentiate these and induce employees to attach to them a much greater significance
and value (Rose, 2011).
The so-called “memory value”, mainly based on non-financial
and para-financial rewards, definitely represents an additional distinct asset
of recognition programmes. Its concept is underpinned by the idea that
individuals are most likely to remember non-cash and para-financial awards,
rather than money. Findings of an investigation carried out in 2006 by Workspan
revealed that a remarkable 18 percent of respondents did not even remember how
they spend their cash awards. Inasmuch as individuals may be delighted and
proud to show to their relatives and friends an object that they have received
as a “thank you” from their employers, these are likely to be even ecstatic to
tell their relatives and friends about, for instance, a voucher for a holiday to
a popular tourist destination received from their organization. In the latter
case the memory of the benefit received is destined to last longer (Rose, 2011),
also thanks to the pictures which will be taken and showed to friends in
different occasions and perhaps posted and shared online in social networks.
Recognition awarded by
means of non-financial and para-financial rewards provide individuals with external
in addition to internal visibility. This clearly makes employees even gladder and
prouder of their work, giving them to understand that whether their employer is
publicly awarding them is because the activities they have performed and the
results they have yielded are deemed by this meaningful and useful for the attainment
of the business objectives. Yet, by means of recognition programmes an employer
can give employees to understand that the organization is giving them genuine
opportunities to express their potential and engage in activities which are
appreciated and valued by the employer. This should in turn provide individuals
a sense of self-fulfilment which should ultimately contribute to increase their
gratefulness and loyalty to the employer.
The emotional impact spawned by non-financial and
para-financial awards, which can also result amplified by the circumstance that
these are handed to employees on occasion of specifically planned public events,
is also correlated to other two mental processes called by Jeffrey (2003) evaluability and justifiability. The concept of evaluability is concerned with the
value which different individuals can place on a non-financial or
para-financial award, which in some circumstances might also be perceived as higher
than the real purchasing cost of the item or service provided by the
organization. The idea of justifiability is instead associated with the
circumstance that, albeit individuals could have actually bought by themselves the
items they receive from their employer as a “thank you”, they do not in that
consider those items or services particularly costly and in some ways not
necessary for themselves and their families. This, nonetheless, does not entail
by any means that employees would not justify and appreciate receiving them
whether offered by their employer for the results these have produced.
Para-financial rewards will be even more welcomed and
appreciated by individuals whereas these have been chosen by an employer taking
heed of the beneficiary likely expectations and wants. This will unquestionably
proof that the employer has dedicated time and thoughts to the individual and
that its efforts were focused on providing the employee with something s/he
would have genuinely appreciated; by no means that the employer is giving anything,
maybe even cheap and outdated, just for the sake of offering something (Rose,
2011).
Reward managers and specialists, nonetheless, have to be
extremely careful when designing and most of all managing these schemes and
need to do whatever they can to prevent the flip side usually associated with
these programmes implementation, which can trigger dissatisfaction and discontent
amongst the individuals not receiving any form of award (Armstrong, 2010).
As maintained by Rose (2011), it is somewhat of ludicrous
that employers spend more than a half of their overall annual budget in reward
and employees neither appreciate their worthiness nor “understand what it is
about.” The real true is that in many cases employers too have not totally
clear how and why they offer rewards to their employees. This is certainly
causing confusion amongst employees, but also amongst managers. Whether reward is
intended as the sum of pay and incentives, and recognition as a means to say “thank
you” to individuals, managers need to be aware that in order to award a
specific achievement is not a salary increase that they have to propose to the
employer for their report. Likewise, whether these want to acknowledge the regular
and sustained outstanding performance of a direct report it is not a flat-screen
colour TV that they have to suggest to properly award the employee. In order to
prevent triggering potentially dangerous downsides, unintended negative
outcomes and inadvertently foster undesired behaviour the mechanic of reward
programmes have to be first and foremost clearly identified and hence shared
with the entire organization management.
The BA model distinguishing fixed salary from incentives
and recognition schemes, outlined earlier, is fairly clear to understand and thus
to explain and execute. Yet, this scheme enables managers and employees to promptly
identify and associate the specific reason for the award with each component of
reward:
- Base salary – based on the organization salary grade
system;
- Incentives – for outstanding performance and results;
- Recognition – to thank employees
for specific achievements and behaviour.
Longo, R., (2013), Reward vs recognition,
Milan: HR Professionals [online].
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