by Melissa Van Dyke | November 10, 2017
Successful financial capital management has long been an accepted form of distinct competitive edge for organizations. Thankfully nowadays successful organizations also acknowledge the vital role effectively attracting and retaining top talent plays in outperforming the competition. In other words, human capital -- and the ability to turn people's potential into performance (and then into profits) -- now distinguishes exceptional companies from the merely mediocre ones. 

But unlike financial capital, human capital involves decidedly human complexities such as ambitions, motivations, feelings, and values. And many businesses are still learning that when it comes to successfully leveraging human capital, rewards and recognition programs aren't just a minor part of the equation; they're an essential tool to apply strategically to work with -- not against -- these human complexities. 

That's why the Incentive Research Foundation (IRF) examined what top performing companies do differently from their average performing counterparts regarding rewards and recognition. While many of the study's findings were surprising, a few weren't entirely unexpected. Overall the results have meaningful ramifications for businesses of all kinds, especially those looking to maintain or secure their status as market leaders.

The IRF Incentive Benchmarking Survey was administered to 900 companies, 300 of which (unbeknownst to them) were deemed "top performers," based on exhibiting all of the following characteristics: high revenues, good growth, excellent customer ratings, and excellent employee ratings. 

Major revelations? We discovered that not only are top performers more likely to reward their sales people (90 percent), employees (88 percent), and channel partners (81 percent) than their more average counterparts, they also design, run, and value their recognition programs very differently.

The research shows that there are substantial differences between top companies and average performing companies regarding rewards, especially in the following areas: how strongly executives believe in and support the recognition program, actual prevalence of non-cash rewards use, who gets rewarded, how much the rewards are worth, and how the reward programs are actually structured.

Lesson 1: Don't forget the executives! Recipients of the rewards and the individuals actually running the program aren't the only key players to keep in mind. There is real power in executives' faith in non-cash rewards. In fact, the executives' belief in the value of these tools as a differentiator was one of the strongest differentials between top performing and average businesses. Turns out executives at top companies are a whopping 35 percent more likely than counterparts at average companies to believe non-cash rewards and recognition are a critical tool in managing company performance. 

In the same vein, the level of commitment by executives to rewards programs was also a notable area where exceptional companies and their average counterparts differed significantly. At a vast majority of top performing companies (93 percent) executives are not only willing to carry out rewards and recognition to remain competitive, but are strong supporters of non-cash rewards and recognition as a competitive advantage for the organization (a full 30 percent more than executives at companies with mediocre performance). 

Lesson 2: Pay a little more per reward, it's worth a company's while. We all know you have to give a little to get a little. Reward payouts are no exception; top performing companies have higher payouts in their programs than average companies do. The typical sales person in a top performing company can expect to earn $3,916 in non-cash rewards versus $2,749 in average companies, and employees earn $170 versus $147, respectively.  

And now, what might be the most surprising finding … 

Lesson 3: Try to reach a higher number of employees within a company.  For many years, an underlying theme of non-cash rewards was to only highlight the "best of the best". This is no longer the case at top performing companies. When asked whether their non-cash program design was structured with the primary goal of rewarding and recognizing the truly exceptional performers (exclusivity) or if it was structured with the primary goal of each participant receiving a recognition or reward in the program (reach), top performers were statistically more likely to say "reach" regardless of who the program was for-sales people, employees, or channel partners. In fact, while 56 percent of top performing companies said they prioritize reach for both employee and sales programs, only 36 percent of average companies said so for employees and only 28 percent for sales.

The bottom line? Top performing companies didn't get to the top by accident. And companies don't dole out rewards simply because it's "a nice thing to do." Rewards work and make companies more successful. Treating non-cash rewards like the competitive advantage they are and implementing them strategically can in fact help to elevate a business to the upper echelons. But you don't have to take my word for it. The data speaks for itself.

The white paper, "Ten Things Top Performing Companies Do Differently" offers a link to download the full "IRF Incentive Benchmarking Survey."


MELISSA VAN DYKE has been President of the Incentive Research Foundation for over six years, during which time she has proudly helped triple the organization's research and education footprint. The IRF funds and promotes research to advance the science and enhance the awareness and appropriate application of motivation and incentives in business and industry globally.