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voice of the employeehow to overcome the morale crisis with increased communication and recognition

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executive summary

The global economic slowdown in 2009 has pushed Human Resources professionals onto the front lines, executing workforce reductions and enforcing cost controls. Because of their close association with management and knowledge of employee attitudes, Globoforce asked these professionals to describe the impact of the recession in their workplaces. To gauge the accuracy of HR and management assumptions of employee reactions, Globoforce also asked employees across multiple functions for their take on the short- and long-term effects of the recession in their workplace.

Some results did not surprise – most in HR have already conducted layoffs and less than a third were willing to say that no more job cuts would occur in their organizations within the next three to six months. These professionals are also very concerned about the impact of job, compensation, incentive and benefit reductions on employee morale and productivity. Interestingly, results also show that employee goodwill is holding up much better than HR perceives, and leaders have an opportunity to nurture this goodwill.

To this end, leaders understand the elimination or reduction of employee recognition is a strategic misstep at a critical time. Some even plan to increase spending on recognition during the recession. A properly executed recognition program delivers a return on investment that far exceeds the actual cost. Even in a time of salary freezes and benefit cuts, recognition programs offer the most cost-effective way to restore employee morale and increase engagement.

Key Findings• Duetolayoffsandanticipatedfurtherlayoffactions,moraleisasignificantareaofconcernwith70percentofemployeesanticipatinganegativeshort-orlong-termimpactonmoraleand89percentofHRleadersalsoexpressingconcern.

• When asked if their HR department had been asked to reduce costs, 88 percent ofrespondentssaidtheyhad,withmeritincreases,bonusesandtrainingprogramsbeingthetopthreetargetsforreductions.

• Thegoodnewsis75percentofrespondentsindicatetheyaremaintainingtheirrecognitionprograms,evenwhileotherareasarebeingcut.Encouragingly,anadditionalfivepercentofthosesurveyedindicatespendingonrecognitionprogramswouldincrease.

• While 77 percent of HR leaders and employees agree that more communication aboutcompanystrategyandcompanyvalueswouldbeeffectivewaystocounteractthenegativeeffectsoflayoffsandreductions,employeesareinthedarkaboutsomeofthegoodnews,suchasincreasesinbudgetfundingorstabilityofthecompanyinthiseconomy.

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the current reality: layoffs and cost cutting will continue

It’s no surprise that layoffs and cost cutting are the current reality for most survey respondents, and many HR respondents don’t expect that to change in the near future. When asked if their or-ganization had been forced to reduce expenses by eliminating positions through layoffs, 66 per-cent said yes. Unfortunately, more than a third of HR professionals surveyed believe the rounds of job cuts are not over.

When asked if their HR department had been asked to reduce costs, 88 percent of respondents said they had, with merit increases, bonuses and training programs being the most frequent target of cuts.

Far fewer expect programs to be eliminated outright with 40 percent of HR respondents indicat-ing there were no current plans to eliminate programs, and 17 percent said their organizations were actually planning budget increases.

Encouragingly, 75 percent of respondents say their organizations are maintaining recognition budgets even as other areas are cut, with an additional 5 percent planning to increase their budgets. These forward thinkers understand the power of recognition to boost morale, increase productivity and help companies gain competitive advantage.

Merit Increases

Bonuses

Training Programs

Core Compensation

Incentive Programs

Recognition Programs

Wellness Initiatives

Pension/RetirementFund Contributions

Medical Benefits

Severance Packages

Paid Vacation/PTO

706050403020100(percent)

63%

47%

45%

32%

29%

25%

17%

17%

11%

10%

14%

Core Compensation

Merit Increases

Recognition Programs

Training Programs

Bonuses

Wellness Initiatives

Medical Benefits

Severance Packages

Incentive Programs

Pension/RetirementFund Contributors

121086420

(percent)

10%

9%

5%

5%

5%

4%

4%4%

1%

2%

In what areas has your HR Department been asked to reduce costs?

In what areas does HR anticipate an increase in budget?

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With unemployment rates rising to levels not seen since the reces-sion of the early 1980s and expected to increase, HR’s perception of attitudes among remaining employees is one of relief. When asked about the prevailing employee mood in their organizations, nearly half (49 percent) of HR respondents believe employees would say, “I’m disappointed in the changes in our compensation and benefits plan, but I’m grateful to still have a job.”

However, as many organizations continue to ask employees to do more with less, HR profes-sionals are appropriately worried about the impact of cuts on employee morale, productivity and goodwill towards the organization. Although most anticipate the negative impact to be short term, a rather worrisome statistic shows a sizeable group of companies think the impact on morale could take years to overcome, with long-term implications.

Non-HR respondents are in agreement with more than two-thirds saying the cuts will have an impact on morale, and a majority says the cuts will have an impact on productivity.

employee attitudes: morale is an area of concern

70 percent of employees anticipate a negative short or long-term impact on morale, and 89 percent of HR leaders worry about this, too.

64%

25%

6%

6%

6%61%

19%

14%

56%

22%

4%

17%

Very little to no impact Some negative short-term impact Long-term negative impact Other

Morale

What impact do you as an HR professional feel layoffs and reduction or elimination of programs and benefits will have on the remaining employees?

Productivity Goodwill

What impact do you expect layoffs and reduction or elimination of programs and benefits to have on the following areas?

Morale

Productivity

Goodwill

706050 1009080403020100Percent employees anticipating negative short and long-term impact

70%

55%

45%

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Although employee goodwill is holding up for now, employers would be wise to avoid complaisance. Goodwill and engagement are not the same thing. Goodwill connotes satisfaction with the status quo. En-gagement includes employees’ understanding of the company’s stra-tegic objectives and their desire to give additional discretionary effort to help the company succeed, in addition to their overall satisfaction.

Low morale and productivity are hallmarks of employee disengagement, and few organizations that expect to survive a recession can afford to have large numbers of their workforce disengaged at this time. According to Gallup studies based on surveys of millions of employees globally, posi-tive employee engagement results in 27 percent higher profits, 50 percent higher sales and 38 percent above average productivity. Clearly, employee engagement can drive bottom-line results. Strategic recognition is one of the best ways to engage employees at all levels of an organization while communicating a common set of values and strategic goals every day.

Although survey respondents understood the value of communication, awareness of the ben-efits of employee recognition was not understood as well. More than three-quarters of respon-dents in both groups agree that communicating company goals, initiatives and values to ensure employee alignment was the best response to the current challenges.

Nearly half of respondents cited employee recognition as a strategy to counteract the potential negative effects of layoffs, reduced benefits and compensation packages. One noticeable differ-ence between HR and employee respondents was in encouraging people to notice and acknowl-edge the stellar efforts of their peers—employees were more likely than HR to say this would be an effective solution.

employee recommendations: manage morale crisis by increasing communication and acknowledgement

Which strategies would counteract the potential negative effects of layoffs?

0 10 20 30 40 50

(percent)

60 70 80 90 100

45%43%

48%47%

77%77%Communicating company goals, initiatives

and values to ensure employee alignment

Implementing or continuing

employee recognition programs

Offering a means for constant

feedback throughout the year

50%41%

Encouraging people to notice and

acknowledge stellar efforts of their peers

HREmployee

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Although goodwill remains, research shows that organizations would be naïve to believe the accumulated toll of salary reductions and freezes and an increased workload will not have an impact on employee attitudes. Businesses that find a way to harness the goodwill remaining with their employees may find it can sustain them through rough times as well as offer a competitive advantage when the recovery comes. Recognition programs offer a cost-effective way to nurture that goodwill into full engagement for bottom-line benefits.

Many leaders understand this value of recognition with 75 percent of respondents indicating they are maintaining their recognition programs, even while other areas are being cut. And although an additional five percent of HR respondents report plans to increase investments in recognition programs, there remains much room for improvement to gain the benefits of recognition.

Implementing these five best practices will help achieve those benefits as well as ensure engagement today and retention tomorrow:

1 / CommuniCaTEClEaRlyOur survey respondents got it right. Be accessible, address concerns openly, and recognize effort frequently and appropriately. According to a recent report from Watson Wyatt, clearly communicating changed strategic objectives or company plans “directly connect employees to the purpose of the organization.” A strategic recognition program that ties frequent and timely employee recognition directly to strategic objectives and company values is one way to show employees how their specific actions help accomplish those objectives. Employees are anxious to learn the rationale behind decisions. Effective communication from senior management directly connects employees to the objectives of the organization.1 It also helps involve employees in the decision-making process so no matter what happens, they don’t feel surprised. For businesses in a position to increase benefits, the good news should be presented in a way that offers an engagement opportunity.

2 / SHoWEmployEESyouRESpECTanDvaluETHEmRespect should be at the core of any business strategy for companies facing layoffs and budget cuts. Show them you know what their strengths are; elaborate gestures are not required. Something as simple as an in-person thank you was the top preferred means of recognition in a recent survey of administrative professionals.2 And, as Harvard Business School Professor Rosabeth Moss Kanter reminded us, a simple hand-written note is not only an effective gesture, it’s already a part of the repertoire of many top CEOs.3 However, global employers should tailor their approaches to be culturally appropriate. Singling out an individual for praise may work in an American workplace, but in other countries or cultures, it may not be welcome.

dealing with fallout: engagement best practices for a recession

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3 / BuilDCaREERpaTHSEmployees understand raises and training may not be in the budget this year, but organizations have other ways to nurture engagement and communicate value to employees. Put them in roles or give them assignments that allow them to exercise their muscles. Allowing them to work with colleagues to acquire new skills or attend meetings with senior managers can help engage employees. This allows employees to connect to their own sense of individual purpose. Helping employees find their purpose allows employers to demonstrate an interest in the professional development of their employees.

4 / REmEmBERTHaTRECogniTionoffERSHigHERRoiTHanBonuSESAs Jeffrey Pfeffer from Stanford’s Graduate School of Business recently said in Workforce Management, “The mistake is that companies try to solve all their problems with pay.”4 In the wake of Wall Street bonus scandals, incentive-based compensation is drawing much more scrutiny, and hefty bonuses are not a wise compensation tool. As it turns out, they may not be particularly effective, either. A McKinsey study published last year showed a $1,000 payment had a 10 times higher return on investment when it was given as recognition than when it was given as an increase in base pay.

5 / RECognizEEvERyonE,noTjuSTToppERfoRmERSAccording to the same Watson Wyatt research, employees who indicate their organization effectively delivers on commitments to employees are 20 times as likely to be highly engaged and 50 percent more likely to be top performers. Recognizing employees equally through recognition programs is one way to communicate the sense that everyone is in it together and invest in the core of the business. These rewards are not just for a few top performers – a global recognition program allows a business to say thank you for all types of effort at all levels of the organization.

1Watson Wyatt. “Watson Wyatt Identifies Steps to Keep Employees Engaged, Productive in a Downturn.” Watson Wyatt. March 31, 2009. http://www.watsonwyatt.com/canada-english/news/press.asp?ID=208842OfficeTeam. “Show them recognition – Manager and Support Staff Not in Sync on Top Rewards, Survey Shows.” CNW Teleb. April 7, 2009. http://www.cnw.ca/fr/releases/archive/April2009/07/c7897.html3Kanter, Rosabeth M. “A Simple Gesture to Boost Morale.” Harvard Business Publishing. December 3, 2008. http://blogs.harvardbusiness.org/kanter/2008/12/a-simple-gesture-to-boost-mora.html4Hansen, Fay. “Special Report: Compensation & Salary Forecast—Where’s the Merit-Pay Payoff?” Workforce Management. November 3, 2008. http://www.workforce.com/section/02/feature/25/91/53/

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For companies in survival mode, engagement and retention strate-gies may seem like luxuries. However, business leaders should re-member that employees have long memories and will remember how they are treated when they determine whether to put in extra effort or get by with the bare minimum. It will also factor into their decision to stay with your organization or pursue other opportuni-ties when the recovery comes.

In an environment filled with bad news, this good news should be welcome—employee goodwill is not as damaged as many in HR have feared, but this goodwill should not be taken for granted. Although it is an encouraging sign 75 percent of respondents report recognition budgets will be maintained even as other areas are cut, only 5 percent report they are actually increasing bud-gets. Because recognition is one of the most cost-effective ways to improve employee engage-ment and morale, many businesses are missing a unique opportunity to engage and motivate their employees.

Steps to communicate clearly and recognize and reward appropriately can buoy employee mo-rale through these tough times and can drive retention when your employees once again have a choice where to work. However, organizations that are planning to cut or eliminate their pro-grams are not positioning themselves for success and could squander an unexpected and unrec-ognized opportunity.

conclusion

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The survey was sent via email to HR professionals and cross-functional employees during the first quarter of 2009. More than 200 respondents answered the questionnaire via an online sur-vey tool and were assured of their confidentiality. Their responses were used to drive the results and conclusions of this report and will be used only in this aggregate analysis. The key findings herein are based at the 95 percent confidence level with a +/- 5% margin of error.

joBTiTlEMost respondents were from management – eight percent were C-level, six percent VP, 18 per-cent Director and 39 percent managers.

CompanySizE71 percent of respondents said their company is engaged in global operations. A majority were from companies with more than 5,000 employees, including 25 percent from companies with more than 25,000 employees, 13 percent from companies with 10,001 to 25,000 employees, and 11 percent from companies with 5,001 to 10,000 employees.

joBRolE64 percent of respondents work in HR, seven percent in sales, four percent in IT and the remain-der from other departments, including R&D, production, administration, customer service and marketing.

methodology & demographics

Fewer than 2,500

2,501–5,000

5,001–10,000

10,001–25,000

More than 25,000

25%

37%

14%

11%

13%39%

29%

8%6%

18%

C-Level

VP

Director

Manager

Staff

2%

1%

Human Resources

Other

Sales

IT

Customer Service

Marketing

Administration

Finance

Corporate Communications

Production

Public Relations

Research & Development

Facilities

Procurement

64% 12%

7%

4%

Founded in 1999, Globoforce is the world’s leading provider of SaaS-based employee recognition solu-tions. Through its social, mobile, and global technology, Globoforce helps HR and business leaders elevate employee engagement, increase employee retention, manage company culture and discover the power of real-time performance management. Today, employees across the world are living their company values and achieving peak performance through the Globoforce platform. A private corpora-tion, Globoforce is co-headquartered in Southborough, Massachusetts, and Dublin, Ireland. To learn more, please visit www.globoforce.com or the company’s blog at www.globoforce.com/globoblog.

© 2012 Globoforce Limited. All rights reserved.

Globoforce (North America)144 Turnpike RoadSuite 301Southborough, MA 01772 USAt // +1 888 743 6723f // +1 508 357 8964e // info@globoforce.com

Globoforce (Europe)21 Beckett WayPark West Business ParkDublin 12, Irelandt // +1 353 1 625 8800f // +1 353 1 625 8880e // info@globoforce.com

Are you managing the employee morale crisis by increasing communication and appreciation? HR leaders can boost morale and productivity in a difficult economic environment while also preparing for the upturn with recognition. Our consultants are ready to help you build the business case for strategic recognition in your organization. Visit us on the web at www.globoforce.com or email us at info@globoforce.com. To speak to one of our global recognition consultants immediately, please call: +1 888-7-GFORCE.