Money, money, money

By MARK STORY

It's work-life balance flexibility - not store-bought goodies - that employees value most when the boss offers non-financial rewards.

Within today's tight labour market, savvy managers are adopting non-financial goodies as yet another weapon in the war to retain talented staff.

But if you thought non-financial reward schemes - offering inducements other than cash - compensated for below-market pay rates, Brent Miller, consultant with remuneration and benefits specialist Watson Wyatt, says you'd better think again.

If implemented properly, non-financial rewards can give good employees another reason not to jump ship. But when executives try to implement non-cash incentives before they've established sound conditions of employment, Miller says they're often seen by staff as cheapskates.

"In an environment where cash is king, non-financial rewards - while adding icing to the cake - will never make up for poor pay," he says.

So when it comes to non-cash rewards, what is it that employees value most? It's common place for organisations to offer sales staff movie tickets, electronic goods, leisure activities, weekends away or even holidays as rewards to boost performance.

What the smarter managers now realise, says Miller, is that one of the strongest motivators for all staff is flexibility around when and how they work. Not surprisingly, he says it's work-life balance rewards, not store-bought goodies that repeatedly top the non-financial rewards list.

It's becoming increasingly popular, says Miller, for managers to give their staff the day off on their birthday or a "sanity day" off every month, while others see the value in providing childcare facilities.

Then there are firms offering staff time off, with pay, to perform voluntary community work. At ANZ Bank 700 staff collectively clocked up nearly 3000 hours of volunteer time in the community during the past year.

"More progressive managers are letting their staff use sick leave to care for elderly parents or young children," says Miller. "Work-related training isn't generally regarded as a non-financial reward. But some companies are starting to fund personal pursuits in the expectation that any type of training will impact positively on the organisation."

How should managers go about implementing non-financial reward schemes within their teams?

The three key questions they must ask themselves, advises rewards expert David Hollier, are:

* Are non-financial rewards affordable?

* Will they achieve the desired results?

* What behaviour are we rewarding and why?

"Ask yourself if what you're proposing to reward staff with is in line with the organisation's corporate culture, and ensure staff understand why you're offering these rewards," says Hollier, manager with staff incentive solutions company e-Rewards.

It's equally important, he says, that executives know exactly what they'll achieve through non-financial reward schemes, who is entitled to them, and what aspects of performance they want to target - especially if they're rewarding more qualitative than sales-based performance.

From Telecom's perspective, non-financial rewards revolve around engagement, valuing people and adding an extra hook to the loyalty-factor.

"We're unlikely to win over customers if we haven't won over our own employees," says remuneration manager Jan O'Neil. "In addition to voucher-based schemes that reward outstanding contributions, alternative rewards programmes - incorporating work-life flexibility - recognise that there's a lot more to people's lives than working for Telecom."

What are the biggest misnomers companies fall into when putting non-financial reward schemes together? One of the biggest mistakes, says Miller, is assuming one-off gifts will solve all staff problems. He says it's important to structure non-financial reward schemes that appeal to people at varying stages of their working cycle.

In other words, finding out what pushes an employee's buttons can depend on the type of organisation, the industry they work in, and their age.

"What people value depends on their time of life," says Miller. "Don't drop the ball by simply assuming you understand the culture of the organisation and the prevailing business climate."

It's critical not to assume that implementing any reward scheme will deliver a magic bullet.

Miller says it's equally important to find out why someone's performance doesn't entitle them to rewards. That also means providing the necessary training support to ensure they do so in the future.

Firms that implement non-financial rewards on the assumption they'll save money are also in for a surprise, says Miller. In fact, based on his experience, they typically end up paying more. But the by-product of better staff retention, he reminds managers, is reduced training costs over the longer term.

"If you're offering non-financial rewards as a cost saving, you haven't thought your rewards scheme through properly. The fringe benefit tax component (FBT) means non-financial rewards are unlikely to be any more tax-efficient than giving away cash."

The big danger in implementing too many short-term non-financial rewards, says Miller, is ending up with the "lone ranger" syndrome among highly competitive sales staff.

Instead of offering one-off prizes, he's more in favour of stepped rewards that overlap each other over the longer term. Not only will you retain staff focus, he says, you'll retain that focus over the longer period.

"That's another reason why it pays to recognise team effort through any rewards-based programme."

A worst-case example, recalls Miller, was a fast moving consumer goods firm that decided to reward its sales staff on the amount of stock it could move into its vendor's site. The product's three-day shelf-life and the vendor's solid returns policy, says Miller, meant that the company ended up paying higher levels of reward while experiencing huge waste rates that impacted on production levels.

"So non-financial reward schemes can have a huge negative impact - especially on the organisation's reputation - if they drive the wrong internal behaviours," Miller warns.

Don't expect to achieve magical outcomes immediately. Though you will see short-term performance gains, Miller suspects that longer-term performance gains could take up to two years to kick-in.

"That's assuming you keep up those rewards throughout the programme, and constantly tweak them to ensure the novelty-factor doesn't wear off," he says.

To ensure non-financial reward schemes deliver stated outcomes, Hollier says it's important to ensure there are no gaps between implementation and the delivery. That means ensuring the rewards are offered in a way that's equitable to everyone involved.

Non-financial reward schemes can be set up in different ways, but those designed to increase sales performance are typically linked to an accumulative points systems.

The more points you acquire, the greater the variety of goodies on offer.

While many firms spend only a few thousand dollars on short-term rewards programmes, large companies, advises Hollier, set-up dedicated websites that let staff redeem their (reward) points on-line.

So, how do you know if non-financial reward schemes work? The speed with which participants redeem their rewards is an important indicator.

But Hollier says managers running such schemes need to seek constant feedback from staff and clients alike, and check that stated outcomes are being met.

"Remember, the potential for negativity over any rewards scheme depends on how you manage the expectations of those participating."