During Financial Woes, Should Companies Nix Extravagant Awards?

Dawn Burke Dawn Burke, Recognition 6 Comments

“It doesn’t take courage to give money for hitting a number.”

–Simon Sinek, WorkHuman 2018

 

I’m a believer in recognizing extraordinary workers with something palpable.  I especially like the idea of creating “experiences” as recognition rewards over cash bonuses.  Experiences build trust, enforce connections, and create memories. An experience could include anything from an incredible dinner to attending an event like a concert, or even a 5-star vacation.  Achievers who have given their all, produced clearly defined results, embraced accountability for their actions, and have remained optimistic in a stressful environment should be publicly rewarded with something the company put some skin in.  

But if a company is struggling financially, is it right to reward at all costs?  Does it model good stewardship of money? Are companies sending the right message that a select few are more important than the whole? And if the costly rewards are cut for a year or two, is it fair to the “achievers”?

In my opinion, it is right to cut costly rewards and it is fair for the achievers who may not benefit from a trip to St. Lucia.  

“Struggling financially” is a broad term, but here are my Mendoza lines:  

  • If any layoffs happened over the year, the awards ceremony at the Ritz-Carlton needs to be cut.  
  • If any “emergency meetings” happened within the year where leaders were forced to cut 25% or more of their operating budget (or the board “will not be happy”), the trip to St. Lucia for ‘’winners” needs to be cut.  
  • If the critically approved headcount gets cut mid-year and impacts the ability to get work done, the wine-tasting adventure needs to be cut.

And here why it is fair to the top-performers.  First of all, let’s be clear. Although it is fair to cut expensive rewards, it totally sucks. Totally. Fairness and suckage are two separate things.  

  • It is fair because there are no guarantees in business.  
  • It is fair because any reasonable person knows the expense it takes to reward a few is not worth punishing even ONE employee through an underserved layoff—a layoff that affects one’s livelihood, career, family, mental health, and confidence.
  • It is fair because building trust with the company should be priority one. The decision to reward extravagantly when financials are impacting the ability to do business breaks trust within the entire employee population.  It questions leaders’ abilities to make right decisions and models the wrong priorities. And you cannot expect employees to make integral decisions if this is what leaders model.

Now, if you are a company that truly does value extravagant rewards over employees, then certainly spend the money. I mean that sincerely. There are some organizations who are very open about where their priorities lie, even if it is rewarding achievers at the expense of laying off others. Many businesses thrive in this environment; especially ones where top execs “chaperone” the expensive event. 

If a company is in an unfortunate position and must limit financial rewards for truly deserving employees, there are still many options to make these employees “whole” and still feel they’ve gotten the recognition they deserve.  You can still create experiences that may be more affordable until times get better. You can re-plan the expensive party when the financials make sense.

It doesn’t take courage to give money for hitting numbers.  But it does take courage to do what’s right, even if that means postponing expensive rewards.

Dawn Burke
Dawn Burke, founder/advisor for Dawn Burke HR, is an HR leader, speaker and writer specializing in new HR practices, engagement and workplace culture. Her HR/leadership career has spanned the last 20 years, most recently serving as VP of People for Birmingham, AL’s award-winning technology company, Daxko (And yes, Kris Dunn and Dawn are making Bham the HR capital of the world! Who knew?). You can also check her out at DawnHBurke.com and a variety of other interesting places. Google her, it’ll keep you posted on what she is up to.

Comments 6

  1. Pingback: During Financial Woes, Should Companies Nix Extravagant Awards? – Site Title

  2. I once worked for a company that – literally – was putting on the Ritz.

    Big leadership (broadly defined if I was there are that point in my career) boondoggle at a Ritz at a far away location.

    Flash forward 10 years. COO and CFO did time for wire fraud. My wife heard the news and asked of the COO (we’ll call him Pete), “Wait, wasn’t Pete the guy you introduced me to on the Stairmaster at the Ritz?”

    Why yes. Yes that was him.

  3. Great piece, Dawn – the only part I struggle with is “the expense it takes to reward a few is not worth punishing even ONE employee” – we’re going through some of this right now and there are definitely a few employees that are critical to acknowledge/reward even during the toughest of times. Of course you DID preface that with “any reasonable person would agree”, so maybe I answered my own question. 🙂

  4. Okay – gotta weigh in on this . USA Today interviewed me when the big AIG issue was in the news a few years back. This is not a black and white issue.

    You need to look at both the focus of the “program” and the rules structure associated with.

    First – if the program is designed to drive sales it is the exact right thing you SHOULD do if your company is having a tough time. I’d also run programs focused on helping drive cost reduction. Those are responsible goals for a program and an executive team. Should they stop marketing because times are tough? Probably not.

    Programs designed to reward for incremental volume mitigates the issue of “cost” – you’re only paying for sales/performance above a goal and therefore have accounted for costs of the program. In other words the cost of the program is a small percentage of the growth/benefit of the performance. Why wouldn’t you run a program with a 3 or 4 or even 10:1 return?

    If you’re talking about poorly designed programs that reward people simply because their #1 regardless of overgoal/undergoal performance you’re right. But don’t blame the game – blame the game designers.

    One of the most reliable and trackable ways to drive increased sales is through a well-designed incentive. Let’s not throw the baby out with the swag water.

    Sometimes a good reward program is a good idea.

    I will say – optics are a problem and I’d recommend a more subdued event – maybe with more individual awards vs big group travel events in Hawaii.

    But that is why you hire a pro like me!

Leave a Reply

Your email address will not be published. Required fields are marked *