Employee gifts & recognition programs – analyzing the business opportunity

Yesterday, YourStory published an update on Hifives, who have launched a revamped cloud-based solution for employee rewards programs. We have also covered several startups in the customer loyalty program space such as MintM (smartphone and cloud based loyalty system), MyPointsCloud (restaurant and pub customer loyalty program), tagNpin (loyalty program consolidation & discovery), GoZoop (digital agency with social loyalty solutions) and Revu (mobile based loyaty programs for SMBs).

Many companies in the loyalty program space are also delving into employee rewards space as an extension to employee gifting solutions. For example, Loylty Rewards Management (funded by Ventureast and Canaan Partners) offers a loyalty platform that also supports employee recognition, service awards and referral awards. QwikCilver (backed by Helion and Accel) extended from preloaded meal cards for employees to employee gifting & incentive programs.

Is there a real opportunity?

On the face of it, the maths is simple but the numbers could be misleading. Corporates in India spend INR 1,000 – 3,000 per employee every year on employee gifting, recognition and non-cash incentives. The IT-BPO industry itself employs over a million people, making it at least a INR 100 Cr of spending by just one sector. However, companies offering solutions in this space will once get a very small slice of the pie – bulk of the money goes to the producers of goods consumed and not the enablers.

This probably explains why Loylty Rewards and QwikCilver offer their employee rewards & incentive solutions as an add-on functionality and don’t have too much dedicated focus on this. However, the other way of looking at it is to deliver genuine value through the offerings rather than just be transaction enabler. That way, you can play not just for the slice of the total spend on gifts/ incentives, but also for the value added to the effectiveness of the program.

Mis-delivered value?

Let’s look at what’s important to the HR department managing these employee rewards and recognition programs of a company. The most critical thing – why these programs exist in the first place – is to motivate and engage employees. On the other hand, the real value delivered by companies focusing on this space is ease of administration. Many of these companies do talk about how their solutions benefit employees by giving them greater choice, delivering products at lower costs and ease of usage. I would argue from an HR standpoint that this so-called value for employees is not effective.

It is more important for an employee in what manner they were recognized by the company – was the award given publically or at least in person by the manager and what was said. Being able to decide between doing dinner at a fancy restaurant or buying crockery for the house after completing 5 years at the company, isn’t really going to impact their engagement levels. In fact, I would argue that a system that automates the task of congratulating the employee and personally handing over the gift actually takes away from the experience.

On completing 5 years in one of my past companies, I had received a $10 pre-loaded cash card from our corporate office (in USA) along with one of those boilerplate letters in which you just customize the employee’s name. Not only did I not value the award, I actually felt angry at getting a $10 gift card and decided not to use it. Maybe, just the letter with a certificate would have been better! Later that week however, my boss got back from travel and we all went out for drinks to celebrate my 5 years. That outing I definitely remember!!!

So where is the value?

In my article on 3 rules for managing incentives at startups, I had explained how one should award (not reward) with experiences and memories. Many companies also have defined guidelines for how employee recognition awards must be delivered. For many types of recognition, it is important for it to be given publically. One client I worked for, stipulated that the manager must hand over appreciation certificates/ gift vouchers in person to the employee. A friend told me about a practice in her team where at least 2 others would take the employee out shopping on their birthday instead of handing over a gift card.

On the popular TV series – Suits – they show how Louis Litt is totally bowled over when he gets a fancy dictaphone as a gift from Daniel Hardman, one of the Managing Partners. Even the fanciest dictaphones don’t cost more than $200, clearly an insignificant amount for a Senior Associate in high flying New York law firm. Litt had been wanting this Dictaphone; the wow factor for him was that his managing partner had actually realised this and presented it to him! Litt’s exclamation of “how could he know” was really about feeling happy that someone so senior had actually cared enough to know what he wanted.

In my opinion, the value and money to be made in enabling employee gifting and recognition programs is through creating platforms that provide this kind of wow factor rather than just providing administrative ease. My next article will be a resource piece on employee recognition programmes. Apart from helping startups with their own programs, I hope that players in this space will also be able to get some ideas/ cues from it.