Do you have a Diamond Employee?
What is the real value of a good employee?
If you have ever purchased jewelry, especially and engagement ring, wedding ring or other recognition memento, you have probably heard a formula given for how to establish a budget, or value assigned to the significance of the event.
When evaluating how to recognize an employee that has done an excellent job, we should employ a similar technique of determining the value assigned to the memento we wish to give for stellar performance. An award after all serves the same purpose as diamond jewelry, and in fact, many times diamond jewelry is given specifically as an award to the very top producers. The NFL Super Bowl ring is a prime example.
So how do we establish a value for an award to give an employee? The first step is to put a value on the achievement. Sales professionals often receive awards because it is very easy to assign a value to their contribution. Whether the award is given for total sales volume, sales growth, or meeting a specific goal or target, chances are it is not difficult to value that person’s contribution. However if the recipient to be of the award is in production or a customer service role, other metrics may need to be used.
Since most compensation plans have a tie to the value of an employee to the business, it is possible to tie the recognition to that number as well. A good rule of thumb is that we should spend 2% of an employee’s annual salary on recognizing outstanding achievement above and beyond the required job.
How would this work? If a sales person earns $80k in direct compensation, it is reasonable to spend up to $1,600 in annual recognition of that person’s efforts. If a customer service rep earns $24k per year, your recognition budget could be $480 per year.
Guaranteed, spending 2% on recognition for that person will reap greater dividends than just giving them the money in cash, because as William James knew, people desire praise and recognition more than anything else. An $80 plaque will stay on their wall for years, reminding them of prior achievement, whereas a nice dinner (or worse, groceries) bought with that same $80 will long be forgotten.