Telling the Truth About Rewards Programs

John Stumpf, CEO of Wells Fargo & Co., should be applauded for the ad he took out in The New York Times, The Washington Post and The Wall Street Journal. In the full-page, letter-style ad, he boldly stated that enough was enough and proclaimed that the bank had a right to reward its top performers. Stumpf reminded those who have forgotten—or never knew—that in the free enterprise system, it is a best practice to give people rewards for reaching targeted financial goals. Simply, it is the norm when running a profitable company.

Senior leaders who “get it” know that genuine recognition practices, strategic rewards and incentive programs not only move performance up the scale but reinforce the organizational culture. These executive leaders understand the dynamics required to drive up productivity, optimize sales performance and generate an engaged workforce that will go the extra mile to get the job done.

In the case of Wells Fargo, we are speaking about rewarding frontline employees, from tellers to mortgage salespeople to financial advisors to top bankers. The company remained profitable throughout most of 2008, and the employees it sought to recognize with a trip performed their very best, and no doubt this conference trip was an incentive for them.

While Wells Fargo did not need nor request the Troubled Assets Relief Program bailout monies, it did nevertheless receive $25 billion, and has said that it has used the money to fund loans and help homeowners avoid foreclosure. Stumpf points out that the costs of this now-canceled conference were to be paid from the profits generated from this division, and not from the bailout monies that Wells Fargo was using to protect homeowners facing foreclosure.

But however well-deserved the trip was, Wells Fargo has canceled it, and perhaps it did so in an effort to find the right balance in doing the right thing. It doesn’t help that the news about Wells Fargo’s conference comes just a few months after the infamous AIG luxury spa retreat last October at the St. Regis Resort at Monarch Beach, California.

The AIG conference took place one week after the failing company got an $85 billion bailout. AIG executives were brought before Congress to account for the $440,000 spent on manicures, pedicures, massages and facials as well as the room and meal costs. What Wells Fargo had in mind was something very different. But all recognition is now being tarred with the same brush. And that’s too bad.

Instead of taking an easy (and inaccurate) cheap shot, the media should instead look at what recognition and rewards can bring to the table in an ailing economy. All of us have to understand that employees who are recognized are the very employees who stay after hours to get goods out to a customer or finish time-sensitive paperwork. When employees feel respected and appreciated for what they contribute, they are less likely to quit, or become so disaffected that they face firing. They’re likely to be more productive, in other words.

“Total rewards” in the compensation and benefits industry consists not only of salary and bonuses, 401(k) and dental plans, but also incentive programs and awards for achieving various results. When employees are urged to be the best of the best in achieving some performance metric, whether measured by the attainment of a financial goal or another key business outcome, they know there is usually provision for them to be acknowledged and often to be rewarded.

This incentive is at work (or should be) not only for the sales-makers and deal-doers, such as the people Wells Fargo sought to reward. In any organization, there also are support staff who solidly work in the trenches, who consistently live the company values and who serve clients the way we all would like to be treated. While there might not be a direct line from these folks to sales made or dollars earned on the company scoreboard, they go above and beyond in their daily work and deserve to be recognized.

Some people might argue that their salary should be enough, but that is like telling a customer that inventory sitting on the stores shelves should be enough for their shopping experience. We almost always prefer to shop where someone tastefully and tactfully assists us in the fitting room, finding matching accessories or offering suggestions on color or style. Just as stores need customer loyalty, so do companies need employee loyalty. And rewarding and recognizing employees (beyond salary) is what gives every business the competitive edge—that is, it gives them a motivated workforce.

Stumpf reminded readers of that in his ad: “Events such as this are the heart of our culture because our product is service, delivered by caring, energized, talented, loyal team members who earn competitive, fair wages and benefits.”

Fairly or not, in the wake of the media backlash against Wells Fargo and other companies, every organization will now need to more carefully examine its rewards programs and recognition practices. Companies must make sure that their culture—the values and beliefs they espouse—are front and center, and that they are driving recognition activities or rewards programs and events.

The business activities that will be rewarded with a trip or some other big-ticket incentive need to be very clearly defined. When behaviors are consistent with the values, and when they help accomplish goals, no one can argue with a performance metric that has been achieved. If you can measure the change in performance, then you can boldly state that the individual deserves the promised reward.

Recognition events such as the one Wells Fargo had planned will need to have better and more solid business purposes behind them—something besides the fun and relaxation associated with being at a nice place. In better days, half the thrill of these conferences is being able to go with a spouse or partner to a place that you might not otherwise have been able to afford. But like it or not, that fun factor isn’t enough right now.

If the money pot really is dry, or if an organization’s ethics and values simply state that a recognition conference is not the right thing to do—whether because of the economy or because the company got an infusion of taxpayer money — you simply have to explain the situation to your employees.

Most important, you must still make the time and make the effort to express the best “thank you” that you can for the contributions employees have made. Tell them how their efforts have made a difference and how they will continue to help turn this troubled economy around.

Those simple words — thank you — can make a world of difference. And no one can take a potshot at that.