Reward & Recognition - Why use a points-based system for employee recognition?

Introduction

There are two main motivations why businesses use points-based recognition:

1. They are a global business with employees located in multiple countries and they want one common currency 

2. They want to be able to reward lower-value awards frequently (e.g. if their reward budget is restricted), so employees can accumulate them over time to purchase wish list items 

We’ll go into more detail on both of these use cases below - but first, what do we mean by "home currency" and "points conversion rate"?  

You'll see the terms "home currency" and "points conversion rate" mentioned a few times in this article, so here's a brief explanation.

The home currency is the main currency the client tracks their budget and receives invoices in, chosen between GBP, USD, EUR and AUD.

The points conversion rate is simply how much money our clients want their points to be worth. We express it as a ratio of home currency to points.

For example: a 1:10 point conversion rate means that, for every 10 points added to the recognition budget, the client pays 1 unit of their home currency (e.g. $1).

This conversion is fully customisable and it is always the choice of our clients, however we can share some guidance to help our clients decide. Read the Multi-country Awards Client Welcome Pack to find out more, and contact your Client Success Manager or Implementation Specialist for support with setting up your points-based recognition program.

Use case 1 - A global client seeking a consistent employee experience

Points based R&R is necessary for rewarding employees across multiple countries. The use of one branded ‘points’ currency creates a consistent experience because all employees send and receive the same currency. 

Our clients purchase points upfront from Reward Gateway. The amount that they purchase is flexible, based on their needs and budget. It might be their entire annual budget, or clients might want us to invoice them monthly, quarterly or on an as-needed basis. Reward Gateway will issue all invoices in the client's chosen home currency (see above).

These points can then be allocated to recognise employees through the platform. However, it is not until the employee spends their awarded points that the points-to-currency conversion occurs (converting points into the employee’s local currency). This is to limit the currency exchange risk, to ensure we provide current currency rates. 

In this scenario, clients can use any conversion they like. However, we recommend using something easy like 1:1, 1:5 or 1:10. By using a transparent and easy to understand conversion, even the employees located in other countries will be able to understand how the global currency via points is worked out. 

For example:

• I’m an employee in the US, working for a UK company
• I receive an award worth 500 points
• I know that 10 points equals £1, meaning 500 points is £50 and therefore that is $65. 

Before setting up award values for all the countries involved in the program, we also recommend that clients consider the values of the retail vouchers available for employees to redeem, which they can obtain through their Implementation Specialist or Client Success Manager. This information can help ensure that employees receive award values they can spend immediately if they wish.

For example:

• I’m the administrator for a recognition program available in the US and Australia. My home currency is USD.
• I know that the lowest value voucher available to employees based in Australia is 20 AUD which equals to around $14.
• As I have set up 10 points to equal $1, setting 140 points as the lowest value award for employees based in Australia will ensure that they receive awards they can spend immediately, without waiting to receive more monetary recognition to build up their balance.

Of course, the platform also has information on points and what this translates to, but it's about transparency and the employees being able to trust and easily understand the equation. 

Use case 2 - A company extending budget and reach

Some companies create a reward strategy that leverages smaller award amounts. This might be because they want to stretch their budget with smaller but more frequent awards, and/or to allow more people to have access to the budget and give out awards.   

One impact of this strategy is that employees may not be given enough points to buy something right away.  However, points tend to lend themselves to collecting behaviour. We’re all used to collecting points — when playing online games or as part of loyalty programmes such as air miles — until we have enough to cash them in to purchase something we want. 

With this strategy, it’s best to use a higher conversion like 1:10, so the points appear higher than the currency amount and therefore feel special to receive.  For example, for many people, receiving 10 points will feel more satisfying than receiving $1.00. 

Determining Award Values

Regardless of the conversion strategy our clients choose to use, the most important thing is that they communicate both the criteria and examples of the type of work behaviours that warrant an award. Recognition programmes are most successful when they are aligned with the organisation's mission, vision, values and goals. Employees can tell if there is — or is not — a clear connection between what the organisation says is important and what is actually rewarded at work.

This communication will help all employees understand how to judge the desired outcomes. It will also ensure timely recognition, which is necessary for the program to be effective. The bottom line is that points awards should be consistent with employees’ achievements and meaningful to the person receiving them. 

What would the client need to be thinking about to implement this?

The implementation team have done a great job of creating new Welcome Packs that highlight the decision items and areas of thought needed for each of our solutions. Read the Multi-country Awards Client Welcome Pack  to learn about the information you need to prepare before setting up points-based recognition.