AARL

Rewards, recognition and knowledge sharing: seeking a causal link

Patricia Milne

ABSTRACT Knowledge sharing is the fundamental requirement of a knowledge-based organisation. Some of the greatest challenges for organisations moving down the knowledge management path stem from well established practices of hoarding knowledge, practices which, in the past, have been well rewarded. Employees were motivated to hoard knowledge because of the competitive advantage that this would give them. The challenge now is to develop an organisational culture where sharing knowledge is the norm.

In seeking ways to foster this culture managers are implementing reward and recognition programs in the belief that they will motivate employees to share their knowledge across the organisation. Some organisations are investing large amounts of organisational resources towards this end.

While there is a strong history of research into the impact of rewards on aspects of employee behaviour including motivation and performance, no research to date has investigated the impact on knowledge sharing. This paper uses the results of the earlier research to provide a context for an examination of the use of rewards and recognition programs in the knowledge aware organisation. It suggests that managers who are relying on them as part of their strategies for cultural change need to support research programs so that they can be confident that the large amounts of resources they are investing for this purpose will bring the return they anticipate.

Introduction

However one chooses to define knowledge management, knowledge sharing is at the heart of the concept; knowledge management is about sharing knowledge and not owning or hoarding it. Some of the greatest challenges for organisations moving down the knowledge management path stem from well established practices of hoarding knowledge, practices which, in the past, have been themselves well rewarded. Employees were motivated to hoard knowledge because of the competitive advantage this gave them. The challenge now is to develop an organisational culture where sharing knowledge is the norm.

From the literature, and from an examination of the websites and intranets of a wide range of companies and organisations, it is obvious that reward and/or recognition programs are being implemented with the basic assumption that they will encourage employee loyalty, foster team work and ultimately facilitate the development of the desired culture based on knowledge sharing.

For example, when discussing the potential barriers to knowledge sharing, the Chief Executive of British Telecom (BT),[1] indicated that the first barrier was cultural. 'People tend to focus on their own targets and see their department in competition with others...there is also a sense that collaboration gums up the works.'

Another barrier noted was an economic one. He stated that people reason that if knowledge provides the company's source of competitive edge, then it also provides the individual's competitive edge within the company. From the perspectives of the employees, companies 'are asking them to share the knowledge that earns them the positions they hold, and their hope of financial reward and advancement'.

He concluded that 'economic worries can be largely addressed by linking rewards to collaboration'. This response is typical of the reactions of many organisations that are investing quite large amounts of company resources into the establishment and management of reward and recognition programs.

Similarly, Buckman described the movement towards knowledge sharing as a journey of cultural change that like most journeys has its pioneers and its laggards. 'As the train begins to move down the track you need to let everyone know where its going and help them get on board. Those that board early and do well, you reward'. Others maintain that the trick to encouraging knowledge-sharing lies in designing reward and recognition systems that stimulate sharing of all kinds: goals, tasks, vision as well as knowledge.[2]

While there is a large body of literature, including research literature, on rewards and recognition programs, there is no evidence to suggest that there is any positive link between rewards or recognition and knowledge sharing. At the very most, it can probably be argued that such programs do send a message to employees that knowledge sharing is valued. However, Denning[3] warns that while the establishment of rewards for individual knowledge sharing activities can signal the importance of knowledge sharing, it also runs the risk of creating expectations of rewards for behaviour that should be part of the normal way of conducting business in the organisation.

If past research has not examined the link between rewards, recognition and knowledge sharing, can these earlier studies be used to provide a context for the present discussion? The answer is undoubtedly 'yes' because of the insights they provide into the nature and purpose of rewards and recognition programs and the impact these have on employee motivation - still important issues for managers who are promoting a culture of knowledge sharing.

With this therefore as its aim, this paper reviews the research literature on rewards and recognition. It examines the role of rewards in organisations, the issues surrounding the rewarding of teams, the importance of rewarding the desired behaviour and managing the reward process. It concludes by highlighting the need for new research to explore the causal links between reward and recognition programs and knowledge sharing.

Role of Rewards

In general terms rewards programs come within the overall concept of compensation strategies. A compensation strategy is the 'deliberate utilisation of the pay system as an essential integrating mechanism through which the efforts of various sub-units or individuals are directed towards the achievement of an organization's strategic objectives'.[4] Reward programs are management tools that hopefully contribute to a firm's effectiveness by influencing individual or group behaviour. All businesses use pay, recognition, bonuses or other types of rewards to encourage high levels of performance.[5]

'Recognition' is slightly different. It is still an important management tool but is usually a non-financial award given to employees selectively, in appreciation of a high level of behaviour or accomplishment which is not dependent on achievement against a given target.

Rewards and recognition programs are used in the belief that they will reinforce an organisation's values, promote outstanding performance and foster continuous learning by openly acknowledging role model behaviour and ongoing achievement. Both types are dependent on managers recognising the subordinates' achievements whether as individuals or as part of teams. Rewards and recognition need to be timely, sincere and appropriately matched to the person or the achievement.

There is a multiplicity of reward and/or recognition programs that can be found in a wide range of organisations. However, while there is research evidence to show that these programs can contribute to many aspects of organisational life, there is no research to support the assumption that they do in fact encourage knowledge sharing.

Background Research

Rewarding employees for their contribution is an issue that has been much discussed and debated in the motivation and human factor literature. But within the business sector, there are those who claim that rewards undermine productivity and performance.[6] When an employer offers a reward for performance, it is suggested that employees begin to perform the task for the external reward rather than for intrinsic reasons. Because of this, perceptions of self-determination are said to decrease and motivation and quality of performance decline. In recent years this view has gained popularity.[7] However, an analysis of more than 25 years of research concerning rewards and performance indicates that rewards can be used effectively to enhance interest and performance.[8] This conclusion, based on an extensive meta-analysis of all of the earlier research, refutes the argument that rewards undermine both motivation and performance. Cameron and Pierce found that generally, people enjoy activities or tasks more when they receive a reward and the argument that rewards undermine performance and interest is not supported by the experimental data.

Cameron and Pierce also investigated whether different types of rewards have different effects. To assess this possibility they analysed studies that used either verbal or tangible rewards. Verbal rewards involved giving participants praise or positive feedback for their work while tangible rewards involved giving money, tickets to a theatre, certificates or other similar rewards. Cameron and Pierce concluded that praising people for their work leads to greater task interest and performance and that tangible rewards also enhance motivation when they are offered to people for completing work or for attaining or exceeding specified performance standards. In summarising the results from the experimental literature they examined, Cameron and Pierce noted that rewards increase performance and interest when rewards are:

• made contingent on quality or performance or are given for meeting clear standards of performance
• made contingent on challenging activities
• given for mastering each component of a complex skill, and
• delivered for high effort and activity.

They concluded that rewards are not inherently bad or good for people. Rewards can have negative effects, but these effects are circumscribed and can be easily prevented. In the workplace, careful arrangement of rewards can enhance employees' interest and performance and this is likely to occur when rewards are closely tied to the attainment of performance standards and to the personal accomplishment of challenging tasks. Their research also suggested that when rewards are linked to specific standards of performance, people are more contented and productive employees.

Some researchers are working in areas that are more closely aligned to knowledge work and knowledge sharing. For example, it has been shown that when rewards are given for creative thinking and performance, people do show generalised creativity in other tasks.[9]

Also, Claman[10] noted that although work has changed, compensation programs have not. 'The current compensation systems do not reward the core competencies of the intelligent career - knowing why, knowing how, and knowing whom' but are still based on the industrial economy from which they evolved. Knowing why refers to a person's work values - careers are now defined more by the employee and not the employer and 'what I want for myself' is important - higher salaries and promotion are not the only medium of exchange.

Knowing how relates to the actual medium of exchange in the knowledge economy, knowledge itself. Old skills such as following orders or knowing and applying policies have been replaced by the skills of the knowing how competency of the intelligent career - research skills, strategic thinking skills and skills of personal leadership. Knowing whom refers to the relationship-building competency that is the set of relationships to which a person contributes and from which they learn.

Increasingly, as teams become the primary work units, many organisations are also adopting team-based reward and recognition programs. These are usually very visible within the organisation and convey a high level of organisational approval for those so rewarded. Again the assumption is being made that these contribute to the overall development of the desired knowledge sharing culture. Reasons for using team rewards include supporting a team-based structure, fostering co-operation among team members and promoting team productivity.[11]

Several factors have contributed to the growing popularity of team rewards. One is the growing interdependence between tasks.[12] Changes in the way work is organised, the flattening of organisations and changing technology have created interdependencies between tasks that often make it difficult to separate the contributions and performance of individual workers.[13]

Research in the related field of performance appraisal shows that frequently, performance can be more accurately assessed by measuring the success of larger units within the organisation rather than the individual performance.[14] Group level rewards have also been shown to influence the collective motivation of team members,[15] encourage either co-operation or competition among employees,[16] motivate individual group members and trigger the occurrence of group level behaviour which is critical to the smooth running of the group as well as to organisational effectiveness.[17] Group rewards can also be linked to the achievement of work-group goals, capitalising on the motivational benefits of goal setting.[18]

The major motivational shortcoming of group incentives is the difficulty employees may have in seeing how their efforts are translated into group performance measures on which rewards are based. Also, team-based rewards may potentially result in a loss of motivation because of feelings of inequity due to a perceived 'free-riding' of other team members and the use of an equality principle when allocating rewards rather than an equity-based principle.[19]

More recently studies have questioned the ability of team rewards to foster co-operation within teams. Wageman[20] found that the level of task independence among group members was positively related to co-operation, helping, job satisfaction and the quality of group process, while the type of reward system - individual rewards, group rewards or both - exerted no independent effects on these criteria.

Team rewards may also foster competition between teams and this may mean that teams move into a competitive, rather than a co-operative relationship with other teams with whom they have to interact.[21]

Rewarding Teams

From the above research a major hurdle in designing any team-based recognition or reward program is to develop one that both sustains team progress and reinforces the team structure.[22] Moving to a team structure itself presents many challenges that are not always well met. But as organisations develop work structures that emphasise empowerment and teams their management processes must reflect this and reward the desired behaviour.

When organisations change the dynamics of work from structure driven, that is organised around individual roles and functions, to task driven, organised around teams, they should change the reward system to support those new dynamics. When work is redesigned, traditional compensation systems often are no longer appropriate and need to be completely rethought. This is not an easy transition to achieve but it can be very important to achieving team success. To gain the benefits of a team-based work environment - flexibility, effective problem solving and a clear focus on results, organisations need to develop a supporting team-based system of reward - one that motivates the right kind of team performance and team behaviours.[23]

Gross noted seven interrelated areas that team champions need to confront: the starting point is leadership; then values and cultures; work processes and business systems; organisation, team and job design; individual and team competencies; management processes and systems; and finally reward and recognition. Ideally, the challenges should be tackled on all fronts, but this rarely happens.

While encouraging greater ownership and responsibility by employees and using teams as a strategy to involve workers in problem-solving activities improves performance and productivity, using teams creates problems for the reward system. It is not easy to design a reward system that recognises both the importance of co-operation and the differences in individual performance. Significant problems arise when reward systems of organisations stress individual results even though people work together in teams.

Barnard offers a strategy that includes employee feedback on the system as a means of dealing with the issue. This includes measuring employee satisfaction with the system, gaining team members' input into its design, and ensuring that there is a method to document performance and reward both individuals and the team.[24]

In an excellent review of the research literature examining team-based rewards, DeMatteo, Eby and Sundstrom[25] conclude by summarising the important issues that need to be considered when designing team-based reward programs. Listed these are:

• Reward characteristics
• Reward size
• Frequency of payout
• Reward allocation procedures (equality Vs equity)
• Organisational characteristics
• Congruence among rewards
• Organisational culture
• Structural characteristics
• Strategy and sub-systems
• Task interdependence
• Team characteristics
• Team size
• Between-team interdependence
• Team type
• Stage of group development
• Measurability of team performance
• Team composition
• Ability
• Individual characteristics
• Individualism/collectivism
• Need for achievement

They conclude by stating that understanding the effectiveness of team rewards is critical considering that organisations spend as much as half of their operating budgets on payroll related expenses, the potentially powerful role of rewards in shaping behaviour in organisations and evidence that the use of team-based rewards will continue to increase. The issue may not be whether to use team or individual rewards, but how to design team rewards in a way to maximise the desired outcomes.

Rewarding the Desired Behaviour

When considering a reward or recognition program a basic issue that may not be well understood, but that managers really need to understand, is the type of behaviour they want to reward so they can be sure that their program actually rewards this behaviour. Kerr[26] provides numerous examples, from politics, medicine, the military, academia, sport, consulting, business and government, of reward systems that do not work because the type of behaviour that is rewarded is the behaviour that the rewarder is trying to discourage. Kerr's paper, an updated version of one that was first written over 20 years ago, is considered a 'classic' within the management literature. An informal poll of the Executive Advisory Panel for Academy of Management Executive found that the problem Kerr highlighted is still prevalent in corporate America today. The results concluded that there is a difference between what is hoped for and what is actually rewarded.

The history of performance appraisal shows that this is an area that is fraught with a unique set of difficulties. While rewards and recognition programs are essentially a different concept from performance appraisal, they do involve some form of measurement or evaluation which can involve either an objective or a subjective approach. Some of the problems associated with performance appraisal apply equally to rewards and recognition programs. Zigon[27] suggests that most people interested in measuring performance do so for one of the following reasons:

• you can't manage what you can't measure
• you can't improve what you can't measure
• high performance teams and individuals require clear goals, and
• pay for performance requires metrics.

However, measurement is difficult for at least three reasons:

• it is not always evident what results should be measured
• even if you know what to measure it is not always clear how the measurement should be done, and
• teams are made up of individuals, thus measurement must be done at both the team and individual levels.

Rewriting the above for a reward context highlights some of the pitfalls in designing reward or recognition programs and shows that it is not necessarily a straightforward process:

• you can't reward what you can't evaluate
• you can't improve what you can't evaluate
• high performance teams and individuals require clear goals, and

• reward for performance requires evaluation

and

• it is not always evident what results should be rewarded
• even if you know what to reward it is not always clear how the rewarding should be done, and
• teams are made up of individuals, thus rewarding must be done at both the team and individual levels.

Managing the Reward Process

In practice, informal incentives in the form of recognition by management and visibility within the organisation can often be more powerful incentives than a formal incentive program. Great care must be taken to ensure that issues of favouritism do not impact on the reward process.

Appraisal of any type is often a very subjective process. Prendergast and Topel[28] argue that accurate and objective measures of an employee's performance are typically unavailable. Instead performance is gauged from subjective opinions provided by superiors and this subjectivity opens the door to favouritism where evaluators use their power to reward preferred subordinates beyond their true performance. The harmful effects of favouritism have two implications for the design of rewards. Incentive pay for employees will be de-emphasised and favouritism causes organisations to use bureaucratic rules in pay and promotion decisions.

Barnard[29] provides a summary of important issues that help ensure a successful reward process. These are:

• rewards can be used effectively to enhance interest and performance
• rewards do not undermine performance and interest
• verbal rewards lead to greater task interest and performance
• tangible rewards enhance motivation when they are offered to people for completing work or for attaining or exceeding specified performance standards
• rewards given for creativity encourage generalised creativity in other tasks
• reward systems should support the new dynamics of team-based organisations and reward the right kind of team behaviour and performance
• reward systems should recognise both the importance of co-operation and the differences in individual performance
• problems can occur when reward systems stress individual results even though people have worked together in teams
• when designing reward systems organisations should:

• gain employees' input into the design
• measure employee satisfaction with the system, and
• ensure that there is a method to document performance and reward both individuals and the team.

Conclusion

From this examination of the literature, particularly that reporting on previous research, it can be concluded that rewards and recognition programs can positively affect motivation, performance and interest within an organisation. While a little more problematic, team-based rewards, if designed appropriately, can also encourage and support a range of positive outcomes. But research has yet to reveal any causal link between rewards and recognition programs and knowledge sharing. Neither is there any research-based evidence to show that these activities do provide the expected return on the sometimes large amounts of money that organisations invest in them.

Notes

1. P Bonfield 'Knowledge Management Strategy at BT' Managing Information July/August vol 6 no 6 1999

2. P Wright 'Do Incentive Schemes Promote Knowledge-Sharing?' Melcrum Online Knowledge Articles http:www.km-review.com/knowledge/artciles/04.htm Accessed 20/2/01

3. S Denning 'Incentives for Knowledge Management' Incentives for Knowledge Management - Incentives for Knowledge Sharing 2000 http://www.stevedening.com/incentives_knowledge_management.html Accessed 27/2/01

4. L R Gomez-Mejia and D B Balkin Compensation, Organizational Strategy and Firm Performance Cincinnati OH South-Western 1992

5. J Cameron and W D Pierce 'Rewards, Interest and Performance: An Evaluation of Experimental Findings American Compensation Association Journal vol 6 no 4 1997

6. W Edwards Deming Out of the Crisis: Quality, Productivity and Competitive Position New York Cambridge University Press 1986; A Kohn Punished by Rewards Houghton Mifflin, Boston 1993

7. J Powell 'How Incentives Undermine Performance' Journal for Quality and Participation vol 21 no 2 1998 pp6-13 ; A Kohn op cit

8. J Cameron and W D Pierce op cit

9. R Eisenberger and S Armeli 'Can Silent Reward Increase Creative Performance Without Reducing Intrinsic Creative Interest?' Journal of Personality and Social Psychology vol 72 no 3 1997 pp652-653; R Eisenberger and J Cameron 'Detrimental Effects of Reward: Reality or Myth' American Psychologist vol 51 no 11 1996 pp115-116

10. P H Claman 'Work Has Changed but our Compensation Programs Have Not' Compensation and Benefits Management vol 14 no 1 1998 pp1-6

11. J DeMattio; L T Eby and E Sundstrom 'Team-based Rewards: Current Empirical Evidence and Directions for Future Research' in B M Straw and LL Cummings (eds) Research in Organizational Behaviour Volume 20 1998

12. S T Johnson 'Work Teams: What's Ahead in Work Design and Rewards Management?' Compensation and Benefits Review vol 25 no 2 1993 pp35-41; A M Mohrman; S A Mohrman and E E Lawler 'The Performance Management of Teams' in W J Bruns (ed) Performance Measurement, Evaluation and Incentives Boston, MA Harvard Business School Press 1992

13. J E Nickel and S O'Neal 'Small Group Incentives: Gainsharing in the Microcosm' Compensation and Benefits Review vol 22 no 2 1990 pp22-29; T H Patten Pay: Employee Compensation and Incentive Plans New York The Free Press 1977

14. F J Landy and J L Farr The Measurement of Work Performance: Methods, Theory and Applications New York Academic 1983

15. B Shamir 'Calculations, Values and Identities: The Sources of Work Motivation' Human Relations vol 43 1990 pp313-332

16. D Tjosvold 'The Dynamics of Interdependence in Organizations' Human Relations vol 39 1986 pp517-540

17. M Deutch 'The Effects of Co-operation and Competition on Group Process' Human Relations vol 2 1949 pp199-231 ; D Tjosvold op cit; B Geber 'The Bugaboo of Team Pay' Training vol 32 no 8 1995 pp25-35

18. E E Lawler and S G Cohen 'Designing Pay Systems for Teams' ACA Journal vol 1 1992 pp6-19

19. G T Milkovich and A K Wigdor Pay for Performance: Evaluating Performance Appraisal and Merit Pay Washington DC Academy Press 1991

20. R Wageman 'Interdependence and Group Effectiveness' Administrative Science Quarterly vol 40 1996 pp145-180

21. E E Lawler and S G Cohen op cit

22. S E Gross 'When Jobs Become Team Roles, What Do You Pay For?' Compensation and Benefits Review vol 29 no 1 1997 pp48-51

23. A M Saunier and E J Hawk 'Realizing the Potential of Teams Through Team-based Rewards' Journal of Compensation and Benefits Review vol 26 no 4 1994 pp24-33

24. J Barnard 'What Works in Rewarding Problem-solving Teams? Compensation and Benefits Management vol 14 no 1 1998 pp55-58

25. J DeMattio; L T Eby and E Sundstrom op cit

26. S Kerr 'On the Folly of Rewarding A, While Hoping for B' Academy of Management Executive vol 9 no 1 1995 pp1-16

27. J Zigon 'Measuring the Hard Stuff: Teams and Other Hard to Measure Work' http://zigonperf.com/hardstuff.htm 1998

28. C Prendergast and R H Topel 'Favouritism in Organizations' Journal of Political Economy vol 104 no 5 1996 pp958-978

29. J Barnard op cit

Patricia Milne, senior lecturer, School of Information Management and Tourism, Division of Communication and Education, University of Canberra ACT 2601. E-mail: tam@comedu.canberra.edu.au.nospam (please remove the '.nospam' from the address).