Business action report

Analysis of the Booz Allen Hamilton
Rewards Program

Presented to

Betty Thompson
Corporate Rewards Program Director
Human Resources Department
Booz Allen Chief Personnel Office

Prepared by

Daniel John
Senior Consultant
Defense and Intelligence Group

28 September 2016

Executive Summary

Background

Employee rewards programs provide organizations with a way to reward, incentivize and motivate employees. Our organization’s rewards program leverages monetary rewards to recognize employees that have exceeded the expectations of their supervisor(s) and/or client(s). The monetary rewards our organization offers play on an employee’s extrinsic motivation levels, or motivation levels that are increased by a source outside of the employee’s own internal emotions and desires. One of the unintended outcomes of increasing our organization’s employee’s motivation levels is an increase in our employee’s ability to innovate. It is this innovation, occurring at the lower level of our organization, that is key to increasing our footprint in an otherwise saturated market.

Purpose

Employee motivation and employee innovation have been shown to be intrinsically linked. Couple that link with a rewards program that incentivizes employees and motivates them and there is a dynamic that allows for an organization to strategically increase the chances of innovation. The purpose of this report is to:

• Define and demonstrate the difference between intrinsic and extrinsic motivation

• Demonstrate the link between management climate and innovation

• Provide a recommendation on changes to our rewards program to take full advantage of employee motivation and its link to innovation.

Furthermore, this paper provides insight into some innovative solutions to enhancing our rewards program based on employee input. The employee input was taken from a small sample of employees ranging from lower-level personnel to senior management personnel.

Findings

Our organization is already on the path to success with the rewards program that is in place. However, with a bit of strategic change to our current rewards program, we could increase our chances at employee level innovation. While we provide a program that utilizes rewards that increase extrinsic motivation levels, our organization needs to utilize rewards to increase intrinsic motivation levels. Increasing employee intrinsic motivation levels should stimulate our organization’s innovation.

Recommendations

The following are some incentive implementation ideas to increase employee intrinsic motivation and changes to our rewards program:

• Developing self-identifiable interest groups using existing organizational social media platforms

• Creating community “think-tank” sessions and allow employees to bring their own challenges to the session

• Introducing quarterly newsletters identifying individual or team achievements throughout the organization

Memorandum

DATE: 28 September, 2016

TO: Betty Thompson, Director
Corporate Rewards Program
Chief Personnel Officer

FROM: Daniel John, Senior Consultant, DIG

SUBJECT: Modifying Corporate Reward Program to Increase Intrinsic Incentives and Employee Innovation

Here is the report you requested on 20 September, 2016. With regard to our corporate rewards program. This report gives recommendations for including intrinsic incentives in our rewards program to aid in increasing employee innovation. This report incorporates both primary and secondary research. The primary research was focused on a small group of employees ranging from junior-level positions to senior management and the group’s thoughts on our corporate rewards program.

While the corporate rewards program offers the organization the chance to recognize employees for the achievements, the rewards that are offered only attribute to incentivizing employee extrinsic motivation. While this is not inherently bad, the exclusion of intrinsic rewards or motivators will ultimately stifle employee innovation. Recommendations for increasing innovative contributions from our employees starts with finding ways to intrinsically motivate our employees through the use of the corporate rewards program.

I am thankful for my colleagues and their willingness to have an open dialogue with me in regards to finding ways to add intrinsic motivators to the corporate rewards program. I am also thankful for your support throughout the process. The ability of everyone involved to maintain an open mind during the duration of this study contributed to the success of this project.

Please feel free to contact me via electronic mail or telephone should you require additional information. I would be more than willing to help implement some of the recommendations in this report by working directly with members of your department should the opportunity present itself.

Table of Contents

1. Introduction 5

1.1 Booz Allen Hamilton Total Rewards Program 5

1.2 Purpose of this study 5

1.3 Scope of this study 6

1.4 Sources and Methods 6

2. Conclusions 7

3. Recommendations 8

4. Findings and discussion 9

4.1 Suggested Blend of Incentives for Maximizing Innovation 9

4.2 Current Management Climate Relating to Innovation 10

4.2 Participation in the Total Rewards Program 10

References 12

Appendix 13

The current global market has forced companies to be as competitive as possible. Success or failure often rides on the coattails of an organization’s ability to adapt to wavering customer needs, changing financial constraints, and ever evolving technological advances. More and more, innovation is the keyword amongst corporations that are fervently reaching for the top of their market. The stressing of innovation may be the key to the success of some of those companies, and rightfully so as Tidd and Beassant (as cited in Hoarty, Gopal, & Elwood, 2013, p. 56) found that companies known for their innovation were often both greatly successful and greatly innovative.

Booz Allen Hamilton has maintained a competitive foothold in the market in which it operates. Amidst major cutbacks to government funding, Booz Allen has managed to increase gross revenue by 2.5% during its 2016 fiscal year (Booz Allen Hamilton, 2016). In order to maintain this growth, Booz Allen has referenced its ability to be innovative in a demanding marketplace, going so far as to standup innovation centers in key areas such as Washington, D.C. (Booz Allen Hamilton, 2016). Through its innovative work, Booz Allen has continued to secure its spot as one of the top government contracting firms in the United States (Washington Technology, 2016). In order to become the top government contracting firm Booz Allen needs to find a way to continually motivate its employees through strategic processes and procedures to push the ability to be innovative even further. One such method for motivating employees that Booz Allen takes advantage of is through the use of a rewards program.

Booz Allen currently utilizes a rewards program that rewards employees for going above and beyond their work duties. Additionally, the rewards program is stated to encompass more than just awards for hard work. Booz Allen’s Total Rewards (Booz Allen Hamilton, n.d.) program is described by the company as “to provide not only competitive compensation, retirement benefits, health benefits, and work-life and wellness programs, but also flexible work arrangements, leave programs, career growth opportunities, and much more.” Combine a seemingly excellent rewards program with corporate plans to nurture innovation, such as the innovation centers and there is a strong chance of innovation at every opportunity.

While the opportunities do seem to present themselves for employees to be intrinsically and extrinsically motivated, Booz Allen’s Total Reward program is mainly used for monetary rewards. However, in order to drastically increase innovation there needs to be a concentrated effort to increase intrinsic motivation levels of employees as well as extrinsic. In fact, some studies have shown that the sole manipulation of extrinsic motivation through monetary rewards can be detrimental to organizational innovation (Hoarty et al., 2013). As a result of claims that many of the firm’s intrinsic incentives go unused, or unnoticed, the Director of Human Resources authorized this study into the types of motivators, current management climate as it relates to motivating innovation, and use of the Total Rewards program.

This study investigates:

• the role of intrinsic and extrinsic motivation on innovation

• the current management climate as it relates to innovation

• employee awareness of intrinsic incentives in the Total Rewards program

Only a small sample of employee feedback was used in the creation of this study. This study is by no means an extensive look at the rewards program and is to be used solely for the purposes of a university writing assignment.

While there are portions of the Total Rewards program that consist of intrinsic incentives for employees, based on the feedback received from a small sample of employees it is believed that the intrinsic incentives are not socialized well enough. Of note, the definition of extrinsic incentives or motivation as it relates to this study consist of “the promise of rewards or praise, or the threat of failing to meet a deadline or receiving a negative evaluation” (Amabile & Pillemer, 2012). Unlike extrinsic rewards that are motivators from sources outside an individual, intrinsic rewards are motivators that are used to motivate employees to do the work they are tasked with because it is “interesting, involving, exciting, satisfying, or personally challenging” (Amabile, 1997).

For the purposes of this study multiple scholarly journals were used for background information on defining intrinsic versus extrinsic incentives and motivation. Additionally, scholarly journals were used to make the determination of the proper combination of intrinsic verse extrinsic incentives that were weighed against the current Booz Allen Total Rewards program. Finally, first-hand interviews were accomplished with a small group of individuals within the company who ranged from junior to senior members, from the consultant grade to the principle grade. The interviewees were asked the following general questions about the Total Rewards program and their responses were recorded by the study author. See the appendix for a comprehensive list of the questions asked to employees.

Based on the findings of the interviews of various Booz Allen employees, the following conclusions were drawn.

1. Most employees are aware of the Total Rewards program and have heard of the program through corporate electronic mailings.

1. While most employees are aware of the program, many were unaware that items such as health benefits fall within the program. Many of the employees were under the impression that the Total Rewards program was solely for quarterly, and annual awards.

1. Most employees, roughly 75 percent of those interviewed, do not take advantage of the community events. This seems to be a case of geographic separation and not necessarily a case of disinterest. Many of the employees who mentioned the community events expressed interest about going but were unable to attend due to client working hours or distance from their home office.

1. Many of the employees at the Senior Associate grade of higher stated that they utilize the Total Rewards program to incentivize their employees from a financial standpoint (extrinsic motivation) and do not use the program for coaching or career development opportunities.

1. While some employees are aware of the various courses that are available online for learning and development, few were aware of the classroom based courses that are open to them free of charge.

1. Management personnel are very accepting of the risk of failure, often offering mitigation strategies for the occurrence of punishment for failure at an individual level. Management was resounding in the belief that the attempt of, and learning from, failure often leads to breakthroughs for improving delivery, improving process and procedure, and creating new products.

After careful consideration of the scholarly journal recommendations on using incentives to motivate for innovation, the interviews that occurred and the subsequent findings, the following recommendations are offered to socialize the Total Rewards program and bolster its intrinsic incentive offerings. Hopefully in facilitating a marked improvement in program participation and strengthening the intrinsic incentives the organization will see an increase in innovative ideas coming from employees of all levels.

1. Increase awareness of the Total Rewards program incentives that are not monetary rewards. This can be done via electronic mail from the human resources department and newsletter mailings.

1. Strengthen the intrinsic incentives offered by the firm. These new incentives could be part of the Total Rewards program but be grouped under a different part of the program allowing individuals to more easily understand what the incentives are.

1. Communicate the courses that are available for employees to take in a classroom setting. Currently our employees are grouped by specialty, for example as an intelligence analyst. The easiest way to send out notification would be to create electronic mailing lists based on specialty and send information on upcoming courses that are classroom based that are focused on the employees specialty.

1. Create more community events. As most of the respondents were interested in the events but were unable to join due to time conflicts, allowing for more events at varying times should aid in increasing participation. Additionally, a survey could be sent out quarterly to determine event meeting times for individuals who are interested.

1. Utilize the corporate social media group function to allow users to create their own groups based off their own interests. While this may cause non-work related groups to get created, it will create more commonality between employees and allow them to talk to other employees that they may otherwise not communicate with.

The findings of this study will be presented in three categories.

• The suggested blend of intrinsic and extrinsic incentives to maximize innovation

• Overall management climate as it relates to increasing innovation

• Participation in Booz Allen’s Total Rewards program

One of the major findings of this study is that while having an incentive program is a good step in creating an environment that is conducive to employee innovation there are ways of implementing an incentive program that can do more harm than good. Interestingly enough, one researcher, Gustavo Manso (2011) found that “incentive schemes that motivate innovation should be structured differently from standard pay-for-performance schemes used to induce effort or avoid tunneling” (p.1824). In order to evaluate the Booz Allen Total Reward program, further research was conducted based on scholarly journals and studies to determine the ideal blend of intrinsic and extrinsic incentives to maximize employee innovation.

Many of the researchers in the field of business psychology and economics suggest that a balance between intrinsic and extrinsic incentives and rewards is needed in order to promote an atmosphere that lends itself to innovation. While solely monetary rewards are the focus of many companies, the use of lower value monetary rewards is believed to be more impactful than the use of higher value rewards (Baumann & Stieglitz, 2014). Additionally, a variation of extrinsic reward types is necessary as monetary rewards alone are not enough to push innovation. When looking at the Total Rewards program, it is obvious that the program takes that into account. The monetary rewards, and some of the other benefits such as stock options are all extrinsic incentives of varying types. Booz Allen’s Total Rewards program also accounts for some intrinsic incentives, which are also key to creating an innovative environment.

Booz Allen’s incentives such as the community events, social media site, and development courses are all intrinsic incentives. These are incentives that employees will take advantage of because it allows them to satisfy internal desires. Combining these intrinsic benefits with the extrinsic benefits mentioned earlier creates an ideal benefits program that, based off scholarly research, should create a balanced atmosphere prime for innovation. However, some benefits are not being used to their full extent. The social media site, for example, which is a great way to get employees collaborating together on work or non-work related functions currently only supports groups based on work tasks. If the group feature were extended to allow for the creation of custom, user-defined groups it could expand cross-team talk and collaboration. This collaboration ultimately leads to employees working on their own initiatives and as teams which will enable greater collaboration and increase innovation as the risk of failure would be share among team members as opposed to solely on one individual (Krupat & Chao 2014).

A positive management atmosphere is imperative for fostering innovation among employees. The importance of the climate of management cannot be underestimated, in fact Amabile (1997) states that “project supervision is likely to foster creativity when it is marked by clear planning and feedback, good communication between the supervisor and the work group, and enthusiastic support for the work of individuals as well as the entire group” (p.54). Based on the responses of the interview conducted, the middle management seems to be pushing employees in the best way possible. Of the 17 individuals interviewed, six were middle management or higher. As the responses in Section 2 Conclusions depicted, most of the members of management were aware of and using the Total Rewards program to incentivize junior employees. Booz Allen needs to continually reinforce this practice via upper management electronic mail down to middle management personnel.

Additionally, management seems to be taking on the idea that failure in the short term from risky yet innovative solutions can payout in the long term. This is an absolute best practice when a company is trying to innovate. As Manso (2011) states, management that “exhibits substantial tolerance (or even reward) for early failure and reward for long-term success” is primed for innovative breakthroughs (p.1824). Management is in the exact place it needs to be at Booz Allen and managers should be made aware at every chance that their efforts are substantially increasing the chances of organizational success. The only area in which management needs to be strengthened is the use of Total Rewards program participation and the extent of the incentives and benefits it offers, but this is not solely a management issue.

Many employees at Booz Allen are aware of the monetary awards that are offered through the Total Rewards program. In fact, many employees were quick to tell anecdotal stories of submitting others for awards for work that outperformed standards. This was especially true of management as 100 percent of management interviewees reported submitting employees at every opportunity. However, many employees were unaware of, or are not taking advantage of, some of the intrinsic incentives offered. Of the 17 individuals that responded to interview requests, only three reported utilizing the intrinsic incentives offered by the program. While this is a staggeringly low amount of participation in the intrinsic incentives portion of the Total Rewards program, it is not caused by a lack of desire to participate.

Many of the employees interviewed stated that their lack of participation is due to scheduling or location conflicts. With the working groups, either client site consultants cannot make the drive to corporate offices during the prescribed time of events or are not close to a corporate office. As for the other intrinsic benefits, employees do not feel like they have gotten enough instruction on how to utilize the benefits. One newly promoted middle manager stated that “it’s not that I am not interested in the working groups or the [social media] groups, I just don’t know how they work. Most of the emails from corporate are about putting people up for awards, I’ve gotten pretty good at that” (M. Demartino, personal communication, September 23, 2016).

The firm would benefit from a revamp of the communication it sends to its employees regarding using the Total Rewards benefits and some of the items that are not necessarily rewards, but incentives that fall under the program. The necessary items for a successful rewards program that maximizes innovation are all there, the education on how to use them is not. Overall, participation in the Total Rewards program as a whole, is exactly where it needs to be.

Amabile, T. M. (1997). Motivating creativity in organizations. California Management Review, 40(1), 39-58. doi:0008-1256

Amabile, T. M., & Pillemer, J. (2012). Perspectives on the social psychology of creativity. Journal of Creative Behaviour, 46(1), 3-15. doi:10.1002/jocb.001

Baumann, O., & Stieglitz, N. (2014). Rewarding value-creating ideas in organizations: The power of low-powered incentives. Strategic Management, 35, 358-375. doi:0.1002/smj.2093

Booz Allen Hamilton. (n.d.). Benefits. Retrieved October 01, 2016, from Booz Allen Hamilton: http://www.boozallen.com/careers/life-at-booz-allen/benefits#Awards%20Programs

Booz Allen Hamilton. (n.d.). Impact Report 2016. Retrieved from Booz Allen Hamilton: https://www.boozallen.com/content/dam/boozallen/impact16/Booz-Allen-Hamilton-Impact-Report-2016.pdf

Hoarty, N., Gopal, G., & Elwood, L. P. (2013). Using rewards systems to motivate employees for innovation. Global Education Journal, 2013(3), 56-66.

Hutchison-Krupat, J., & Chao, R. O. (2014). Tolerance for failure and incentives for collaborative innovation. Production and Operations Management, 23(8), 1265-1285. doi:10.1111/poms.12092

Manso, G. (2011). Motivating innovation. The Journal of Finance, 66(5), 1823-1860.

Washington Technology. (2016, June 01). 2016 Top 100. Retrieved from Washington Technology: https://washingtontechnology.com/toplists/top-100-lists/2016.aspx?Sort=Top-100-Defense-Revenue

Booz Allen Hamilton corporate rewards program survey

Booz Allen provides a comprehensive corporate rewards program called Total Rewards as a means to use extrinsic and intrinsic incentives to motivate employees.

Please take a moment to answer the following questions so that the strengths and weaknesses of the Total Rewards program can be assessed and modifications to the program can be suggested so employees can take full advantage of the program.

1. Are you aware of Booz Allen’s Total Rewards program?

2. What does the Total Rewards program mean to you?

3. How often do you leverage the Total Rewards program as an incentive for your subordinate employees? (Asked to members of Senior Associate grade and higher).

4. Do you currently take advantage of any of the Total Rewards program incentives that are not monetary rewards? If so, which portions?

5. As a manager, what is your tolerance for failure acceptance against innovation? (Asked to members of Senior Associate grade and higher).