Employee Recognition Programs: Why They Work and How to Maximize Them

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In business, every penny counts towards something. And in a successful business, most of those pennies count towards the bottom line. Because of this profit-centered dynamic and the expenses that already come with payroll and employee education, many employers think long and hard about implementing an employee recognition program; it is one more expense, after all. But if you really analyze the data and the science behind the efficacy of recognition programs, you’ll find that they are well worth the investment. Here’s why implementing an employee recognition program is such a good idea and how to do it the right way.

The Science and Stats Behind the ROI

While keeping your employees happy has obvious ethical and moral benefits, many employers fail to see the dire consequences that an unhappy workforce can have on profitability. First and foremost, it is important to note the direct correlation between employee appreciation and workforce stability. According to a Gallup poll, the number one reason that people leave their jobs is because they feel unappreciated. Because of this, employers who choose to implement an employee recognition program have 31% fewer letters of resignation than those who ignore the importance of employee rewards.
Another important thing to note is that these programs have been on the rise in recent years as companies start to reap the benefits of their investments. In 2012, only 58% of Best-In-Class workplaces had some sort of employee recognition program in place. Just one year later, that number rose to a full 67%, according to one independent study. This figure is still on the rise today and is projected to keep growing.

But what is the quantitative ROI per capita for the average company? It’s hard to say, considering that each business has a unique mix of leadership, benefits, and working environments that all contribute to the ultimate happiness of its employees. Nevertheless, a study done in conjunction with Forbes attempts to put a price tag on employee satisfaction, comparing the average 1-2% of payroll that a company will spend on employee rewards to the whopping 76% of employees who respond to rewards with increased productivity.
These numbers don’t lie; from increased employee productivity to less voluntary turnover, the effects of rewards programs are wide-reaching and culture-changing. With that in mind, let’s take a look at how you can retain your top employees by creating a program of your own.
Creating Your Own Success Story

To get started down your own path to success, you first need to decide which kind of rewards program is best for your company. If you want to retain top employees, you need to make this a generous reward, but at the same time, you need to keep an eye on your profit margins and your ROI. A few common low-cost ways of recognizing employees include awards for years in service, holiday or end-of-season gifts, or extra vacation days. On the other hand, yearly bonuses, frequent spot bonuses, or a gold star program are expensive yet rewarding ways to honor your employees.

In addition to deciding what to reward, you also need to decide who to reward. Of course, you want to reward the people who are doing the best work in the company. But at the same time, you have to be careful not to confuse the “best” work with the “hardest” work. For example, an employee who just graduated might not handle your most pressing responsibilities, but if they put in extra time and complete all tasks thoroughly, they deserve just as much recognition as those at the top. 

To account for these differences in job responsibility, be sure to reward both effort and results. Otherwise, your top-down approach won’t fully reach the people who form the foundation of the company. Additionally, you could try instituting a peer rewards program where employees can recognize others at their own level. This can help you reach all levels of the company in a way that is still authentic and rewarding. 

All in all, it is important to remember that an employee recognition program is about keeping the best and brightest people happy at your company. These top employees might not all be in the C-suite, however, so it is important to pick a rewards program–whether low or high cost–that engages all levels of the company. 
Stick to These Best Practices:

To maximize your results, it is important that you adhere to some employee recognition best practices. When designing and implementing your program, be sure to consider the following things:

• Make your program structured yet spontaneous. According to Megan Biro, an expert in talent development, your feedback to employees must come in the moment but with structured reasons for why they deserve recognition. In other words, more specific feedback promotes more specific behavior. 

• Be creative, not expensive. In human resources expert Kevin Kruse’s article “25 Low-Cost Ways to Reward Employees“, he makes the point that eccentric prizes are often better than expensive prizes. Instead of a luxury vacation or hefty raise, he recommends a casual dress day, one-on-one lunch, bring your pet to work day, or a thank-you Post-It note. 

• Make your praise meaningful yet frequent. While it’s important to regularly call out your employees on the good that they do, you don’t want to make your compliments appear trite or insincere. One expert claims that there is science behind meaningful praise, but there is no link when the praise is insincere. 
The effects of employee recognition programs are bountiful, ranging from greater retention rates to increased productivity, but it will take some serious up-front work and thought to create an effective program for your company. Above all else, make sure that you stick to the expert-proven best practices above to maximize your results and avoid rewarding one group while ignoring another. Although it will take time to build a program that your employees both respect and look forward to, there are endless possibilities and opportunities when it comes to building the perfect program. With persistence, research, and trial and error, your company could experience the incredible benefits of an employee recognition program.