Employee Recognition Delivers Great Returns

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By Martin Berman-Gorvine

June 29 — Employers that spend a little on recognizing their employees get a lot of return on their investment, consultants agree.

Employers that devote just 1 to 2 percent of their payroll budget to employee recognition programs can have a “best-in-class” program that improves engagement and retention, Katie Scott, solutions consulting director at Dublin, Ireland-based social recognition provider Globoforce, said June 28.

A similar estimate came from Gary Beckstrand, vice president of Salt Lake City-based employee recognition services provider O.C. Tanner Institute. “Organizations typically spend anywhere from 0.5 percent to 2.0 percent of payroll on employee recognition. The return on recognition spending has been linked to higher employee retention, engagement, and business results,” he told Bloomberg BNA in a June 29 e-mail.

Beckstrand said a recent study by his company “showed a two-to-one increase in highly engaged employees within companies with strong performance recognition compared to weak performance recognition. A separate study reported that having an effective years-of-service recognition program increases average retention by four years.”

These results too dovetail with those from Globoforce. “According to a survey we recently did, just 20 percent of employees have been recognized in the past month, but 78 percent of employees would work harder and 83 percent would feel more engaged if they were recognized,” Scott said.

The survey also found that employees who had been recognized in the past month were twice as engaged, 34 percent more likely to believe their company was a best place to work, 35 percent more likely to say their employer's culture is fun and enjoyable, and 37 percent more likely to believe their company cares about them.

“The real measure of a valuable worker isn’t their hands or their brain, but their heart,” said Scott, referring to workers’ commitment to the organization.

“Today, social recognition is how many of the most admired companies in the world are building more human workplaces and igniting their culture,” Scott said. “Everyone’s on the lookout for great work, and through social amplification, it becomes part of your culture.”

Annual Bonuses Don't Cut It

But Scott said that it “just isn't enough” to reward people with an annual bonus. Giving an employee a $5,000 annual bonus is a significant expense for a company, she observed, but it only results in a month-long increase in engagement. It's much better to cut that bonus up into smaller pieces and reward the employee throughout the year, resulting in a continual boost to his or her engagement, she said.

JetBlue Airways recently introduced an employee recognition program, dubbed “Lift,” and found that for every 10 percentage point increase in recognition, the company benefited with a 3 percent increase in retention and a 2 percent increase in engagement, Scott said. Engaged crew members in turn are three times more likely to “wow” customers and twice as likely to be rated as role models or be in the top 10 percent of compliments.

In response to a question, Scott said there are two ways of “putting meaning behind your thank yous”: employers can tie them to their core values and can be specific about why they are thanking the employees.

Beckstrand stressed how critical employee recognition has become. “Recognition has also been correlated to a wide range of improved business results such as customer satisfaction, innovation, productivity, and profitability. We’ve always understood intuitively that employee recognition positively impacts employee attitudes and workplace performance, but the overwhelming empirical evidence in the last few years clearly demonstrates that employee recognition is no longer a nice thing to do, but a measurable, critical contributor to business success.”

Or Can Recognition Be Free?

A different perspective on what employee recognition should cost was offered by Kevin Nakao, vice president of employee engagement at Seattle-based employee recognition company TINYpulse. “Employers don't have to budget anything for recognition because giving recognition is free,” he told Bloomberg BNA in a June 29 e-mail, since it doesn't cost anything to send a congratulatory e-mail or to recognize someone in person or at a company event.

Nakao added that he doesn't recommend awarding prizes or compensation for recognition because it can lead to hurt feelings. “I've always had more luck when there's no compensation tied to recognition,” he said.

Scott was speaking during a webinar sponsored by her company.

To contact the reporter on this story: Martin Berman-Gorvine in Washington at mbermangorvine@bna.com

To contact the editor responsible for this story: Tony Harris at tharris@bna.com

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