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HR Connection blog

Tracking the ROI of Employee Recognition

Posted by O.C. Tanner | Dec 29, 2021 9:30:00 AM

Employee recognition programs play an important role in top-performing organizations everywhere today, especially in companies renowned for their thriving workplace cultures. But is a recognition program truly worth the investment? Do its benefits outweigh its costs? And if so, is it possible to quantify the return on investment (ROI) if such a program? The answer to these questions is a resounding "yes!"

Start with the Culture

Take care of your employees, and they will take care of your business.

- Richard Branson

Caring for employees is truly possible only in a world-class corporate culture that encompasses the why, when, where, and how of work. If humans require a great culture -- a fertile environment that motivates and inspires them to achieve -- to do their best, how can leaders begin to create such a culture? Are the factors that shape that culture all created equal? And if not, which ones matter most?

The answers to those questions all point to one thing: employee recognition. Because no other investment can deliver a greater positive impact (and as simply and cost effectively) on workplace culture, employee recognition has a significant ROI indeed. It provides a substantial lift to multiple areas, such as attracting top talent, increasing motivation, improving productivity, fostering innovation, encouraging great work, and improving business results.

But how can managers ensure that their recognition programs are generating the ROI they deserve? And how can they constantly improve the ROI of recognition over time? The first step is knowing how to measure the ROI of recognition, which is more than a dollar figure. Money plays a role, but the return on recognition investment is a combination of many impact measures that together form a complete picture of recognition ROI. It's critical to identify specific goals for recognition impact, establish benchmarks, and track measurable improvements as they occur.

The unique challenges an organization faces gives it a starting point for determining which measures are most essential to track. For some companies, for example, that starting point is a problem, such as improving employee engagement, strengthening company culture, or decreasing employee turnover. As employee recognition begins to drive improvement in the company's chosen areas of focus, managers can expand their impact wish lists and point their recognition strategies at other significant business results. Three areas of impact contribute most significantly to recognition ROI: experience impact, culture impact, and business impact.

Experience Impact

Corporate culture is practically inseparable from everyday employee experiences. The corporate point of view of those experiences emphasizes the employee life cycle (attraction, recruitment, onboarding, development, etc.). Much more important -- but less understood -- is the employees' point of view, which includes small daily micro-experiences, such as interactions with peers, mentoring from leaders, opportunities for growth, challenging assignments, accomplishments, and other activities that define life at work.

Appreciating and being appreciated for great work are essential components of a thriving corporate culture. When a company lacks an effective recognition programs (or has programs with low participation), or when appreciation isn't woven into its cultural fabric, there's work to be done. In great organizations, showing appreciation prominently and often is second nature, like breathing. A great recognition solution should create hundreds (or even thousands) of positive employee experiences daily. These experiences reinforce employees' decisions to work where they work, help them connect with their teams and with company values, and motivate them to give their all to the organization's success.

For employee recognition programs to succeed, they must be supported and nurtured, and they must provide quality experiences. Determining the ROI of recognition begins with measuring the recognition experience. To see the flow of appreciation within the organization, managers need to monitor program metrics, beginning by answering some basic questions:

  • How many employees have logged into and begun using the company's recognition program?
  • Do they stay involved and active as recognizers?
  • Does participation increase over time? Or does it peak and then fall off?
  • How satisfied are employees with the whole recognition experience from start to finish?
  • Does the recognition program make them feel truly appreciated?
  • Do recognition tools integrate well with daily workflow and other technologies?
  • Is the program easily accessible, equitable, and fair? Does it include everyone?

The best way to find answers to these questions is to keep tabs on program adoption, program activity and engagement, and program satisfaction. When combined, systems data and mixed-method research yield a clear picture of experience impact.

Case Study

Ocwen Financial Corporation is one of the largest mortgage and lending servicing companies in America, with over 5,500 employees in the USA, India, and the Philippines. In 2015 a global engagement survey revealed that Ocwen employees wanted to see improvements in recognition. At that time, the company's recognition experience varied across departments and locations, and there was no direct visibility into who was being recognized or how.

Ocwen partnered with O.C. Tanner to design and launch a consistent, visible, global employee recognition program aligned with its core values. Senior leaders were involved in the design, naming, and launch of the program (called Applause), which included technology and analytics for giving e-cards, spot awards, customer service awards, performance awards, and special mention awards worldwide.

Since the debut of Applause, 97 percent of Ocwen employees have given or received recognition through the program. Surveys conducted the year after launch showed a considerable jump in engagement scores related to rewards and recognition, and quarterly pulse surveys have also shown positive feedback from employees and leaders alike.

Culture Impact

Most leaders agree that great products, delivery, and service come from purpose-driven, happy, motivated people -- the kind of employees who are present when their corporate culture is a breeding ground for success. How can companies measure the impact of recognition on culture? First, they need to understand what a thriving workplace culture is.

Many factors can influence workplace culture, but six aspects of the employee experience are the fundamental building blocks of a thriving culture. Companies with high-performing cultures excel in all six of these areas:1

  • Purpose (feeling connected to the organization's reason for being)
  • Opportunity (having opportunities to grow and develop)
  • Success (innovating, doing meaningful work, playing on a winning team)
  • Appreciation (feeling valued and appreciated for individual contributions)
  • Well-being (physical, social, emotional, and financial health)
  • Leadership (having leaders who support, mentor, and help employees find joy in accomplishment)

To see culture impact, an organization must measure employee perceptions of the six elements of a thriving workplace -- first to set benchmarks, and then to gauge improvement as the recognition experience improves. This data is gathered through both quantitative research (e.g., censuses, pulse surveys, integrated triggers) and qualitative research (e.g., interviews, focus groups, paired conversations). When combined, these two types of data offer a clear picture of culture impact.

Case Study

GE Appliances, a Haier Company, is a home appliance company with over 12,000 employees. The company's acquisition by Haier Corporation in 2016 gave leadership the opportunity to shape a more employee-focused culture that "makes life better" for employees and helps the business thrive by replacing a payroll/cash-based recognition system with more meaningful practices.

In partnership with O.C. Tanner, a cross-functional team of HR, IT, communications, marketing, and other GE groups met with executives and employee "cultural ambassadors" to gather input for shaping a new and improved recognition solution. The result was Recognize YOU, a comprehensive program that gives everyone in the company a chance to recognize and celebrate teamwork and accomplishments.

An instant hit with employees, Recognize YOU has made a measurable impact on the company's culture. Engagement survey scores showed the risk of attrition decreased by 58 percent when employees received any type of recognition in the prior month. Recognition increased employee perceptions of opportunity for growth and development by 108 percent and positive perceptions of leaders by 180 percent.

Business Impact

Once organizations begin to understand the true cost-benefit relationship of effective employee recognition, its value is difficult to ignore. The lift recognition provides to the everyday employee experience and culture includes improved perceptions of leaders, lower turnover, greater innovation, and elevated net promoter scores -- all pretty significant outcomes from what can be a relatively small average annual investment per employee.

But translating all of that to some sort of bottom-line cost savings, customer benefit, or increased profitability is the proof of ROI many leaders seek. Fortunately, in spite of all the other things that influence financial success, it is possible to connect the dots between employee recognition costs and business results simply by following the money.

Symptoms of culture problems vary from company to company. Some organizations struggle with burnout, whereas others wrestle with attrition. Some have trouble motivating employees, inspiring innovation, increasing sales, or creating a great customer experience. All of these things can be measured and cross-tabbed with program data to reveal the true impact of effective recognition.

Consider for a moment the high price of voluntary turnover, which costs businesses $1 trillion dollars per year in the USA alone.2 Taking into account that "79 percent of employees who quit their jobs cite a lack of appreciation as a key reason for leaving"3 and that an effective years-of-service award program can increase employee tenure by two full years,4 it's clear that recognition can help companies mitigate these losses. And doing the math on turnover-and-replacement costs (multiplying the number of employees who have quit by one-half of the average pay per employee yields a conservative estimate) highlights just how valuable recognition programs can be.5

Case Study

Ohio Living is one of America's largest not-for-profit multisite senior living organizations, with more than 3000 employees across 12 communities. Knowing that its people truly want to make a difference in the lives of the seniors and other customers they serve, Ohio Living partnered with O.C. Tanner to create an employee recognition solution that connects employees' intrinsic motivation with the company's mission and purpose by providing tools for celebrating day-to-day accomplishments and major career contributions.

Ohio Living has enjoyed an extraordinary return on this investment. The organization's employee recognition practices have been quantifiably linked to higher employee retention across all locations, lower patient infection rates, fewer patient visits to the ER, lower hospital readmission rates, more five-star ratings than ever before, and public recognition as both a great place to work and one of the top healthcare companies in Ohio.

Final Thoughts

Recognition programs are powerful tools that can help companies engage and retain their best employees. Because such programs require time, effort, and money to develop and implement, it's important to ensure that they are effective enough to warrant those investments. Armed with knowledge gained from qualitative research, quantitative research, and other methods, organizations can measure the ROI of their recognition programs, and then adjust and improve them to achieve greater returns from them.

Topics: Impact, ROI, Employee Recognition, Corporate Culture

Written by O.C. Tanner

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