There’s more to recognition than meets the eye.
While an employee recognition program is sometimes seen as a ‘nice to have’ by businesses, its impact on your organization can run far deeper than you think.
When you frequently show appreciation to employees for doing their jobs well and going above and beyond, it can create a ripple effect that improves everything from productivity, to innovation, to training, and a whole lot more besides.
In this blog, we’re going to take a look at 4 key ‘impact areas' for your program, and examine the several benefits of employee recognition in each one.
Recently, members of our team sat down to really identify all the benefits of employee recognition in the workplace, both in terms of the direct effects you can see from sending recognition, and the indirect effects it has on your wider business.
We found that these could be broken down into 4 key ‘impact areas’:
Each of these areas see different levels of return from employee recognition software, as well as drastically different gains, ranging from intangible improvements in areas like morale and engagement, to quantifiable differences in key bottom-line performance indicators, like employee turnover and administration time.
In the next section, we’ll break down all of the benefits we’ve seen from our programs for clients in each of these areas.
When you ask yourself what the benefits of employee recognition are, the answer will probably look different depending on your business and the challenges you’re trying to overcome.
If you’ve had issues with employee turnover, recognition might be part of a plan to improve retention, and the return will come from making wantaway employees feel more valued. On the other hand, you might have no issues with turnover, and be solving for a more practical problem, like centralizing and formalizing ad hoc recognition that’s already happening across your company, in which case the ROI will come from improved trackabilty and reduced administration.
Defining what you want your program to impact will help you set out clear goals, and make a compelling business case to your leadership for the need to invest in it.
Here’s a breakdown of the many benefits of employee recognition and rewards software in each of the areas we’ve identified.
An improved sense of appreciation is arguably the most direct and obvious benefit of employee recognition and rewards for your employees. By congratulating and celebrating them when they excel, you make them feel seen, and let them know that their efforts are truly valued by your company.
This can have numerous positive outcomes for your business and your employees, including:
The old saying goes that ‘a happy worker is a busy worker’, and people who feel like they’re appreciated for doing their jobs are more likely to be motivated and productive. In turn, they become more engaged in their work, and fully invested in their jobs and their purpose, going beyond just earning a paycheck.
In fact, Gallup has found that engaged employees are up to 18% more productive. Imagine what kind of bottom-line impact that could have for your business!
But the benefits of employee recognition on motivation and engagement don’t just result in increased productivity. This is where the ripple effect we talked about starts to kick in.
Rather than merely executing the basic responsibilities of their jobs better, engaged employees are more likely to stretch themselves further. This could mean tackling responsibilities that don’t typically fall within their wheelhouse, bringing ideas to the table that benefit other departments or teams, or simply making some extra effort to make their work environment better by taking part in employee resource groups or other committees.
The more people challenge themselves, the more they grow. Having a highly engaged team that routinely looks to help each other rather than simply looking after their own individual tasks means more people contributing fresh perspectives.
This can result in more innovative solutions to problems across your organization as a whole, and breed a more dynamic, forward-thinking culture.
A workplace where everyone contributes beyond their own individual roles is also more collaborative. Your team will function as a more aligned whole, working together to get where they need to go.
You can use employee recognition to directly foster this outcome, too, by encouraging your leaders to specifically reward team members who collaborate more.
On a more practical note, employees who feel appreciated in their roles are more likely to, well, show up.
According to a study by Circadian, absenteeism can cost as much as 2.5-3.5k per employee each year, depending on their industry and employment classification. Gallup estimates as much as an 81% reduction in absenteeism among engaged employees.
Reducing absenteeism is also one of the more tangible, measurable benefits of employee recognition and rewards, and it’s worth considering it as a key goal or KPI for your program.
One of the reasons that improved employee appreciation helps reduce absenteeism is because it has been shown to actually make a positive difference to people’s mental and physical health. A study found that employees in companies where recognition is a strong part of the culture are half as likely to experience burnout.
With as much as 77% of employees reporting experiencing burnout, this is a huge problem that recognition could help your company solve.
While burnout is the extreme end of the spectrum when it comes to employee health, you can actually see the benefits of employee recognition and rewards across the board in improving your team’s wellbeing.
Feeling more appreciated can help to alleviate employees’ stress levels, exhaustion, and overall wellness. When you show them recognition, you reassure them that their efforts are paying off, and stop them from questioning their contributions or value to your company. This can help them approach work with a healthier, more balanced mindset.
While this a ripple effect of recognition, you can also use your program to directly support efforts to improve employee wellness by rewarding people for taking part in initiatives like wellness challenges, taking positive steps in their own personal development, or even demonstrating good work-life balance.
When it comes down to it, appreciation and recognition is a huge factor in shaping the relationship between employees and their leaders.
If there’s a disconnect between the value an employee feels they should be placed on their contribution to the company and how they are recognized and rewarded by leadership, the employees will feel short-changed. And when that happens, that relationship will start to break down, and the trust you build with employees will be damaged.
Conversely, making sure employees feel adequately appreciated can build trust with leadership, fostering stronger bonds and helping to convince employees that they are in good hands.
Companies who really appreciate their employees are rarer than they should be, and this fact won’t be lost on your employees.
If you consistently show them recognition for their efforts, it will build loyalty, and make them more likely to want to stay at your company for the long-term.
The consequence of the loyalty, trust, and engagement you build with your employees is that they’ll be less likely to look elsewhere. Companies that score in the top 20% for ‘recognition-rich cultures’ report turnover rates that are 30% lower than average.
That’s a huge difference to your employee retention, and one that brings its own ‘ripple effect’ of employee recognition benefits…
Most HR professionals strive to improve employee retention, but retention in and of itself isn’t the end goal.
Having employees with long tenures helps to reduce costs, improves productivity, and ensures that your team has a wealth of accumulated knowledge and skills that will grow over time to allow them to perform better. Here’s why retention is one of the most important benefits of employee recognition.
Are you better at your job now then when you started out? There’s no doubt you probably are. With few exceptions, the longer employees spend at a company or in a role, the more they learn and the better they get.
Routine tasks take less time, common mistakes happen less often, and challenges become more easy to navigate as employees become more confident and assured. This accumulated knowledge is an asset to your company, and one you want to appreciate in value, rather than simply lose.
Plus, if you’ve encountered many long-tenured employees at different companies, you’ll know how much they help other employees. When new staff can be trained and onboarded by people who ‘know the place inside out’, they get up to speed faster, and have a valuable resource for any questions and concerns.
On that point, the cost of onboarding and training new staff is one of the biggest reasons why employee turnover is estimated to cost as much as 30-50% of an employee’s annual salary.
When you replace a team member, you can’t expect them to hit the ground running from day one. They’ll need time to learn the ropes, and you could be looking at an onboarding period of as much as 60 working days or more before they’ll start performing at full capacity.
This can be compounded in frontline industries like construction and hospitality, where new employees might need to obtain training and certifications to do certain jobs.
By helping improve retention, employee recognition benefits your company by both reducing the number of people you need to onboard in a given period, and ensuring that there are experienced staff on hand to help new hires get up to speed faster.
And of course, if you’re retaining more staff, you also spend less on recruitment. The cost of advertising positions, conducting interviews, and administrative work in drawing up contracts and processing employee information can all add up fast, and employers with high turnover can often see a big impact on their bottom line as a result.
High employee turnover also takes its toll on the staff that get left behind. When an employee leaves, the other people in their team are left to cover for them, and need to deal with higher workloads until a replacement is found, trained, and gets up to speed.
Your managers need to work harder to redistribute tasks, and other team members need to do more to pick up the slack.
Naturally, dealing with heavier workloads and constantly being shortstaffed can have a negative impact on morale, as employees struggle to keep up.
Improving retention can also benefit morale due to the social bonds employees build with each other being maintained. When employees see teammates they’ve developed strong friendships with over time leave, it may lead to them reconsidering their own positions. Conversely, 76% of employees who have close friends at work say it makes them more likely to stay in their jobs.
All of these factors have an impact on the overall performance of your company, and the service you deliver to your client base. Regardless of the industry you are in, if your team is understaffed, they’ll struggle to meet demands on time, make more mistakes, and fail to produce good results for your audience.
This could damage your customer relationships, and cause you to lose valuable clients, see decreased sales, and fall short of your goals or targets. Strong employee retention on the other hand, can have the opposite effect. Not only does it help ensure your service meets the highest standards, but your employees will build relationships with your customers over time.
Having strong relationships with customers can improve your company’s brand and reputation, helping you to gain more clients and grow through referrals and word of mouth recommendations.
On the side of the coin, your HR team will see the benefit of an enhanced employer brand, as your company becomes known for being one that employees want to stay with long-term. This will actually make it easier to attract new candidates, increasing your chances of hiring more engaged employees who are in it for the long haul.
In the last two sections, we covered some of the impacts that recognition itself can have on your company, but what are the benefits of employee recognition software specifically? If you already have some form of ad hoc or in-house recognition happening at your company, why invest in a program to do it for you?
One of the main advantages of software like Guusto is in centralizing and formalizing your efforts. If your recognition process is too manual or doesn’t have clear direction, it can be inconsistent across different departments, locations, or even among different managers with disparate approaches or attitudes. This is especially true at large companies.
Here’s how using a software program can help to alleviate some of these issues.
If recognition at your company is too ad hoc, you have no line of sight into how, when or how much it is happening. This could mean that some employees in your company aren’t being recognized enough, or even at all, or that the rewards they’re being given aren’t valuable to them.
In other cases, it could lead to some leaders or managers overspending, and causing your team headaches. We often see prospective customers who come to us purely because of the need for better tracking of recognition expenses. Managers will hit them with expenses for gift cards, meals, or other recognition efforts which they haven’t planned for.
With a recognition software program, all the guesswork is taken out. Your team and your leadership can build a strategy, forecast your budget, and make more informed decisions about how your employees should be recognized.
This extra oversight also helps you better align your recognition efforts with your company goals and the culture you’re trying to build.
You can draw a clear line between your company goals, core values, and key performance indicators across departments, and encourage managers to reward employees with these cultural pillars in mind.
That alignment helps to alleviate a huge problem we’ve seen across several companies – micro-cultures.
When recognition happens in a vacuum, it perpetuates silos. Consciously or unconsciously, managers may push their teams to prioritize short-term, departmental goals at the expense of wider company objectives, or reward behaviours that don’t really fit your values or the culture you’re trying to build.
With a formal recognition program, you can set clear parameters for what they should be rewarding, and coach them to ensure they stay on track.
On the subject of managers, another issue with more ad hoc, localized efforts is that it puts far too much onus on them to decide how recognition should look.
Some managers are great at rewarding and appreciating their teams, while others aren’t. They simply don’t think about it, or are unsure how to approach it, or may not even feel it’s necessary.
When you rely solely on managers to spearhead recognition, it means that some employee groups will receive lots of recognition, while others will get nothing. With a centralized program, you can set objectives and directives to ensure that employees on every team are recognized frequently and appropriately.
On that note, more centralized recognition means a more inclusive system for your employees, where everyone across the organization is rewarded the same way, and with the same frequency.
This will leave less employees feeling shortchanged because they see other departments or groups as being valued more highly by the company.
Which, of course, will increase employee satisfaction. As we’ve covered earlier, when everyone at the company feels appreciated, they’ll be more engaged, more productive, and more collaborative. Perhaps even more crucially, they’ll be more likely to stick around. Which leads us to…
We’ve already talked a lot about the benefits of employee recognition and rewards for retention, but one thing that a centralized software program will specifically help to reduce is turnover problems in specific departments.
When one department is constantly churning employees at a much higher rate than others in your company, that department can become a liability, with serious inefficiencies that hamper your organization as a whole. It should also be a serious red flag for you that there are some issues with that team, and a lack of recognition could be one of them.
If a specific department feels like they’re not being rewarded in the same way as others, they’ll start to feel like the company doesn’t value their work, and turnover will start to climb. By making sure recognition is consistent and equitable, you ensure that won’t be a problem.
Last but not least, it’s important not to underestimate the benefits of employee recognition and rewards software for your own team. HR professionals who find the right program usually find that the ease of administration compared to more manual solutions alone makes it worth the investment. Here’s why.
If your team is manually tracking rewards expenditure in a spreadsheet, it leaves a lot of room for human error. Managers may fail to report things, individuals in your team could input figures wrong, or you simply may not be able to organize the information you need in a manageable way.
This creates headaches for both HR and your finance department, and can even cause issues with reporting taxable benefits. With a software program, all of this work is done for you. Your team can easily load everyone in your company into the system, track all expenditure, generate readymade reports for finance, and even integrate with your HRIS platform to sync data.
In addition to making your processes less prone to error, a recognition platform is also a lot less work. With the right software, you no longer need to worry about sourcing and buying gifts, organizing deliveries, and creating spreadsheets – it’s all done for you.
You can even send gifts in bulk, put rules in place to automatically allocate budgets to team members, and even automate delivery for milestone rewards like anniversaries and birthdays.
With less administrative work, your team will have more time for other things. HR teams often have a million and one things to worry about, and maintaining a laborious, manual recognition system can take a lot of hours out of your week. Recognition software makes maintaining your program quick and easy, freeing your team up to tackle other tasks.
With more time, your team will be able to devote more of your focus on strategic initiatives like talent development, employee engagement, and building your organizational culture. These big-picture initiatives are crucial to driving organizational success, and you don’t want them to fall by the wayside because your team is bogged down in administrative work.
And because you have more time to devote to these initiatives, you’ll also execute them better. You’ll be able to devote more attention to planning, execution, and measurement for the initiatives that matter most to you, leading to better results.
Administrative inefficiencies across your team can also cause delays in recruitment, onboarding, and other critical HR functions, so anything your team can do to alleviate that is a win.
The other issue with having too much administrative work is it can lead to your staff struggling to keep on top of everything, which can cause morale to dip. And because some of this work can be tedious and repetitive, it can be even more frustrating for your team.
Most HR people aren’t passionate about admin, and freeing up time for them to put plans in place in areas they really shine like engagement or inclusion can be a great way to increase their job satisfaction.
A streamlined, efficient HR team that tackles big picture projects which really make an impact? That’s a dream job description for a lot of HR folks!
Reducing some of your admin work will not only help you to improve morale and retain your staff, but also to attract the right people if you do need to hire new team members.
Even if you’re convinced about the benefits of employee recognition software, making that case to your leaders can be a different story, and you may need to work hard to convince them to invest in this area.
If you need help, our Employee Recognition Executive Pitch Kit is packed with practical tools and resources to help HR leaders make a compelling case for their programs. The Kit includes:
Pitching Recognition to the C-Suite, a guide featuring tips from HR experts on how to get your program approved
A fillable PowerPoint template for your executive presentation
A one-page proposal template
Our ROI Calculator to help you quantify the potential payoff of your program
Fill out the form below to get instant access to all 4 of these assets for free!