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Is It Possible To Measure The ROI On Employee Recognition Programs?

Treat employees like they make a difference and they will.
- Jim Goodnight

To be recognised for one’s good work is a human need. Given that millennials form a major chunk of the workforce, there is increased emphasis on recognition. Employees respond positively to appreciation because they feel that their work is valued. This leads to motivated and engaged employees.

In today’s ever-challenging economy, implementing successful employee recognition programs is a must. But what about the ROI (Return On Investment) on these programs? Can it be measured? You could be spending an x amount per employee every year to recognise their work in various ways. Isn’t it important to have quantifiable results backed by credible metrics to justify the continuation of these practices?

Employee of the Month

Let’s find out how the ROI on employee recognition programs can be evaluated.

Measuring ROI On Employee Recognition Programs

Having an employee engagement strategy is not enough. Many companies are still aimlessly investing in unplanned engagement efforts that seem to provide zero ROI.

If you are looking to incorporate employee recognition program in your company, make sure to focus on essential performance indicators that can be measured. Let’s look at each such indicator in detail below.

1. Reduced Employee Turnover

As per the findings of a recent study, organisations with employee recognition programs have 23.4% less turnover than organisations without. Is this not a good enough indicator of how a great recognition strategy ultimately impacts your ROI?

The company already incurs huge costs undertaking recruitment and training of employees. It is a massive setback if the best of your talent leave the organisation.

An email acknowledging the achievements of your employees is one of the battle-tested ways of showing recognition and still works well. It not only boosts employee morale but also paves the way for a long-standing trust your employees will place in you.

In a recent study by Forbes, companies that scored in the top 20% for building a recognition-rich culture enjoyed a 31% lower turnover rate.

A reduced turnover rate means lesser recruitment costs and more productive employees, which will directly impact your ROI positively. A proper assessment of the turnover rate before and after implementing a recognition program will give clear and measurable results.

2. Increased Engagement

An employee is positively engaged with a company if he is aligned with the organisation’s goals and is loyal towards the success of the company. Engaged employees perform at their level best each day by bringing passion into their work often leading to innovative practices.

According to the recent State of the Global Workplace report, 85% of the employees are not engaged or actively disengaged at work. 18% are actively disengaged in their work and workplace, while 67% are ‘not engaged’.

One of the best ways to get employee engagement right at the workplace is to get performance management right. And the potential impact on the bottom line is significant. Organisations with highly engaged employees have 50% higher productivity, 20% higher sales, 44% higher profitability and 44% higher customer satisfaction. These organisations achieve earnings per share growth that is more than four times that of their competitors.

In one of the surveys, when asked what leaders could do more of to improve engagement, 58% respondents replied: “Give Recognition”.

Give away ‘personalised’ trophies to employees…

Recognising employees with trophies, plaques and keepsakes designed to highlight the importance of their achievements goes a long way in keeping them motivated, thereby impacting the ROI.

3. Better Business Results

The product that you sell is the focal point of your business. The various departments in your organisation are all aligned towards making that product better every day and sell for itself by creating a brand out of it.

A great employee recognition program instils a sense of ownership amongst the employees and paves way for increased customer satisfaction. They work with motivation every day and are committed to contributing effectively. This, in turn, increases sales resulting in a strong bottom line.

The single most important goal of any business is to earn profits by selling their products and having a huge customer base. This is reiterated with best recognition practices being followed.

4. Innovation And Productivity

The absence of innovation will soon render any workplace and their employees unproductive. Change is the only constant, and it is of utmost importance to keep revisiting and improvising strategies and practices in this challenging economy.

Research states that employees who receive strong recognition are 33% more likely to be proactively innovating, generating two times as many ideas per month as compared to those who aren’t recognized well. Further, companies that provide effective performance recognition are more than two times likely to be highly innovative.

When asked which benefit would do the most to encourage innovation and efficiency, employees reports were:

  • 27% wanted to be recognized for their ongoing efforts
  • 41% needed recognition for going above and beyond their usual work
  • 32% said that even a 5% salary bonus would make them feel recognized at work.

All of this will, in turn, lead to innovations and increased productivity.

If your company is filled with employees coming up with innovative practices, the chances are that your employee recognition practices are on the right track and your ROI is strong.

5. Ultimate Brand Value

A brand represents the sum of people’s perception of a company’s customer service, reputation, advertising and their employees. Happy and engaged employees will paint a positive image of an organisation and reflect a high brand value.

To have a great brand value outside, work for a high brand value on the inside first. Your employees are your first Customers, and a satisfied Customer is the best business strategy of all! A positive employee recognition program reinforces a sense of care and belongingness for the Organisation.

Choose ‘unique’ ways to enforce brand value…

Engraved plaques, merchandise that carries the company logo and even certificates of appreciation are excellent ways to show recognition for employees’ work and convey the fact that they ‘belong’ to the company.

The true measure of a company’s brand value can be assessed by the employees working there. They know the pulse of the company and also serves as a measure of checking engaged employees.

ROI of employee recognition programs can indeed be measured in terms of reduced turnover, reduced absenteeism, improved employee morale, engaged employees and increased brand value of an organisation.

How to measure the ROI on Employee Recognition Programs

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