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New Year’s Resolution: Make 2020 the Year You Start Tracking Employee Recognition Program ROI

Previous generations of employee recognition and reward programs put more emphasis on offering gifts and monetary incentives for reaching non-performance related benchmarks. Leaders invested time and thousands of dollars yet didn’t achieve substantial improvement in employee happiness and productivity. In addition to this, the practice of annual performance reviews didn’t always provide a completely accurate depiction of an employee’s efforts. Employees wanted more timely recognition for their efforts and praise for their ideas and skills. This is why the newest generation of employee loyalty programs values peer-to-peer recognition.

How do we know that incorporating peer-to-peer recognition works? According to the Society of Human Resources Management (SHRM)’s January 2018 report Using Recognition and Other Workplace Efforts to Engage Employees: “Of the 29% of HR professionals whose organizations use peer feedback, 89% reported it having a very positive or somewhat positive impact on their organization.”

The success of modern employee recognition programs is also related to some key characteristics of the Millennial population. It’s now common knowledge that millennials make up the largest portion of the workforce, and their upbringing, which relied on instant praise and feedback for their actions, has overlapped into their careers as well. Most millennials need feedback and recognition to feel appreciated at work, which impacts their loyalty and performance.

Ultimately, managers should strive to quickly connect with their employees every day. While this recommendation might sound exhausting, it simply means that managers should send a text or instant message, make a quick call or drop by an employee’s desk or office for a few minutes.

Managers: Millennials Want Feedback, but Won’t Ask for It

Management of Millennial population workers

Employee recognition programs have the power to impact many organizational KPIs important to HR professionals and top management.

Recognition programs have a direct impact on such KPIs as employee retention, job satisfaction scores, and the level of absenteeism. These are the main indicators that companies need to track to evaluate the ROI of their recognition programs.

For more about KPIs and their importance to your organization, read our article Rewards and Recognition Programs – KPIs to measure and their meaning. 

There is also evidence that better engagement rates lead to fewer safety incidents in the workplace, so the number and cost of safety incidents are also legitimate KPIs to track while measuring the success/ROI of reward and recognition programs.

“Gallup’s 2016 meta-analysis study — which examined more than 82,000 business units and 1.8 million employees in 230 organizations, across 49 industries and in 73 countries — shows that business units with engagement scores in the top quartile of Gallup’s employee engagement database have 70% fewer safety incidents compared with bottom-quartile units.” – Gallup, Engaged Workplaces are Safer for Employees.

And, according to the Society of Human Resource Management, “HR professionals with value-based recognition programs and a budget of 1% of payroll are more likely to perceive positive effects on the organization and its employees.” Based on their study, the ROI tracked and recorded saw 80% (versus 49%) stronger employee brand – among other benefits. 

Four KPIs of employee recognition program that deliver clearly measurable ROI 

  • Overall ROI. You can compare the cost of your recognition program against the increase in revenue and correlate a portion of that increase to those recognition efforts by cutting out external factors etc. that also affect your revenue. 
  • ROI of reduced employee turnover. By tracking your employee turnover rate, you can distinguish the costs that headhunting, hiring and training new employees place on your business. By increasing your employee retention, you’re saving those costs and including them instead as a ROI. 
  • ROI of a reduced number of workplace safety incidents. As noted above, safety incidents are decreased with employee recognition programs. You can compare costs related to safety incidents in the previous period with those in the analyzed period to calculate a rough ROI. Such costs may include paid sick leaves and compensations, lost profits related to the absence of workers and other expenses and losses related to the specificities of your organization.
  • ROI of a reduced level of absenteeism.

Same with an ROI of reduced safety incidents, you can compare the costs related to absenteeism in the previous period with that of the analyzed period to come up with a trackable number. This indicator includes an average salary for each missed day, loss of potential revenue, and overtime costs. Use the formula offered by Gijs Houtzagers to get a full picture of how much absenteeism costs to your company.

Some benchmarks to help you in recording the ROI of your employee recognition program

There is a 2016 SHRM report available that offers some insights on the impact employee recognition programs have had on other organizations that you can use as benchmarks for your program. For instance, 90% of organizations that implemented a value-based recognition program said it positively affected employee engagement and 75% said it increased employee productivity.

Two-thirds of HR professionals agree employee recognition helps with retention.

Using Recognition and Other Workplace Efforts to Engage Employees

HRs' opinion on employee recognition

The importance of tying employee recognition to the core values of your company is confirmed by numerous studies including those mentioned above. That’s why the solutions offered by Online Rewards provide the greatest degree of flexibility that will help you to adapt the content and activities related to the program to your company culture. We help companies to organize everything starting from the technical side to compliance with the latest best practices and scientific evidence to ensure the highest ROI for your employee recognition efforts.



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