Complete Guide to Successful Employee Recognition Programs

Date: December 8, 2022

Amidst the Great Resignation and plummeting retention rates, employee recognition and appreciation readily take center stage. Your hard work to recruit top talent may not pay off unless you can hold on to it and ensure peak work efficiency.

A smart approach to employee recognition can increase productivity, decrease turnover, improve team culture, boost loyalty, and even prevent burnout. That's where employee recognition programs come in.

While 80% of companies have some type of employee recognition program, around 40% of employees still don't feel duly recognized. Let's take a closer look at creating an effective recognition program for your workforce.

Why Is Employee Recognition Important?

In psychology, gratitude has a strong connection to happiness. It contributes to positive emotions, higher productivity, and even better health. Employee recognition is a direct demonstration of gratitude and appreciation.

When done right, recognition can have a direct effect on your company's reputation, success, and bottom line.

Want to build a great recognition program? - Check out Bucketlist Rewards here it builds great cultures in both Fortune 500 companies and tiny startups.

How to Calculate ROI for Employee Rewards Programs

Implementing an effective employee rewards program can have a significant return on investment for three key reasons.

Higher Engagement

According to Gallup, only 36% of U.S. employees are actively engaged in their work. This has a direct effect on work efficiency. Companies with highly engaged workers experience a 17% increase in productivity.

Recognition has a significant impact on employee engagement. Employees that see their efforts duly recognized have an incentive to continue working hard. Meanwhile, others see what success looks like and feel motivated to achieve better results.

If you calculate how much revenue a 17% increase in productivity brings your company, you can easily start calculating the ROI of the employee rewards program.

However, an increase in productivity isn't the only factor contributing to the high ROI of employee recognition. Lower turnover and reduced absenteeism are just as important.

Lower Turnover

Businesses that practice successful employee recognition can experience an impressive 59% reduction in turnover. In 2021, 47 million Americans voluntarily quit their jobs. The numbers continue to rise. One of the reasons is poor recognition and engagement.

The cost of recruiting, training, and retaining one employee can be high. To replace an employee, you need to get ready to pay:

  • $1,500 for hourly workers.
  • Over 100% of salary for technical positions.
  • Over 200% of salary for C-suite positions.

According to a joint report released by Gallup and Workhuman, an effective employee recognition program can save a large company (10,000 workers) over $16 million annually.

Besides spending a significant amount of money on replacing a valuable worker, you need to consider the time it takes to get a new one into the loop. This time can also affect the company's operation quality and bottom line.

Reduced Absenteeism

Companies that implement successful employee rewards programs experience a 41% reduction in absenteeism. According to CDC, the cost of absenteeism is:

  • For small employers – between $16 and $81 per year.
  • For large employers – between $17 and $286 per year.

The average cost of an employee recognition program is 2% of the payroll. If you add all the possible savings from lower turnover, reduced absenteeism, and higher engagement, you can calculate the ROI of a successful employee rewards program.

What Are the Benefits of a Recognition Program?

An effective employee recognition program is an integral part of your company's success. While the Great Resignation is in full swing, employers need employees much more than the other way around.

That's why everything that keeps your top talent in place and at its peak capacity has a direct impact on the company's bottom line.

Motivating Employees

Motivation is closely connected to employee engagement and productivity. Motivated employees are more likely to produce quality work and stay in their current workplace. The key motivation killers are micromanagement, low pay, and poor recognition.

An effective employee recognition program drives employee motivation. It includes recognizing talent, catching beneficial activities, and rewarding them timely. A structured program can help you identify opportunities for recognition and implement an effective reward system.

Reducing Churn & Increasing Longevity

According to research, around 79% of employees who quit their jobs cite lack of recognition as one of the key reasons.

Many workers who try to do their best hope for some form of appreciation. When it doesn't occur, employee satisfaction levels plummet, and they start thinking about quitting.

By implementing effective recognition efforts, you are giving your workforce the attention they deserve. This contributes to employee happiness, motivation, and higher productivity.

Employee Satisfaction

One study found that happy workers are 20% more productive than unhappy employees. Meanwhile, unsatisfied workers are more likely to be disengaged.

When company leaders or human resources specialists recognize achievements, employees feel more satisfied with their work. This boosts the overall morale of your workforce and motivates other employees to achieve higher productivity levels.

Keeping employees satisfied doesn't just increase productivity. It improves the overall work environment and reduces turnover rates. Meanwhile, satisfied employees turn into brand ambassadors who can help with recruiting new talent for your business.

Employee Engagement

Employee engagement is one of the major factors that contribute to the company's success. Highly engaged teams show 21% greater profitability than poorly engaged or disengaged workers.

Recognition programs can cement engagement for your top talent and boost it for the rest of your workforce.

While engagement doesn't depend on recognition alone, it's rarely possible without due appreciation. While your HR specialists arrange training and provide the right working tools, they also need to focus on public and private recognition.

Keep in mind that the most memorable recognition comes from:

  • Worker's manager – 28%
  • High-level leader – 24%
  • Manager's manager – 12%
  • Peers – 9%

In many cases a simple "thank you" announced publicly can go a long way toward boosting employee engagement rates.

Attract Top Talent

Companies that implement successful employee recognition programs become more appealing to the top talent. Besides taking the time to study company values, benefits, and salaries, many employees try to learn about company culture and recognition opportunities.

An effective recognition program sends a clear message that the company cares for its employees and rewards their achievements.

Reduce Burnout

Employee recognition can help prevent burnout in many different ways, including:

  • Boosting employee happiness – happy employees are less likely to feel overworked and underappreciated.
  • Increasing engagement – under-engaged and disengaged workers are more prone to burnout.
  • Implementing wellness – many companies choose wellness-related rewards to recognize their talent's effort. This can improve employees' health and prevent burnout.

Recognized employees feel appreciated and more secure. Both of these factors contribute to lower burnout rates. Meanwhile, they have an opportunity to provide feedback that employers can hear and implement for better efficiency.

Employee Recognition Programs That Work- Google's Success Story

When it comes to creating the kind of workplace where people actually want to be – and stay – there are certain companies whose names come up again and again. Companies with strong employee recognition programs – like Google – regularly top this list. Just Google it and you'll see – top of the Fortune 100 list, top of the Business Insider 50 list, and top of the Comparably 50 list.

This didn't happen by accident. Of course, everyone hates to lose good employees, especially A players. Studies regularly show a top reason employees leave is lack of recognition. As many as 66% would leave if they did not feel appreciated – and that number jumps to 76% among Millennials. That's as many as three-quarters of your workers.

That's a problem.

At Google, they recognized the issue. They did what they do best – they analyzed it. And then they rolled out a comprehensive rewards and recognition strategy for making sure people wanted to work there and keep working there.

Guess what? It worked like a charm. According to research by PayScale, 86% of Google employees are satisfied with their jobs. As Google's former HR head Laszlo Bock explains in his book, Work Rules! Insights from Inside Google That Will Transform How You Live and Lead, there are three defining aspects of Google's culture: finding a compelling mission, being transparent, and giving people a voice.

Google employees agree. Here's the kind of review every company should strive for on Glassdoor: Google is "a company that treats their employees great and in return gets motivated and loyal employees."

There are plenty of lessons you can take away from Google's experience and apply to your own company. Here's a look at how Google made this happen – and how you can, too.

Give Experiences Instead of Money

Google learned through experience that non-monetary awards motivate people better than cold hard cash. It may seem counterintuitive, but Bock explains it's the difference in the way people view the two types of rewards.

Consider that time when Google offered big cash awards – up to $1 million – for its top performers. The idea was to generously reward the people who helped the company based on their accomplishments. Sounds good, right?

Well, that's not the way it worked out. Google discovered the program fostered jealousy and resentment – not the positive response they had in mind.

So Google phased out the cash rewards program and rolled out a new rewards program that offered experiences – everything from dinners out to new tech gadgets to trips to Hawaii. Employees said they found the new program more fun, more memorable, and more thoughtful than the cash awards.

Cash prizes are evaluated on a cognitive level, and seen through practical eyes, Bock says. Meanwhile, a non-cash prize conjures up a different feeling, triggering an emotional response. And it helps when you take a page from former General Electric CEO Jack Welch and get to know your employees personally.

"In the end, employees will end up happier if you give them an experience—something personal and nonfinancial," Bock says. "But it only works if you know what makes your people tick."

That's the thinking behind Bucketlist, where rewards are thoughtfully designed to reflect what matters to your employees. When you're ready to offer the kind of experiences Google does, you can learn more here.

It Doesn't Have to Cost Much

Bock regularly says anyone can replicate much of Google's success. Surprisingly, some of the company's most popular perks don't really cost that much.

The bottom line is that the company's culture underpins everything else it does. It's a self-fulling prophecy: By taking care of its employees, Google has created the kind of culture that people want in a workplace, which means it can attract and retain the best employees.

"Most of the programs we use to delight and care for Googlers are free, or very close to it," Bock writes. "And most would be easy for almost anyone to duplicate."

Give Bonuses for Individual Efforts

Google uses two specific types of employee rewards programs, one where managers can reward employees and another where employees can recognize each other.

Spot Bonuses Recognition:

  • A spot bonus program is typically used to recognize and reward exemplary one-time achievements. That's exactly how Google applies its program, as a way tool for recognizing special behavior.
  • The program allows managers to reward any employee who served on their project teams with a monetary award or with non-cash recognition, such as dinner for two.

Google Peer Bonus:

As one Google employee explains: "Both the peer and spot bonuses are intended to recognize going 'above and beyond' one's normal duties and expectations. It may be working extra hours to help a team finish a project, or fixing an issue."

Don't Forget to Recognize Group Achievements

Rewarding an entire group for its performance also can benefit your company. At Google, they use the "no name program" to do just that. It was designed for executives to recognize teams for outstanding performance, with incentives ranging from team celebrations to team trips.

Group rewards encourage bonding among team members. Getting your teams to work together benefits the entire company. As the Society for Human Resource Management points out, "successful organizations are highly innovative, and innovation requires teamwork for the development of new ideas. Team-based incentives create, as well as emphasize, the need for collaboration across the company."

The program was modified from an earlier version so that it would be easy to use and easy to share. It's a public shout-out for a job well done. "Broadcasting a compliment makes both the giver and the receiver happier," explains Bock.

During his tenure at Google, Bock also kept a "Wall of Happy" outside his office door, where he posted the kudos received by members of his team.

"Simple, public recognition is one of the most effective and most underutilized management tools," Bock says.

Give Lots of Kudos

Googlers can send each other gThanks notes – a peer-to-peer recognition program that lets employees send online thank-you notes to coworkers without going through an approval process.

Done Right, Employee Recognition Reduces Churn and Improves Morale

Today, employee recognition isn't a choice, it's an integral part of successful business operations. To hold on to your top talent, improve efficiency, boost productivity, and become an industry leader, it's important to implement a successful employee recognition program.

Appreciative companies are appreciated companies. Reducing churn and improving morale are key factors that contribute to the bottom line of your business.

At Bucketlist, we developed a highly effective employee retention tool that helps you design and manage an effective employee recognition program. Contact us for a free demo today!

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