How to Measure Employee Recognition ROI

Benefits of employee recognition

We know that employees that are recognized are 32% more effective (Haas School of Business) and we have found that 69% of people say their workplace wellbeing will improve if they are thanked more. We also found that 78% of people looking to leave a job said they would stay for more recognition.

Effective recognition – especially when consistently done through an employee recognition program – is good for the employee and for business success.

Key metrics to measure employee recognition ROI

Whether you have an existing recognition program and are looking to evaluate your success to-date, or if you are getting ready to set up formal recognition and want to measure your success right from the start, here are some of the most common ways our clients track and report on the impact of recognition.

Employee retention rates

Reducing retention is one of the most powerful ways to save a business money.

Even conservative estimates indicate that the cost of replacing your people is 33% of their salary. Some of our clients track voluntary turnover at a company-wide level and can see how various people initiatives are increasing or reducing those turnover numbers over time. Because turnover has lots of contributing factors, it can be especially effective to track turnover by department or group so you can isolate more specific reasons for increases or decreases.

Employee sentiment and experience

One of the simplest ways to track the success of a program is by gathering feedback from employees. Questions such as, “I have received recognition in the last week” or “I feel that my hard work is rewarded” can directly and more quickly measure the impact of your recognition efforts.

Employee Engagement

Many companies are already tracking employee engagement in some way, but you may want to time your efforts to support a recognition launch.

Metrics such as eNPS or absenteeism can be benchmarked before launch, and then quarterly or biannually after launch to see when your recognition efforts start to bear fruit.

Company financial performance

While recognized employees are more likely to contribute to positive financial impacts on the business, there are lots of other impacts to those same metrics. You may want to look for those indicators that are more likely to show early results. Increased Customer NPS by location, for example, will positively impact financial results down the line and may give you insight more quickly than jumping to tracking profit by location.

Methods to measure the ROI of employee recognition programs

1. Use engagement and pulse surveys

If you are gathering employee feedback from surveys, you will have overall trends to refer to. Are the numbers going up or down over time? What changes have you seen since launching recognition?

By breaking down these results by department and looking at recognition participation against these scores, companies can determine if the focus of efforts should be in increasing recognition participation or recognition quality. If people aren’t feeling more appreciated, and participation is low, you can promote basic usage.

If people aren’t feeling recognized and recognition is happening at similar levels to other groups, more exploration can be done to determine how to make recognition effective. More manager participation, implement rewards, etc.

2. Analyze turnover and hiring costs

We have referenced the Work Institute estimate that replacing an employee costs 33% of their salary, but if you want a more specific number for your company, consider all the costs and calculate for yourself. What recruitment costs are incurred? How many hours are spent in interviews and by how many people? New hire technology costs? What about the time it takes to train someone new? Who does that training and how many hours do they spend? For many organizations, the cost – especially at higher levels in the organization – can be close to 100% of salary, and so the employee experience is crucial in saving money and time to replace key personnel.

3. Run cost-benefit analysis

We have a calculator that helps our clients determine how to plan for reward budget. That cost should be taken into account when you consider the cost of recognition, but additionally, you can consider benefits such as: 

• Turnover reduction: Deloitte found that companies with effective recognition and appreciation programs experience a 31% lower voluntary turnover rate
• Decreased absenteeism: Gallup found that recognition or praise for good work can lead to 27% reduction in absenteeism.

4. Leverage employee recognition platform analytics

For many organizations, the real measurement is “are people using it?” One of the main benefits of formal, online recognition programs is your ability to track success over time. Some of my favorite numbers to consider are the number of recognitions sent, percentage of people receiving recognition, percentage of people sending recognition, and percentage of managers participating.

If you have a recognition event on Employee Appreciation Day, you may see your numbers take a boost – but look to see if more people are recognizing or if the same people are sending more. You will want to ensure that a few people aren’t carrying your program for it to really build strength over time.

How to increase your employee recognition program’s impact

I've rarely met a company that is worried about too much recognition, so if you are measuring your success, you are likely looking for ways to improve your results. Here are some tried and true ways to grow your culture of recognition.

Integrate recognition into daily workflows

One of my favorite best practices is starting regular meetings with a recognition moment. This is a nice tone to begin the conversation with, and it reminds everyone to consider what is working – not just what is broken.

Our US head of marketing loves to send out a reminder on Fridays – before the weekend wipes our memory – so we will go into our recognition program and capture successes from the week.

Personalize recognition efforts

We love to offer a range of eCards to our employees so they can pick a sentiment that matches their needs. I just sent an “I couldn’t do it without you” eCard to our IT contact, and it perfectly captured my sentiment. I also know there are some colleagues who would love to have their recognition story told at the start of a team meeting, or that I should send reward points to ensure they know the impact of their actions was felt.

Get leadership buy-in

We found in our Appreciation Index report that the top driver of employee appreciation was being recognized by their manager. Hopefully the stats we’ve provided on the benefits of recognition will get leaders engaged, and any feedback you’ve gotten from employees will drive that point home, but if not we can make the point that just 10 minutes a week providing a few words of encouragement can mean the world to people.

Align recognition with company goals

One way to make recognition more natural – especially for senior leaders – is to provide ways to recognize the goals or KPIs that managers are already fired up about. Do you need an eCard about on-time delivery? Or for preventing falls on nursing units?

Most people align their recognition efforts with their values, but don’t forget about the business goals that are driving success.

Adapt based on employee feedback

Last but not least, recognition programs fit best when they are built with employee needs in mind. Has it grown stale? Are the recognition topics you suggest too heavily weighted towards sales and don’t include reference to operational KPIs? Is it hard to access or find? Getting feedback from employees and adapting over time can take a stale program and make it shine.

Start measuring your employee recognition ROI with Reward Gateway | Edenred

Recognition is our bread and butter, and we love to track success over time. Let our Employee Experience Platform act like that additional team member you really wish you could hire. Let it automate your work anniversary program or track your usage over time. It can provide you, and your employees, the experience they are looking for!

Learn more about how our suite of employee experience solutions can help you make your corner of the world a better place to work.