Nearly 70% of employees are disengaged at work, costing the global economy $438 billion in lost productivity. And the scary thing is, that number is steadily going down, showing that more and more people are not engaged at work.
What is the cause of this epidemic of disengagement? Why are most employees disconnected from their jobs, simply going through the motions and only doing the bare minimum of what’s required of them?
The truth is, there are multiple causes of disengagement, such as toxic work environments and a lack of professional development. But one of the main culprits is a lack of recognition.
When employees feel recognized, valued, and appreciated at work, they are 4x more likely to be engaged. They’re also 56% less likely to look for a new job, 48% less likely to feel burned out, 14% more productive, and 5x more connected to company culture.
Employee recognition ROI is clear—but you don’t have to take our word for it. In this post, we’ll go over statistics, real-world examples, and how to measure your own recognition ROI.
(Ready to dive in? Use Awardco’s ROI calculator to figure out your return!)
What is the ROI of employee recognition?
Measurable business outcomes tied to recognition efforts—that’s what we mean by the ROI of recognition.
Frequently, leaders underestimate the ROI of recognition because it’s viewed as soft or undefined. And without proper research, this perception can be accurate. However, considering recognition is critical for retention, productivity, culture, and wellbeing, it’s time to get a clear picture of the true ROI.
As mentioned above, the benefits of employee rewards and recognition programs are as follows:
- Boosts retention
- Increases engagement
- Cuts stress and burnout
- Increases productivity
- Builds culture
Check out our Recognition page to dive deeper into how it can help your organization excel.
Recognition boosts retention
Rewards and recognition directly influence employees’ desire to stay at the company. One study found that when incentives are used to recognize and reward employees’ contributions, their retention went up 87%!
Here’s a real-world example: Citizens Business Bank built a culture centered on personalized, wellness-focused recognition that reinforces their core values. These efforts have led to a 25% reduction in attrition for employees recognized in their first six months.
Recognition increases engagement
If employees know that their efforts will be noticed and appreciated by leaders, they’ll be more engaged. It’s that simple. In fact, when managers are great at recognizing, employees are 40% more engaged!
Lineage Logistics used recognition to better appreciate their deskless manufacturing employees, and they achieved an astounding 100% engagement on the platform, proving that the opportunity to recognize and be recognized builds excitement around your culture.
Recognition cuts burnout
Stress and burnout are huge risks at work—50% of employees say they feel a lot of stress at work on a daily basis. But showing and receiving gratitude can boost happiness by 25% and lower stress, and research shows a clear link between happiness and a 13% increase in productivity.
As an example, Quick Quack Car Wash used recognition to improve their stressful, service-focused workplace. They made sure each employee felt valued for their efforts, and it’s led to a happier culture and a 20% drop in turnover.
Recognition increases productivity
The tie between recognition and productivity is clear: when employees feel like they matter, performance, motivation, productivity, and profitability go up. Other research found that effective recognition programs increase productivity and performance by 14%.
WOW! mobile boutique tied incentives into their performance strategy, ensuring work never gets overlooked. This has been so effective, they’ve seen a 50% increase in productivity!
How to measure the impact of employee recognition
Hearing these general industry stats is great, and they should help you get buy-in for your programs. But now let's help you figure out the ROI of your unique programs on your specific organization.
1. Set clear objectives
Before you figure out the ROI of your recognition program, you have to set goals to act as a measuring stick. For example, do you want it to raise retention by 10%? Engagement scores by two points? Productivity metrics?
Set clear KPIs and make plans that tie recognition efforts into those objectives. For example, if you want to improve retention, make a program to recognize new hires throughout their first year and measure their retention throughout.
2. Collect baseline data
Before implementing any changes, make sure to collect any baseline data you need to give you a clear view of any improvements. What is your retention rate right now? What are your engagement scores? How do people feel about your culture?
3. Track any changes
After you implement your recognition program, make sure to frequently track changes to the objectives you want to improve. Consistently measure turnover, engagement, stress, wellbeing, productivity, or similar to ensure your stats are accurate.
4. Monetize the benefits
As you see benefits from your recognition programs (and if done correctly, you WILL see benefits!), make sure to tie monetary impacts into those benefits.
For example, if engagement scores go up by two points a year after implementation, do some digging and see what other improvements have showed up. Has that greater engagement led to faster project completion? Has it cut down on turnover? Has it improved morale around the office?
Try to tie monetary gains to the improvements you see so that you can say recognition has improved engagement by “X,” which has improved productivity by “Y,” increasing income by “Z”.
How employee recognition software maximizes your ROI
Manual recognition takes a long time. Digital recognition takes a few minutes, max.
Manual recognition requires spreadsheets. Digital recognition simplifies the process.
Manual recognition misses important dates/accomplishments. Digital recognition ensures no milestone is ever overlooked.
The truth is, employee recognition software ROI is clear: by using a software tool that consolidates your rewards and recognition efforts into a robust, easy-to-use platform, you can make recognition much more effective and spread it to more people.
With a tool like Awardco, admins can scale their recognition efforts without additional efforts. Plus, they can take advantage of:
- Automated processes and communications
- Quick and hands-free reward fulfillment
- Powerful reporting and deep analytics
- HRIS integrations for greater cultural connectivity
Curious how an employee recognition software can change your workplace? Reach out to Awardco.
Common pitfalls in measuring employee recognition ROI
Many companies invest in recognition, don’t see the results they want, and give it up as a bad job much too soon. Here are some common pitfalls these companies fall into when trying to improve through recognition:
- Measuring only short-term results. Recognition can transform your culture, but it doesn’t happen overnight. Give it at least a year to really see what impacts effective recognition can have.
- Ignoring qualitative feedback. Yes, ROI is most impactful when there are numbers behind it. But don’t ignore it when employees say they feel happier and more valued, or when they share personal stories of meaningful recognition. These are signs of cultural improvements.
- Not tying recognition programs to company goals. When recognition is aimless, the ROI will be scattered. Make sure to tie each recognition program you implement into your core values and goals.
Hit your targets with meaningful ROI
Employee recognition can provide impactful financial and cultural ROI when it’s implemented correctly. It improves engagement, boosts retention, and increases productivity, all while making your culture more welcoming, exciting, and value-driven.
Use this guide to measure your own recognition ROI—and to help you do so, check out our ROI calculator.
For even more details about the ROI of recognition you can expect, read our latest white papers.
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