March 28, 2023
January 20, 2021

Leadership and Recognition: The Business Impact of Leaders Who Recognize

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Leaders have a more powerful impact on employee experience and engagement than anything. And there are numbers and brain science to prove it.

Employee engagement has been an increasing focus for many executives (and let’s be real, many managers too) in recent years, and current global circumstances have placed increased emphasis on the topic as much of the workforce shifts to remote work. Why does engagement matter? What part do leaders play in getting their people engaged? How does this ultimately affect the bottom line? We’ll answer some of these questions below, but you can get the full story by downloading our white paper below.

The question "why does engagement matter?" has been asked in many different ways, and it deserves an answer. Before we discuss this, though, you may want to sit down for a second while we tell you these stats:

Yeah. It’s crazy.

Engaged people (and we aren’t talking about engaged to be married, though that could potentially apply here too....sorta) are happy, productive people, and they are the foundation of every company. Engaged workers produce better quality work, on time, and are more innovative. However, as stated, only about 30% of the U.S. workforce is engaged in their work. That means 70% of the workforce (some reports have this number as high as 85%) are disengaged. With the pandemic wreaking havoc across the global economy, it’s not hard to imagine the number of disengaged employees being on the high side of that number—and rising.

Leaders Directly Influence Employee Engagement

For many leaders, moving employee engagement in the right direction can be a challenge. As with many things in any organization, improving engagement comes from the top. According to Gallup, leaders have an incredible impact on helping employees engage in their work, with nearly 2/3 of the variance in employee engagement scores across organizations being influenced directly by leaders.

That’s a fancy way to say that leaders have a more powerful impact on the engagement of employees within your company than almost anything. With good leadership, employee engagement can become a potent source of strength rather than an insidious cause for worry—and we could all use a little less worry these days.

Frequent Recognition Conveys Value and Builds Trust

So how do leaders have the most impact on engagement? By building trust. According to the research on the neuroscience of trust, recognition and rewards have the single largest effect on how an employee experiences value at work. As leaders provide praise and recognition, something special happens in the brain of both the giver and the recipient.

Here’s the science: the process of giving and receiving compliments (or recognition, which is a fancy way to say compliments) releases a chemical in the brain called Oxytocin. Oxytocin reduces stress on a physiological level, often producing feelings of joy, fulfillment, and happiness. In experiments done by leading neuroscience researchers, it was found that when people reward and recognize, both the person recognizing and the recipient see a boost in Oxytocin in the brain and a reduction of activity in the Amygdala—where stress chemicals are produced. And that fosters trust. Bada bing bada boom.

Basically you get more of the good and less of the bad, all because of recognition.

Leaders in the Workplace Directly Influence ROI

If all this information isn’t enough, let’s look at a specific example. The national average for annual revenue contribution per employee is $165,000. High-trust organizations generally have a 50% increase in productivity. An increase of this magnitude would generate an additional $82,500 to an employee’s annual revenue contribution to the company. That’s $82,500 of additional revenue contribution per engaged employee. With that in mind, can you as a leader afford NOT to utilize rewarding recognition?

It’s clear that investing in improving the manager to employee relationship by providing powerful rewards and recognition can have a massive impact on trust and communicated value—and in turn provide higher financial returns to the organization as a whole. But it’s not just about ROI. People aren’t numbers, though we often reduce them to such when we’re talking about business. 

The Bottom Line

Good leaders care about the people they work with. Caring means recognizing often (among other things), whether publicly or privately, with prizes or without. Whatever form recognition takes, if it is frequent, sincere, and specific, it will generate more trust between leaders and their employees. And employees, because they will feel cared for, will care more. It’s that simple.