May 29, 2022

The ROI of Employee Recognition

Employee Recognition for a Modern Workforce
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As part of a business, you know the ever-present battle between two things: investment and returns. Deciding what is and isn’t worth your time and money is a balancing act that many businesses still haven’t mastered. And with the Great Resignation in full swing, you have a new front on the battlefield of business to analyze and gauge:

Employee rewards and recognition.

Employee rewards and recognition is a growing trend that will combat the Great Resignation and help you retain your talent. But is it really worth the investment? What sort of returns do you get from investing valuable time and money into employee recognition programs? For this post we’ll talk about the ROI of employee recognition, and we’ll help you see that it’s not only worth the investment, it’s vital to the growth and success of your business. (And we can help you calculate your recognition ROI, too!)

Employee Recognition’s Effect on Turnover

Just like Uncle Al’s new hairpiece at Thanksgiving, employee turnover is the elephant in the room when it comes to the work environment today. It’s something that, in today’s world of employee freedom and choice, can’t be ignored. So what is the ROI of recognition when it comes to retention and turnover rates?

With over 47 million Americans resigning in 2021, the highest number in the past 20 years, the Great Resignation isn’t slowing down. And whenever someone quits, it will cost the company anywhere from half to 2X that employee’s annual salary to fully replace them. So if an employee making $50,000 a year quits, replacing them will cost anywhere from $25,000 to $100,000. To top that all off, one in four employees quit last year—if your company has 100 employees and 25 of them quit, that could cost you anywhere from $625,000 to 2.5 million over the year. That’s a lot of greenbacks to be losing because of something so easily remedied with a “Thank you!” or a “Great job!”

Now let’s look at recognition. The number one reason employees leave their jobs is a lack of recognition. In fact, companies with effective recognition programs have a 31% lower voluntary turnover rate than those without. That means you could expect to spend anywhere from $425,000 to 1.7 million in turnover instead of nearly 2.5 million. That’s a huge amount of savings! 

To top it all off, 63% of employees who are recognized are very unlikely to look for a new job. If you’re looking for the ROI of recognition, you’ll find it in a lower turnover rate and more money in your pocket. Period.

Employee Recognition’s Effect on Engagement

Engagement can be hard to measure, but it’s possible. Engaged employees:

  • Are 21% more profitable
  • Are 17% more productive
  • Are 41% less likely to struggle with absenteeism
  • Lower recruitment costs by 22%
  • Boost customer satisfaction by 10%

Plus, highly engaged companies have a 25-59% lower turnover rate than companies with disengaged employees (see awesome savings in the example above). 

So engaged employees save you money and make more money, which means you get a big ROI. But how does recognition create a more engaged workforce? Well, when employees believe they’ll be recognized for their hard work, they are 2.7X more likely to be highly engaged in the work they do. It’s a simple idea, really. Saying thanks and appreciating good work goes a LONG way for making employees feel supported and valued. And they’ll give back in innumerable ways.

With recognition, employees are three times as likely to be more engaged, which means three times more likely to be more profitable, more productive, and more present. 

What About Employee Rewards?

Recognition doesn’t exist in a vacuum. While recognizing and showing appreciation to your employees is vital, ignoring the “rewards” part of the equation isn’t a good idea. That’s like equipping your army with armor but forgetting to give them weapons.

When employees are given minimal recognition and mediocre rewards, their turnover rate is 4X higher than when employees are recognized more often and with more rewards. When you show your appreciation by giving employees a gift—whether for a birthday, a service anniversary, a holiday, or just because—they are more likely to feel connected, engaged, and loyal to the organization.

Recognition—Worth the Investment

When you invest time and money into creating and maintaining a robust employee recognition and rewards program, you can see a massive return on your investment. Recognition not only improves employee happiness, but it lowers turnover, increases engagement, and fully prepares your company for the war for talent and the Great Resignation.

Awardco is dedicated to helping you develop a customized recognition program that will build your culture of employee recognition and appreciation. And with the world’s largest reward network, you can provide employees with both the recognition and rewards that they crave. We like to think we’re turning the Great Resignation into the Great Retention. And we’d like to invite you along for the ride. 

Calculate Your Own Employee Recognition ROI

We know no one likes doing math (unless you’re one of the crazy people in accounting), so we created an ROI calculator to do the math for you! Use the calculator to see for yourself the returns you can expect after investing in employee recognition. We hope this tool can help you increase buy-in from upper level managers and executives and increase the effectiveness of your recognition programs.

With the right rewards and recognition strategy, 2022 is your opportunity to conquer turnover rates and disengagement, no matter what the Great Resignation brings.