Employee recognition: a ‘nice to have’ or an essential part of running a business?

Many companies assume an occasional thank you or one-off gift is an adequate approach to employee recognition but is it enough? Evidence shows businesses need to start taking employee recognition more seriously; here are six reasons why.

Recognition drives engagement – and engagement matters

Research over the past couple of years is confirming that engagement’s become a key business priority. And given some of the alarming statistics from companies like Gallup about how disengaged employees are feeling it isn’t a great surprise. Why is engagement so low? One major problem is that many employees don’t feel valued or recognised, and that’s an issue given that one of the main drivers of engagement is employee recognition. Some studies have suggested it’s one of the most fundamental drivers of all – increasing engagement by up to 60% according to this Towers Watson report.

Create a strong employee recognition programme and you have a way to tell your employees they’re valued.

Engaged employees are productive employees

A one off gift to say thanks does not lead to sustained engagement. Regular ongoing recognition will – and that ongoing sense of engagement helps increase productivity. Temkin Group research into employee engagement suggests 91% of highly engaged employees consistently gave maximum levels of effort at work. Companies with the most engaged employees reported 2.5 times greater revenue growth than competitors with the lowest levels of engagement. And Gallup research shows top quartile companies (in terms of engagement) outperforming the bottom quartile by 21%.

Recognition embeds the culture your business needs

In 1992, leading academics James L. Heskett and John P. Kotter set out the case for the importance of a strong culture in their book ‘Corporate Culture and Performance’. They showed that companies with strong cultures had higher growth levels in revenue, stock price, net income and employment. The evidence supporting their case has continued to accumulate over the years. Culture affects customer service, productivity, absenteeism and financial performance. Companies know the value of culture – but many have struggled to know how to develop the culture they need.

Employee recognition programmes provide a platform to continually show appreciation for the right kinds of actions and behaviours in your business. They allow you to reinforce appropriate employee behaviours and create alignment with company values, goals and strategies.

And that gives you the way to nurture and grow the business culture you want.

Engagement aids retention

If employees aren’t engaged, your employee turnover is likely to increase. Research from Hay Group found companies with high levels of engagement had 40% lower turnover rates than companies with low levels of engagement. Given that the average cost of replacing an employee is estimated to be £30,614, it’s a powerful reason to make sure you’re creating the right environment to encourage employees to stay.

Employee recognition programmes are cost effective

Companies pay out billions on employee rewards yet many spend their money on random gestures that are detached from employee engagement and business success. The impact is brief. A well-structured programme based on the psychology of recognition means companies don’t need to spend a fortune to have highly engaged employees.

You’ll be ready for the millennials

Millennials are the new generation of employees and they expect instant recognition. They won’t wait until their annual appraisal to be told they’re doing a good job. As this report from PWC highlights, they want appreciation as and when it’s due. Is your employee recognition programme ready for this? If you don’t give the recognition and feedback they need, millennials won’t wait around. They’ll find someone else – potentially a competitor – that does.