Introduction

What’s most important to your business? Is it employee turnover, company reputation, or sales opportunities? Of course, they, and many more things like them, are imperative to your company’s success.

But underlying all those things, as fundamental as they  — and every other facet of your business — are, your employees are the ones propelling your business forward.

And, in today’s competitive business climate, it turns out that one of the best things you can do for your employees, brand, and bottom line is give employees the recognition they not only deserve, but crave.

Here’s what we know:

• Organizations that excel at employee recognition are 12 times more likely to generate strong business results
• Companies with recognition programs enjoy a 31% lower voluntary turnover rate than companies without such programs
• Companies with happy employees enjoy higher productivity (31 percent) and higher sales numbers (37%)

Consider the gold watch ... then toss it out.

Ah, the gold watch, the classic symbol of employer-generated employee recognition. Essentially, you’re telling your employees: “Survive here long enough, and we’ll give you one of these nice, shiny objects.”

Introduced by PepsiCo, Inc. in the 1940s, the idea of an employer expressing gratitude for an employee’s decades-long commitment to the organization with a parting gift of a gold watch was indeed novel. Fast-forward to today and the idea of giving an employee a gold watch 30 or 40 years after they started working for the company seems anachronistic. The average employee tenure now is around five years (and that’s being generous). If employees want any kind of watch at all today, it better be a smart watch.

Confused about where to start? Don't be.

When it comes to building great employee recognition programs, we’ve got you covered. This step-by-step guide will show you how to develop, implement, and establish a recognition program for everyone in your organization using best practices that deliver proven results. You’ll want everyone to participate but if you want company-wide adoption of your program, start at the top.

From Top Line to Bottom Line: The Powerful Impact of Employee Recognition

Getting your CEO to care and recognize the program is vital to success is the first step. Then, reach out to managers and employees to bring them on board. Be sure you promote the right behaviors and goals, then measure your results continuously. 

When employees are given recognition for their achievements and contributions to an organization's greater good, the results can be not just rewarding, but remarkable.

Properly designed and implemented, the impact of a recognition program will be felt company-wide – not just on the bottom line, but on the front lines where your company meets your customers. It will impact key metrics like engagement, employee retention and even improve employer branding with your employees acting as your greatest champions.

Let’s review ways employee recognition can positively impact your business and why you should invest in instituting and maintaining a recognition program.

Improve Engagement

How important is engagement in today’s competitive business environment? A 2015 survey by Deloitte’s research subsidiary, Bersin, shows that engagement, along with culture, are the top issues companies are concerned about. Nearly nine out of 10 (87%) of employers rated engagement important or very important to their organization’s success.

Companies who invest at least one percent of their payroll in recognition programs report higher engagement levels (and not surprisingly, better financial results) than those who do not make this investment. HR professionals understand this perhaps better than many other executives.

Boost Performance

Savvy employers use employee recognition programs to incentivize behaviors that lead to superior performance and thus can positively affect a company’s bottom line. The right recognition program can align your team around your organization’s core values and behaviors. It can have a beneficial impact throughout your business.

One Bersin study found that organizations with the most sophisticated recognition practices are 12 times more likely to have strong business outcomes. Use this Employee Turnover Cost Calculator from the Center for Economic and Policy Research to see how much employee turnover is costing your organization.

Increase Employee Retention

Employees who are recognized are more engaged in their jobs and consequently, they tend to stay at their company longer. Recruiting, hiring, and training a new employee can cost a company 16 to 22 percent of an employee’s salary. The cumulative effects of employee turnover can be devastating to a company’s performance, thus making employee recognition that much more important.

Build Your Employer Brand

Prospective employees use many factors to decide to which companies they will offer their talents. Today’s workforce is so enamored with benefits and company culture that 95% of job candidates value culture overcompensation. It’s common for them to use information from their networks, social media and career sites to learn more about a firm’s culture and help them make the important decision regarding which company to join.

A good recognition program leads to happy employees, who will become your greatest advocates. They’ll be the ones inclined to post positive comments about your company and its culture on social media or on career websites like Glassdoor. This will help your recruiting efforts and build your employer brand, so your company’s a top choice for candidates.

Develop Brand Champions

When recognized for their achievements, employees become brand champions. Their enthusiasm for the brand positively influences everything they do and every interaction they have from the sales prospects they uncover and the deals they close, to the candidates waiting in your lobby for job interviews, the customer service they provide, the social media they publish and the press opportunities available to you.

JetBlue, for example, the nation’s fifth-largest airline with roughly $6 billion in annual revenue and 18,000 employees, reported that a 10% increase in recognition resulted in a 2% increase in engagement.

When JetBlue’s employees were engaged, the company learned they were three times more likely to “wow” their customers and twice as likely to be in the top 10% of net promoters.

In other words  — they became brand champions. Better still, they became brand champions outside and inside the company.

Your CEO: The Key to Building a Successful Recognition Program

Whether your CEO’s name is synonymous with your brand (think Sears or Bloomberg) or not, it’s imperative to get your CEO deeply committed for your recognition program to succeed.

The CEO embodies the company’s mission and values. The CEO’s behavior sets an example for others to follow, and by embracing the recognition program, she sends a clear message that this is something she considers important and that the company values.

HR needs, as a first step, to get the CEO on board — to champion the program and be committed to driving its results. The CEO is the ultimate owner of employee happiness, and therefore needs to be the primary rewards and recognition champion.

Without getting your CEO on board, a rewards and recognition program risks failure. But how do you get your CEO to care?

The Right Metrics and Goals Sell Themselves

Your CEO has targets to meet and goals to reach. Whether these are higher sales numbers, greater market share, or improving other metrics, such as employee retention or engagement, there are a multitude of key performance indicators (KPIs) a company deems important and tracks.

It’s your job as an HR professional to demonstrate to your CEO and her management team how effectively a recognition program can help them achieve the company’s goals. By using the right statistics and tying the program to your organization’s KPIs, you can build a compelling case for implementing your recognition program.

Review what key metrics the CEO would like to reinforce (e.g. sales, employee happiness, productivity, engagement etc.) and then show how recognition programs can help achieve these. Make a fact-based case citing relevant stats to show recognition boosts KPIs.

For example, a 2013 Glassdoor survey revealed that 80% of employees said they were motivated to work harder if that hard work was recognized and appreciated. Yet, many employees feel undervalued because their extra efforts were neither recognized nor appreciated by their employers. More than one-third of employees told Cicero that recognition is the most important thing their organization could do to propel them toward producing better work.

The point is this: the facts are on your side when it comes to making your case for implementing or investing in a recognition program. Use them.

The CEO as a Program Champion

Once your CEO is bought in regarding the value of investing in a recognition program, it’s important to educate her on her role in championing the program and ensuring its effectiveness.

Start by bringing your CEO up to speed on the current state of recognition in your organization. For example, nearly 80% of senior leaders thought their employees were recognized

at least monthly. In contrast, only 40% of managers and 22% of employees thought they, or their peers, were recognized that frequently. There may be a similar gap in perception versus reality at your company.

Setting Your CEO Up for Recognition Success

You can facilitate your CEO’s involvement in your recognition program by giving her the information and structure she needs to act as program champion and communicate her dedication to creating a culture of recognition.

The CEO’s communications should be geared toward the entire organization — managers and your employee base at large. She can use various communication methods and outlets to communicate a recognition program importance, such as:

• An all-hands meeting to launch the program; pledge to make company-wide, ad-hoc recognition systemic.
• Email or Intranet posts expressing the CEO’s support of the rewards and recognition program, the importance of the goals to which the program is connected, and the value placed on regular, consistent recognition.

The CEO should ensure that she is:

• Walking the walk and talking the talk. CEOs must routinely dispense recognition to their direct reports and employees.
• Sharing progress. Company-wide updates from the CEO, complete with specific metrics showing the progress being made, help keep employees apprised of progress and motivated.

What Your CEO Should Communicate

Make sure your CEO clearly communicates:

• How recognition can help reinforce the company's mission and values
• How your recognition program is connected to the company’s KPIs and its success

When the entire organization sees how integral your CEO considers the recognition program is to achieving individual, team, and company-wide success, results will follow.

What Every Manager Needs to Know About Recognizing Employees

Even with executive support, your chances for maintaining a successful employee recognition program are greatly diminished if your managers don’t commit to its success by adopting it. They must understand recognition’s tie to the company’s mission and how it can positively impact the company’s success, and its KPIs and goals. Recognition can also enhance managers’ own relationships with their direct reports, as well as the company’s connection to these individuals.

Once bought in regarding the importance of recognition, managers need to know how and when to give it for maximum effect.

Manager Recognition Use Case Examples

Reinforce Core Values

Core values go to the center of your organization. A company’s leadership needs to carefully implement and support core value recognition. Ensuring that company core values are clear from the get-go and sample behaviors are in place to support them is imperative.

It’s critical that everyone, including managers, be fully engaged in implementing and supporting how core values are recognized at your company.

Core value recognition is too important to happen haphazardly. Managers, working with a recognition program administrator, can create a regular schedule or cadence for core values recognition, such as weekly or monthly.

The HR professional in charge of administering the program can email managers reminding them when it’s time to celebrate core values and suggest some examples of specific behaviors to reward and recognize.

When a manager recognizes an employee, the occasion should be listed as “Great job!” and in the accompanying note of praise call attention to which core value was demonstrated and how. For example, “Neil, you did a great job by helping out with the [XYZ] project team and jumping in to lend a hand. You displayed our core value of ‘foster cooperation’ by setting an example of partnering with the team.”

Finally, this ‘Great job!’ is GREAT NEWS! Share it company-wide where possible, or division-wide at the very least if more appropriate given your organizational structure.

Reinforce Key Behaviors

Acknowledging someone’s performance can help to encourage the same behavior in the future. Employees want to know what’s expected of them — which key behaviors the company and their manager want to reinforce. Those definitions, crafted by leadership and management, should be documented and they should identify examples of the desired behaviors, such as punctuality or friendliness towards customers. Managers should then clearly communicate the behavioral expectations to their team.

The recognition program manager or even CEO, depending on your organizational structure, should help keep the importance of recognition top-of-mind with managers by sending weekly or biweekly emails reminding them to recognize their team and peers.

Share the success story as broadly within the organization as makes sense.

Celebrate Milestones

Employee milestones, such as birthdays or work anniversaries, should be recognized and celebrated by managers. Birthdays and work anniversaries tend to be the standard milestones recognized, although your company may choose to do one or the other, or something else altogether.

A typical budget for these types of celebrations, enough to be meaningful for the recipient, is $20 to $50 per occasion. Cards or notes of appreciation should be personalized and can include notes of thanks for their contributions. Co-workers should be invited to join in the well-wishing as the impact of recognition is magnified when others chime in.

The breadth of sharing of these types of milestone events depends, largely, on your company’s culture. Team unit, department, or division, whatever works best for your organization.

Give Spot Bonuses

Empower managers to be able to reward employees in timely ways in keeping with recognition goals and that make sense for that business unit. For a sales organization, that might take the form of ‘SPIFF’ bonuses, hefty cash payouts for meeting certain goals. In other business units, the recognition may be better suited to smaller, micro-bonus programs. Either way, be sure to shout out “Great Job!” or “Congratulations!” while calling out the specific achievement whenever the milestone is reached. This is one instance where shouting it from the rooftops, or at least as publicly as possible, makes sense.

Support Wellness Initiatives

Wellness initiatives are well-suited for recognition programs. Fond Rewards, for example, can be centrally managed, allowing program administrators, who may or may not be a member of the HR team, to track milestones and initiate a prescribed response in recognition of the achievement in keeping with best practices. Managers may also be given a budget by program administrators to dispense to support company wellness initiatives and work with HR to determine when goals are hit.

Beware: Wellness initiatives require close attention be paid to health care privacy regulatory and statutory requirements. HR and the company needs to set guidelines around the information that will be collected and what is, or isn’t, shared publicly.

How to Get Managers on Board and Informed About Recognition Best Practices

As with any other company-wide initiative, you will need to get your managers trained on the ins and outs of how best to implement your employee recognition program. These managers are key to the program’s success, so be sure to give them the training and the tools they need to succeed.

Best Practices

Here are some employee recognition program best practices you can share with your management team:

Frequent

Studies, such as the one from human capital consultants Willis Towers Watson in 2012, show that employees crave some form of recognition every seven days. What’s more, more than half of employees who have been recognized for their achievements at work within the past six months report being happy at work.

Ideally, recognition is given in real-time whenever possible (that’s the preference among millennial employees).

Ad-hoc

Call it the ‘surprise effect’ or just something unexpected; if you can recognize good work when the person doing that work least expects it, your recognition is likely to be more effective. The opposite, a ‘milestone’ recognition, such as a work anniversary, is anticipated and therefore less likely to delight.

Specific

The more specific the behaviors your program recognizes the better your chances of fostering those behaviors across the entire workforce. Awarding ‘Employee of the Month’ doesn’t tell people what unique contributions that person made that deserved praise; turning a customer’s complaint into a compliment, for example, is something specific employees can emulate throughout the course of their employment.

If you recognize specific behaviors or performance (versus arbitrary achievements, such as birthdays or tenure), you not only reward the employee, but you reinforce the foundation of the company’s culture.

Meaningful

To be effective, recognition needs to be meaningful to the employee receiving it. Given the diversity in the modern workforce, one of the best ways to ensure the rewards and recognition being given are meaningful is to let the recipient choose their reward. Many companies use a reward program that lets employees choose from a variety of options, everything from restaurant gift cards to charitable contributions. Making it meaningful make its impact last. Personalizing awards with career details, for example, increases the value of recognition programs and makes its impact more lasting.

Worst Practices

There are two recognition strategies –— one relatively new, one a relic from the mid-20th Century — that savvy HR professionals now recognize are ineffective.

Tenure-Based Reward Systems

Introduced by Pepsi Cola in the 1940s, the concept of earning a gold watch for ‘putting in your time’ with the company has proven ineffective over time. Research by Forbes showed that even though 87 % of recognition focuses on tenure, tenure-based reward systems have “virtually no impact on organizational performance.”

Gamification

Newer forms of employee — gamification (leaderboards, achievement badges) — are considered ineffective by the majority of the today’s workforce according to research.

The notion of making a game out of recognizing good work amongst your employees seems like a good idea at first. It’s not. Nearly seven out of 10 employees say that gamifying recognition (leaderboards, badges, etc.) is ineffective at motivating positive behavior at work.

Encouraging Employees to Recognize Each Other

An engaged employee is a productive employee. And no business, no matter how good, can afford anything less than every employee being as productive as they can be. It stands to reason then, that having all employees engaged and committed to your recognition program is essential. The effects of employee recognition programs are cumulative; the whole is greater than the sum of its parts. The more your recognition program can be an embedded part of your company culture throughout the organization and adopted by every employee, the better your results will be.

What is social recognition, and how does it benefit employees?

Social recognition, the process of “providing employees with the tools to create meaningful relationships with each other,” has itself become recognized as one of the most important assets in your employee recognition arsenal.

Today’s social recognition programs are technology-driven with real social science behind them and offer a host of benefits. The almost ‘ground-up’ approach of a social recognition program —  peer-centric and organic — also builds trust with its transparency and boosts collaboration among the workforce more than a simple pay raise could do.

The best social recognition programs, according to the Society for Human Resource Management (SHRM), “... follow a two-pronged award strategy. They encourage employees to recognize their peers when they demonstrate a company value or achieve a corporate objective, and they make rewards more meaningful by giving recognized employees a choice in the awards they receive.”

Peer-to-peer (P2P) recognition is between coworkers and allows for immediate feedback between peers, something millennials especially value. According to Bersin, employees uniquely value feedback from their peers because peers know what each other are doing on a day-to-day basis, so their recognition is especially meaningful. The best peer-to-peer recognition programs have a social recognition component and vice versa.

Program Implementation and Communication

After the initial roll-out of employee recognition program, it’s important to keep the momentum going. Regular follow-up communications from the CEO, a division head, or HR can help ensure your employees know about the program and know that senior management cares about the program and their welfare and job satisfaction.

Those communications, formal, informal, or some of both, should emphasize the company’s KPIs and how, by simply participating in the program, employees can align with and support those goals.

Program Ambassadors

It’s not practical for top-line management, or often times even for front line management to be omnipresent. Appoint some program ambassadors to help encourage recognition!

Program ambassadors can not only be an extra set of on-the-job eyes to spot recognition-worthy behavior, they can also promote and champion the program in the small, yet powerful and intimate ways that managers sometimes cannot.

Go Mobile, Go Social

The world has gone mobile along with your workforce. The sooner you recognize the importance — and the power — of mobile communications as part of your employee recognition program strategy, the better. Use text messaging, for example, to remind employees about something worthwhile, such as a timely upcoming corporate goal or someone whose behavior exemplifies the core values you’re trying to promote. You can also promote your recognition program on your company’s enterprise social network, like Yammer or Slack, if applicable.

Track Program Success

Your employee recognition program, if properly designed and implemented, is going to have its own KPIs, the metrics you will use to gauge its success. Keep a watchful eye on these employee recognition program metrics to ensure your program achieves its goals:

Total Recognition

What percentage of your employees are recognized on a monthly basis? Additionally, you can break out your peer-to-peer program participation rates to track the percentage of employees who are giving recognition regularly.

Percentage of Usage

What percentage of managers are giving regular recognition? How many of your employees redeem or use the rewards you provided them?

Recognition Amount

Recognition amounts vary widely between companies and even within companies. Sales recognition programs, for example, might pay substantially higher sums, often in cash bonuses, compared to a program designed for IT support staff.

Per-Employee Spend

The key to establishing an effective per-employee spend on employee recognition is striking a balance between budget, achieving the desired results, and meaningful- ness to the employee. Although this number is also quite variable, consider setting aside $10 to $20 per employee, as a minimum, each for their birthday and their work anniversary as a good starting point.

Total Program Spend

It’s a small investment with a huge payoff. Companies spend between 1 percent and 2 percent of payroll on employee recognition. If your company can excel at employee recognition, you are 12 times more likely to generate strong business results than companies that do not master this critical human capital tool.

Measure Employee Happiness Using eNPS

Perhaps one of the most important metrics you, as an HR professional, and your organization as a whole should track is the company’s employee net promoter score (eNPS). Your recognition program may very well have an impact on your eNPS, so you should track it before program launch and then at regular intervals thereafter.

Although more nuanced, your company’s eNPS measures your employees’ happiness based largely on the answers to just a couple, or at most, a few, questions, such as:

• “On a scale of zero to 10, how likely is it you would recommend this company as a place to work?”
• “What is the primary reason you gave that score?”
• Or some variant of “How likely would you be to recommend this company’s products or services to a friend or colleague?”

The first question gives you a quantifiable metric you can use to gauge the mood of your labor force while the second gives you some insight into the underlying causes for those sentiments.

Armed with that information, divide your squad into promoters, passives, and detractors and work to drive the needle toward the perfect 10. Companies that do so successfully are likely to grow, on average, more than twice as fast as their competitors according to a 2014 Bain & Co. study.

The benefits of your employee recognition program will resonate throughout the organization. But, you won’t know and you won’t be able to measure your success and plan your future, unless you take the time to track and measure the various components of your program. Analyze your results thoroughly to continuously improve the program and the company.

Although you may consider the results magical, there’s no magic potion for taking your employee recognition program from good to great. It takes hard work, common sense, and smart, informed decisions. Be sure your employee recognition program includes these characteristics:

Keep It All About the KPIs

Link every form of recognition to company values and KPIs.

Make It a Priority for the CEO

Your CEO has to be a true believer and the program's number one champion for your employee recognition program to be spectacularly successful.

Everyone's Responsible and Everyone's Accountable

Great employee recognition programs find a synergy between individual recognition and team accomplishments. Everyone should contribute to building a culture of recognition across the enterprise.

Track Everything

Determine what you want to achieve, which metrics help you achieve them, and put your employee recognition program on a measurable path to success.

Have Fun

Maybe the best of all benefits from your employee recognition program: A happier company culture! Coming to work just got a whole lot better.

Conclusion: What Makes a Good Recognition Program Great?

Until you succeed in the workplace, you cannot succeed in the marketplace. Use this recognition program guide to learn how to get your employees properly recognized, motivated, engaged, and primed for success in today’s competitive business environment.