Measuring Employee Recognition Program ROI

Author: Luke Freeman, Purpose and Performance Group

Recognition for outstanding performance has been part of human society through history. Ancient Egyptians received the “Golden Fly of Valor” for bravery, and all modern militaries award medals and other honors for exemplary service. While these honors have been awarded for hundreds of years, many of us in contemporary organizations want to move beyond tradition to discover why people seem to be motivated by recognition, and build programs that will elevate the spirit of our team members and play a part in creating employee experiences that lead to sustained financial performance.

And we should. A 2017 study by the Intellective Group found that in 2015 US companies spent $90 billion on non-cash incentives. Leaders want to stretch that money as far as possible to mitigate the $536 billion annual cost of voluntary turnover in the US. Despite the investment, things aren’t trending in the right direction. The average tenure of employees decreased by 6 months between 2014 and 2016. To make matters more difficult for employers, team member expectations keep rising.

Younger generations see competitive pay and benefits as basic requirements, and view psychologically and emotionally fulfilling work experiences as hallmarks that set apart great companies from the rest.

For all these reasons, modern recognition programs have to be designed to reinforce profitable behaviors and build authentic culture that contributes to meaningful employee experiences. Use the following best practices to build and evaluate your recognition system.

Know Thyself

“A happy-fun-time” shouldn’t be the outcome you’re shooting for in your recognition program design. Go a step further and identify what strategic goals you’re trying to impact with your recognition investment. Here are a few areas you could consider supplementing with intentional recognition:

• Culture Definition: Reinforce your desired culture by clarifying your purpose and values, identifying behaviors that support each aspect of your culture, and formally recognizing those who live out the behaviors.
• Get Strategic: List the change initiatives your company is executing right now, and design recognition experiences for people who help support reaching major milestones.
• Do some Reporting: Who is getting recognized and for what? Pour over your data to help identify high performers and emerging leaders for development and leadership pipelines.
• Customize: What are the non-negotiable key performance indicators for your specific industry and company. Design recognition experiences to reward hitting performance goals or exemplifying characteristics needed in your unique context.
• Open the Black Box: Talk to key managers and get a list of superstar team members. Do some interviews, surveys, or whatever you have to do to identify what drives their performance. Design a recognition program that supports educating the rest of the company on the attributes you identify and recognize everyone who begins to behave like a superstar.

Get Smart

All the custom metrics above are critical, but you should also collect baseline data for the long haul. These domains are all good areas to measure annually so you can track the efficacy of your recognition program:

• Employee engagement (the Gallup Q12 and Utrecht Work Engagement Scale are a good pair)
• Employee Net Promoter Score
• Turnover
• Productivity
• Average tenure
• Industry-specific standard metrics (for example: waste in manufacturing, customer satisfaction in service)

Good Numbers

Just measuring random stuff isn’t enough. Be sure you’re not changing too much too fast. It’s best to collect data on recognition program effectiveness after each small adjustment. If your workforce is large enough you can try a few initiatives at once with different experiment groups of randomly selected business units, teams, or individuals. But always be sure to keep measuring baseline information with a control group. You can find a great primer on experiment design here.

Takeaways

All of this sound intimidating? Setting up a research experiment or digging into the behavioral foundations of your culture not your thing? Don’t worry! Being just a little more intentional can help you build the recognition program the people you work with deserve. Just remember that recognition experiences, whether they’re an online badge from a peer, or an award from an executive leader, should make people feel good about themselves, their relationship with the organization, point the way forward for everyone who watches the interaction, and clarify a positive vision of “the way we do things around here”. You can make progress by choosing just one of these recognition ROI non-negotiables:

• Collect an annual employee survey.
• Recognize people for living out your values.
• Record when you make changes to your recognition program so you can compare the timing with lag measures like financial or other performance data in the future.

Can’t Get Enough

Want more nerd-speak about the science of recognition? We’re just a few clicks away.

• Call to talk about your unique situation: most initial studies of your recognition program, employee engagement, or other people practices are relatively quick and inexpensive. 
• Let’s get social: LinkedIn, Twitter, Facebook, Instagram

Last but not least, it’s time to recognize you. Great job reading this article! Spending your time learning about measuring the ROI of recognition programs really shows your deep care for the people inside your organization, and that you’re committed to making a difference and designing really cool recognition experiences that will help the individuals and your company win! We can’t wait to see what you come up with.

Learn more about Purpose and Performance Group.