How To Measure the ROI of Employee Recognition: A Guide for HR Leaders and Executives

In today’s business world, employee recognition programs play an important role in top-performing organizations everywhere. This is especially true for companies that are renowned for their thriving workplace cultures.  

Many articles speak to the ROI of recognition in industry-wide terms. But when it comes to your organization, is a recognition program truly worth the investment? Do the benefits outweigh the costs? And if so, can the return on your recognition program investment be quantified?  

The answer to these questions is yes.  

The impact of employee recognition

First of all, the ROI of employee recognition is more than a dollar figure. Sure, money is part of the story, but the return on your recognition investment is a combination of many impact measures that combine to form a complete picture of employee recognition ROI.

When we deploy Culture Cloud recognition solutions, we work with clients to identify specific goals for recognition impact, establish benchmarks, and track measurable improvements as they occur. It’s an exciting journey. (See how we've worked with American Airlines, Capital One, Dow, and other clients to create custom employee recognition solutions.)

93% of O.C. Tanner clients see measurable employee recognition ROI in the first year. —Tech Validate

The unique challenges your organization faces will give you a starting point for determining which measures are most essential to track. We often see clients begin with a problem, such as improving employee engagement, strengthening company culture, or decreasing employee turnover.  

As employee recognition begins to drive improvement in your chosen area(s) of focus, you can expand your impact wish list and point your recognition strategy at other significant business results.

Here are three areas of impact that contribute to employee recognition ROI:

1. Employee experience impact ‍
2. Company culture impact ‍
3. Business impact

Read on to discover how carefully measuring each type of impact can provide a complete picture of the return on your recognition investment.

Recognition and the employee experience

The overall employee experience includes every workplace micro-experience: all of the interactions with peers, mentoring from leaders, opportunities for growth, challenging assignments, and proud accomplishments that define life at work.  

When it comes to a thriving company culture built on the foundation of a healthy employee experience, these micro-experiences really matter. So why not make these experiences as positive as possible?

A great recognition solution can create hundreds (or even thousands) of positive employee experiences daily across your organization. These experiences reinforce employees’ decision to work where they work, help them connect with their team and with company values, and motivate them to give their all to the organization’s success.

When asked, “what is the most important thing your company could do to cause you to produce great work,” the number one employee response was “recognize me.”

How to measure the impact of recognition on the employee experience

To really understand the impact of recognition on your overall employee experience, start by measuring the recognition experience itself:  

• How many employees have logged in and begun to use your program?
• Once they begin, do they stay involved and active as recognizers?
• Does program participation increase over time? Or does it peak and then fall off?
• How satisfied are employees with the whole recognition experience, start to finish? Does it truly make them feel appreciated?
• Do recognition tools integrate well with daily workflow and other technologies? Is it easily accessible?
• Is your recognition program equitable and fair? Does it include everyone?

The best way to find answers to these questions is to combine systems data with mixed-method research. Be sure to keep tabs on:

• Program adoption
• Program activity and engagement
• Program satisfaction

O.C. Tanner’s Culture Cloud platform comes with advanced analytics that allow you to track recognition participation in real time.  

Impact dashboards not only show you the recognition basics—who gave, who received, what award level, etc.—they also allow you to see usage in greater detail by tracking unique givers, creating time period comparisons, examining recognition trends, breaking down results by business unit, measuring satisfaction, and comparing your results against other companies on the Culture Cloud platform.

With your recognition program stats in hand, you can then layer them into your employee experience reports. Looking at any given time period, ask yourself:

• How does recognition activity correlate to engagement scores on our internal surveys?
• Have we noticed a decrease in turnover since implementing our integrated recognition program?  
• Do our employees report higher rates of fulfillment, satisfaction, and belonging now that we’ve built out our recognition program?

Want to know what kind of employee experience results you can expect from a fully integrated recognition program? Take a look at our Global Culture Report to access all the data and insights.

Employee recognition and company culture

Most leaders agree that great products, delivery, and service come from purpose-driven, happy, motivated people. The key to keeping your teams engaged and happy at work is your company culture.

As we’ve mentioned, employee recognition is one of the most powerful tools you can use to create a thriving workplace culture. But how can you measure the impact of recognition on culture? It starts with understanding what a thriving culture is.

Workplace culture is such a broad topic with so many known influences. It’s easy to find corporate culture models that cite dozens of complex contributing factors.  

To make understanding culture easier, the O.C. Tanner Institute analyzed dozens of existing models and performed rigorous global studies to quantify what the ideal workplace culture looks like from employees’ point of view.  

The result is a clear and simple model of six things employees look for in a great place to work. These six aspects of company culture are grounded in the employee experience and are the fundamental building blocks of a thriving culture.  

Research shows companies with high performing cultures excel in all six of these areas:

• Purpose: Feeling connected to your organization’s reason for being
• Opportunity: Providing opportunities to grow and develop
• Success: Innovating, doing meaningful work, playing on a winning team
• Appreciation: Feeling valued and appreciated for individual contributions ‍
• Wellbeing: Physical, social, emotional, and financial wellbeing ‍
• Leadership: Leaders who support, mentor, and help employees find joy in accomplishment

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How to measure the impact of recognition on company culture

Being able to see the culture impact of employee recognition in your own organization is where the real fun begins.  

To do this, you need to begin measuring employee perceptions of the six elements of a thriving workplace—to set benchmarks and measure improvement as your recognition experience improves.  

Understanding your current company culture requires a combination of quantitative research (census, pulse, integrated triggers) and qualitative research (interviews, focus groups, paired conversations). If you're a larger enterprise, O.C. Tanner’s measurement team can help you conduct culture impact studies based on the six elements of a thriving culture.

Another view comes from a feature of our Culture Cloud employee recognition platform called the Culture Impact Dashboard. The Culture Impact Dashboard shows the impact of recognition on employee perceptions of the six elements: purpose, opportunity, success, and so on.

First, pulse surveys ask employees questions like:

• Is this a great place to work?
• Do you enjoy working with your team?
• Does your leader advocate for you?

Then the system compares current and past results to explore the correlation between people receiving (and not receiving) recognition over time. It can even show you how your organization stacks up against other companies on the Culture Cloud platform.  

By asking whether employees would “recommend your company as a great place to work to a friend,” the Culture Impact Dashboard also provides your organization’s Net Promoter Score (or NPS). This is a high-level indicator of whether employees see your culture as a positive, healthy, and thriving one.

When you combine system data with qualitative and quantitative research, you can get a clear picture of culture impact—the second pillar of recognition program ROI.

Measuring the business impact of employee recognition

In some ways, the business impact of employee recognition is the simplest to measure. After all, you can find data on employee satisfaction, engagement, retention, absenteeism, productivity and more in your HRIS, LMS, and CRM systems.  

O.C. Tanner can help you blend that data with your recognition platform’s data to track the impact of recognition on a variety of business results over time. Then you will have a complete picture of the ROI of employee recognition in your organization.  

Organizations that practice recognition effectively are 12x more likely to have strong business results including increases in shareholder return.

The financial benefits of employee recognition

Symptoms of culture problems vary from company to company.  

Some organizations struggle with burnout, others with attrition. Some have light problems in those areas but have trouble motivating employees, inspiring innovation, increasing sales, creating a great customer experience, etc.  

The great news is all of these things can be measured and cross-tabbed with employee recognition program data to reveal the true impact of effective recognition.

Consider for a moment the high cost of turnover. According to Gallup, voluntary turnover (people choosing to leave) costs U.S. businesses $1 trillion dollars per year.  

And those are just the U.S. numbers. Scale that cost out to the rest of the planet, and you can see a worldwide business cost drain. One that employee recognition can help you mitigate.

79% of people who quit cite “lack of appreciation” as their reason for leaving.
Employees are five times more likely to stay when regularly acknowledged for good work.
An effective employee recognition program increases employee tenure by two full years.

If you do the math on your organization’s turnover-and-replacement costs (number of employees who have quit multiplied by one-half of your average pay per employee for a conservative estimate), you can know your approximate turnover costs per year. Then you can track the impact of employee recognition on retention and calculate your dollars saved.  

Many O.C. Tanner customers have done exactly that.

For example, a client with tens of thousands of employees recently discovered that the money they saved through improved retention not only paid for their recognition program but provided a financial rate of return better than if they had invested the money elsewhere.

Integrating an employee recognition platform

Launching any new HR technology or initiative comes with challenges. Research indicates that eight out of ten organizations struggle with HR tech adoption challenges.  

95% of clients say O.C. Tanner’s recognition program's ease of use is better than competitors.  

To overcome these challenges, ensure your employee recognition platform:  

1. Is intuitive and user-friendly ‍
2. Integrates with technology your employees already have
3. And provides meaningful awards for employees

Minimizing barriers to adoption is key to a successful employee recognition platform. Ensure you aren’t making these common employee recognition mistakes when adding or refreshing an employee recognition software.  

Employee recognition ROI in action

GE Appliances

Situation

GE Appliances, a Haier company, is a home appliance company with over 12,000 employees.

A few years ago, the company’s acquisition by Haier Corporation gave leadership the opportunity to replace a payroll/cash-based system with more meaningful recognition practices.  

The goal was to use recognition to shape a more employee-focused culture that “makes life better” for employees and helps the business thrive.

Solution

A cross-functional team of HR, IT, communications, marketing, and other GE teams partnered with O.C. Tanner to create a meaningful recognition solution.  

They met with executives and employee “cultural ambassadors” to gather input for shaping a new and improved recognition solution.  

The result was Recognize YOU, a comprehensive program that gives everyone in the company a chance to recognize and celebrate teamwork and accomplishments.

Results

Recognize YOU was an instant hit with employees and it made a measurable impact on culture.  

Engagement survey scores showed the risk of attrition decreased by 58% when employees received any type of recognition in the prior month.  

Recognition increased employee perceptions of opportunity for growth and development by 108% and positive perceptions of leaders by 180%.  

These stats and others like them show the powerful impact recognition can have on company culture.

“To be able to correlate engagement survey scores with recognition is one of the most compelling things we’ve seen.”
—Natalie Snyder, Senior Director, Compensation and Benefits

Onity

Situation

Onity is one of the largest mortgage and lending servicing companies in America, with over 5,500 employees in the US, India, and the Philippines.  

A few years ago, a global engagement survey revealed that Onity employees wanted to see improvements in employee recognition. The experience varied across departments and locations and there was no direct visibility into who was being recognized, with what, or how.

Solution

Onity partnered with O.C. Tanner to design and launch a consistent, visible, global employee recognition program aligned with its core values.  

Senior leaders were involved in the design and launch of the program and even helped name it Applause.  

The program included technology and analytics for giving eCards, spot awards, customer service awards, performance awards and special mention awards worldwide.

Results

97% of employees have given or received recognition through the Applause program since its launch.  

Surveys conducted the year after launch showed a considerable jump in engagement scores related to rewards and recognition.  

Quarterly pulse surveys also show positive feedback from employees and leaders alike.    

“Today we can proudly say the Applause program is part of the DNA of Onity.”
—Assistant Manager, Human Resources

Ohio Living

Situation

Ohio Living is one of America’s largest not-for-profit multi-site senior living organizations.  

The organization’s 3000+ employees promote quality of life and wellness of body, mind and spirit for thousands of residents across 12 communities.  

Ohio Living set out to revolutionize its workplace culture by implementing a world-class employee recognition program focused on happier employees to create healthier patients.

Solution

Knowing that their people truly want to make a difference in the lives of the seniors and other customers they serve, Ohio Living partnered with O.C. Tanner to create an employee recognition solution that would connect employees’ intrinsic motivation with Ohio Living’s mission and purpose.  

The program provides tools for celebrating day-to-day accomplishments and major career contributions.

Results

Ohio Living’s return on investment was extraordinary. The organization’s employee recognition practices have been quantifiably linked to:

• Higher employee retention across all locations
• Lower patient infection rates
• Lower ER visits among patients
• Lower hospital readmission rates
• More 5-star ratings than ever before
• Ranking as both a great place to work and one of the top healthcare companies in Ohio.  

“When recognition is done right, it helps success come more easily. We currently have the highest quality outcomes in the history of our organization.”
—Dana Ullom-Vucelich, Chief Human Resource and Ethics Officer

Looking to measure your recognition ROI? We can help.

Our Culture Cloud solutions come with built-in measurement tools that help organizations of any size translate recognition data into impact and ROI.  

For large or global enterprises with more complex data sets, O.C. Tanner’s Culture Cloud measurement team is at the ready to help you combine systems data with mixed method, quantitative and qualitative research to tell your recognition ROI story.

We have nearly 100 years of experience helping some of the world’s biggest enterprises measure the impact of employee recognition on employee experience, culture, and business results.  

Our proven approach can help you discover the truth about your employee recognition ROI so you can adjust, improve, and achieve returns on your recognition investment.

To begin measuring the impact of recognition on your business goals, contact us here, or call your O.C. Tanner representative.