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 like this one 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. This article will show you how.
Employee recognition and company culture
As Richard Branson once famously expressed, “Take care of your employees and they will take care of your business.” While widely accepted, this axiom is much harder to achieve than it sounds. Caring for employees requires a world-class corporate culture. And the elements of culture are vast, encompassing why, when, where and how we work.
This leads to an essential question that lies at the heart of Culture by Design: If humans require a great culture to do their best—a fertile environment that motivates and inspires them to achieve—where can leaders begin to create such a culture? Are the things that affect culture all created equal? If not, which ones matter most?
The answers to those questions all point to one thing: employee recognition. Research indicates that no other investment can deliver as positive of an impact on workplace culture—as simply and cost-effectively—as employee recognition.1 That makes the ROI of employee recognition significant indeed. Recognition provides a substantial lift to everything from attracting top talent to increasing motivation, from improving productivity to fostering innovation, from encouraging great work to improving business results.
93% of O.C. Tanner clients see measurable ROI in the first year.2
But how can you connect the dots? How do you make sure the employee recognition program you have is generating the ROI you deserve? And how can you work to constantly improve the ROI of recognition over time? It begins with knowing how to measure the ROI of recognition.
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 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.)
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.
In the course of our work, we have identified three areas of impact that contribute to recognition ROI:
- Experience impact
- Culture impact
- 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 employee experience
Corporate culture is practically inseparable from everyday employee experiences. We’re not talking about the oft-cited employee lifecycle (attraction, recruitment, onboarding, development, etc.). That’s the corporate point-of-view. We’re talking about the much more important, but less understood, employees’ point-of-view. This vantage point includes every small daily 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, those are the things that really matter.3
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.”4
Appreciating and being appreciated for great work are essentials of a thriving corporate culture. So if you lack an effective recognition program to begin with, if participation in your solution is low, or if appreciation isn’t woven into the fabric of your culture, there’s work to be done.
In great organizations, appreciating out loud and often is second nature, like breathing. A great recognition solution should create hundreds (or even thousands) of positive employee experiences daily. 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.
Integrating an employee recognition platform
Launching any new HR technology or initiative comes with challenges. But studies show that employee recognition programs need to be supported, nurtured, and provide quality experiences to succeed. Research indicates that eight out of ten organizations struggle with HR tech adoption challenges.5
98% of clients say O.C. Tanner’s recognition program ease of use is better than competitors.2
How to measure the employee recognition experience
Recognition ROI begins with measuring the recognition experience. To see how appreciation is flowing in your organization, you need to monitor program metrics, beginning with the basics.
- 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 Recognition 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.
This system data, when combined with your own mixed-method research, provides a clear picture of experience impact—the first pillar of recognition ROI.
Experience ROI in action: Ocwen Financial
Ocwen Financial Corporation is one of the largest mortgage and lending servicing companies in America, with over 5,500 employees in the US, India, and the Philippines. In 2015, a global engagement survey revealed that Ocwen employees wanted to see improvements in recognition. The experience varied across departments and locations and there was no direct visibility into who was being recognized, with what, or how.
Ocwen 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.
97% of employees have given or received recognition through the Applause program. 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 Ocwen.” —Assistant Manager, Human Resources
The impact of employee recognition on company culture
Most leaders agree that great products, delivery, and service come from purpose-driven, happy, motivated people—the kind you get when your corporate culture is a breeding ground for success. And 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.
Precisely because 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:3
- 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)
How to measure culture impact in your organization
Being able to see culture impact 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 Culture Cloud 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.
Culture ROI in action: GE Appliances
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.
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.
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
How employee recognition impacts business goals
Once organizations begin to understand the true cost/benefit relationship of effective employee recognition, its value is difficult to ignore. The lift recognition provides to the everyday employee experience and culture tells a strong story that includes improved perceptions of leaders, lower turnover, greater innovation, and elevated Net Promoter Scores. Those are pretty significant outcomes from a relatively small average investment of about $200 per employee per year.
But translating all of that to some sort of bottom-line cost savings, customer benefit, or increased profitability is the proof of ROI many leaders seek. Fortunately, in spite of all the other things that influence financial success, it is possible to connect the dots between your employee recognition costs and business results. Here’s how:
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 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.7 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 recognition can help you mitigate.
79% of people who quit cite “lack of appreciation” as their reason for leaving8
Employees are five times more likely to stay when regularly acknowledged for good work8
An effective years-of-service award program alone increases employee tenure by two full years9
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. While the precise details involve private organizational and employee data, the stories are meaningful. 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.
Measuring the business impact of employee recognition
In some ways business impact 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 systems 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 twelve times more likely to have strong business results including increases in shareholder return.1
Culture ROI in action: Ohio Living
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 workplace culture by implementing a world-class employee recognition program focused on healthier patients and happier employees.
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.
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, and being ranked 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 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 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.
- 2019 Global Culture Report, O.C. Tanner
- TechValidate 2020
- 2020 Global Culture Report, O.C. Tanner
- 2018 Global Culture Report, O.C. Tanner
- PwC's HR Technology Survey 2020
- 2019 Global Culture Report, O.C. Tanner
- O.C. Tanner Whitepaper “5 HR Challenges. 5 Ways Recognition Can Help.”
- O.C. Tanner Whitepaper “The Business Case For Recognition”
- 2019 Global Culture Report, O.C. Tanner