Employee recognition creates better workplace performance: Here’s detailed proof

When you introduce employee recognition activities in your work team, business unit, or in the whole organization, you create the opportunity for major positive results, including measurable improvements in employee engagement and organizational performance. This is not just hopeful thinking about a ‘feel good’ subject – the detailed data outlined in this article underscores the fact that employee recognition creates better workplace performance.

Employee recognition creates better workplace performance

We all need to feel appreciated. Praise from others is a powerful source of our motivation. Such recognition supplements our own internal motivation. In the workplace, there are many low-cost (even no-cost) ways to recognize the good work of others at all levels. The benefits at all levels can be huge, as discussed below.

What is employee recognition?

Employee recognition is the timely, informal or formal acknowledgement of a person’s or team’s behavior, effort or business result that supports the organization’s goals and values, and which has clearly been beyond normal expectations.

The act of recognition – whether you call it recognition, praise, appreciation, commendation, a compliment, thanks, gratitude, respect, acknowledgement or feedback – amounts to a positive response to an employee’s job well done or for their good service.

There are 3 main areas of employee recognition for individuals:

1. Celebrate careers. Recognition for “Years of Service” at an organization. For example, award items and symbolic pieces given to employees to celebrate their anniversary of employment after 1, 3, 5, 10, 15, 20, 25 years, etc.
2. Reward results. Recognition for “Above and Beyond Performance” for wins and tasks achieved. This is typically more formal and frequently accompanied by an award item.
3. Encourage good work. Recognition for “Achievements and Ongoing Effort”. This is usually informal and comes as a written note, an email, or a sincere face-to-face “thank you.”

You can achieve wonders with implementing employee recognition in your work area and your whole organization. Some industry experts say recognition is a manager’s most powerful tool. It is actually a powerful option for anyone to implement with their peers at any time.

Research studies regularly point to the major improvements gained from recognition. Employee recognition is essential for satisfied and productive workers. Implemented sensibly and with genuine intentions, employee recognition programs provide enormous benefits for employers and workers alike. And due recognition is not difficult to put into action.

During my career as a manager and consultant, I have been privileged to establish employee recognition programs in various organizations. A few years ago, I found it particularly heart-warming when a linesman at the power utility where I was corporate affairs manager, said in one of the recognition focus groups I was running, that it was the first time in 20 years anyone in the organization had ever asked his opinion on anything! As an employee myself, I have seen poor recognition and its damaging repercussions close up in many workplaces. From observing these situations, I believe employee recognition is one of the most valuable – and unfortunately neglected – workplace activities possible.

Many managers avoid giving praise

Like many other ‘soft’ areas like communication and HR, employee recognition too-often doesn’t happen or is done badly. However, not giving recognition comes at a cost – reduced workplace performance.

We can all understand that giving negative feedback is usually awkward: a 2017 survey reported in an article in Harvard Business Review online, found that 44% of 7,631 managers said giving negative feedback was stressful or difficult, and 21% admitted they avoid giving negative feedback at all. But astonishingly, 37% of managers admitted they avoid giving positive feedback! Authors of the article said:

“Leaders obviously carry some incorrect beliefs about the value and benefits of different forms of feedback. They vastly underestimate the power and necessity of positive reinforcement. Conversely, they greatly overestimate the value and benefit of negative or corrective feedback…Giving only negative feedback diminishes a leader’s effectiveness in the eyes of others and does not have the effect they believe it has.”

Worldwide research proves employee recognition creates better workplace performance

Effective in dealing with top workforce challenges

(You can quote the findings of all these research studies to senior management in making the business case for introducing employee recognition into your organization.)

Good recognition is the most versatile and influential tool you can use to deal with the top organization-wide workforce challenges, which in a 2018 global survey were rated as, in order of importance:

1. Employee retention/turnover
2. Recruitment
3. Culture management
4. Succession planning
5. Employee engagement.

Greater employee engagement leads to better results

Engagement is one of the most important business concepts because it creates a win:win working environment for everyone. Greater engagement leads directly to improved productivity, customer loyalty, sales, and profits at the business unit and organizational level.

Gallup defines employee engagement as “the involvement and enthusiasm of employees in their work and workplace.” And Aon defines employee engagement as “the level of an employee’s psychological investment in their organization.”

Gallup has been tracking employee engagement for 20 years because it believes engagement is the key factor influencing employee – and therefore organizational – performance. Gallup says in its 2020 report, Employee Engagement and Performance: Latest Insights from the World’s Largest Study: “Developing highly engaged teams results in fewer negative outcomes, more positive outcomes and greater success for your organization.”

The above report showed that compared with business units in the bottom quartile of engagement, those in the top quartile accomplish these improvements:

Greater organizational success

• 23% more profitability
• 66% greater wellbeing (net thriving employees)
• 13% more organizational citizenship (participation)

More positive outcomes

• 10% more customer loyalty/engagement
• 18% more productivity (sales)
• 14% more productivity (production records and evaluations)

Fewer negative outcomes

• 81% less absenteeism
• 18% less employee turnover in high-turnover organizations
• 43% less employee turnover in low-turnover organizations
• 28% less employee theft
• 64% fewer safety incidents (accidents)
• 58% fewer patient safety incidents (mortality and falls)
• 41% fewer defects.

Companies with engaged workforces have higher earnings per share (EPS). For instance, public companies that received the Gallup Great Workplace Award experienced 115% EPS growth compared with the 27% EPS growth of competitors from 2011-2015, according to Gallup.

This is supported by the Aon Hewitt Trends in Employee Engagement survey of 2011, which found that:

“Organizations with engagement levels of 65% or greater outperformed the total stock market index and posted total shareholder returns that were 22% higher than average; companies with engagement levels of 45% or less had a total shareholder return that was 28% lower than the average return in 2010.”

Recognition is the most important factor in employee engagement

Employee engagement defined

International management consultancy, Gallup Inc. stated that “Employee engagement reflects the involvement and enthusiasm of employees in their work and workplace” in its State of the Global Workplace 2021 Report.

In its 2018 Trends in global employee engagement report, AON defines employee engagement as “the level of an employee’s psychological investment in their organization.” Crucially, employee recognition creates better workplace performance as the key driver of engagement as shown in the image. Although the category is “Rewards & Recognition,” AON says, “this year ‘recognition for contributions (beyond pay and benefits)’ was the key factor in putting “Rewards & Recognition” to the top, with ‘fair pay’ providing a support role.

Image, right: AON 2018 Trends in Global Employee Engagement report.

Proof

“Business units with high employee engagement achieve higher productivity, higher customer loyalty/engagement, better safety, lower turnover and higher profitability, among other positive business outcomes, according to the Gallup State of the Global Workplace 2021 Report relating to more than 100,000 business units.

A key motivator, employee recognition creates better workplace performance

The Boston Consulting Group conducted an online global study of 200,000 employees from 189 countries in 2014, finding that “Globally, the most important single job element for all people is appreciation for their work.” Appreciation was the top factor for happiness on the job, ahead of 25 other factors, and was highlighted in the findings as an indication of “the growing importance of ‘softer’ factors.”

A Cicero study in 2015 found that employees self-reported that their own drivers of great work were:

Source: Cicero 2015 research: Employee performance: What causes great work?

Employee recognition creates better workplace performance – more than financial rewards

Employee recognition is a primary motivator. Many studies show that what workers want from their jobs is not more benefits or money – it is more recognition for work well done. Research into the impact of pay has shown that employees often say pay is very important, but pay rarely correlates strongly with overall satisfaction (only if the pay level is perceived as being really bad). Where pay is low, it is usually just one component of an overall unsatisfactory employer attitude and behavior.

Due to the pandemic, the path ahead is uncertain for many people. The unsettled work environment is volatile as a result. Leaders need to take more account of factors like inclusion and equity so they create an environment in which employees have more of a voice and feel more accepted and valued. This will be more of a factor in future employee recognition. In a similar way, employee wellbeing has risen to become a major workplace factor for employees. Management need to increase the physical and mental support of their workforce.

The table below shows the top 8 “focus areas” revealed in a 2020 Trends in Global Employee Engagement report by Kincentric, a subsidiary of the Spencer Stuart, a global executive search and leadership consulting firm, based on a survey of 850 global HR professionals. Due to the workplace uncertainties caused by the pandemic, factors other than recognition have become more prominent as priorities, such “Talent & Staffing” and “Senior Leadership.”

Above image: Kincentric 2020 Trends in Global Employee Engagement report.

The change is already underway! My physiotherapist, a senior professional, told me recently that he had just been recruited by one of the biggest mining companies in the world to manage its employee wellness activities. It wasn’t a role from left field – he had worked in the sector previously, so he knows what the working life involves for miners. His pay would be huge in that role.

Creating more meaningful work

A 2018 BetterUp study, reported in the Harvard Business Review, found that more than 90% of the 2,285 US professionals surveyed were willing to trade a percentage of their lifetime earnings for greater meaning at work. More meaningful work involves creating a sense of achievement in work activities, and more acknowledgement by peers and managers of work well done. Suitable employee recognition is essential to a sense of meaningful work.

“It is more important than ever that employees find meaning in their work. Traditional rewards systems and career ladders are disappearing, so workers need new reasons to believe in their companies.” These are the conclusions drawn in a 2018 McKinsey article by Prof. Dan Cable and Associate Prof. Freek Vermeulen, who go on to say:

“…By now, it is well understood that people who believe their job has meaning and a broader purpose are more likely to work harder, take on challenging or unpopular tasks, and collaborate effectively. Research repeatedly shows that people deliver their best effort and ideas when they feel they are part of something larger than the pursuit of a paycheck.”

What is the role of employee recognition in making work more meaningful? Cable and Vermeulen note: “Put simply, work becomes more meaningful when people know that their actions are noticed and appreciated…Good leaders make constructive praise a regular part of their management routine.” They suggest: “Periodically make a note of one good thing done by each team member, thank them for it, and describe why it made things better.

In an influential article in the Harvard Business Review in 2011, Prof. Teresa Amabile and researcher Steven J. Kramer also found that recognition is a key factor in employee motivation and productivity, ie employee recognition creates better workplace performance. The researchers found that what motivates people on a day-to-day basis is the sense that they are making progress. When managers recognize people for the work they do, it signals they are important to the organization. Recognition feedback validates the employees’ sense of worth and achievement.

The BetterUp study in 2018 supported the findings of Amabile and Kramer’s research. Only 1 in 20 people rated their current jobs as providing the most meaningful work they could imagine having, and on average, the respondents said they would be willing to forego 23% of their entire future lifetime earnings in order to have a job that was always meaningful.

Employees with very meaningful work spend an average of one additional hour per week working, and take two fewer days of paid leave per year. Based on established job satisfaction-to-productivity ratios, highly meaningful work will generate an extra $9,000 per worker annually, according to the BetterUp researchers, who also noted:

Explicitly sharing experiences of meaningful work is an important form of social support. Organizations can encourage managers to talk with their direct reports about what aspects of work they find meaningful, and get managers to share their perspectives with employees, too. Managers can also build in time during team meetings to clearly articulate the connection between current projects and the company’s overall purpose. Employees can more easily see how their work is meaningful when team project goals tie into a company’s larger vision.

Praise from peers and managers is a key component of the meaningful workplace, for instance praise when goals are accomplished and projects completed. This type of engagement and employee recognition creates better workplace performance.

Better retention

During conditions of low unemployment, workers will not tolerate a disappointing workplace for the sake of job security. As a result, nearly half (47%) of 738 HR professionals cited employee retention/turnover as their top workforce management challenge in an SHRM survey in 2018. In the survey, two-thirds of HR professionals agreed that employee recognition helps with retention.

Industry figures show that the average overall turnover rate in 2016 was 18%, of which voluntary turnover was 13%. The true cost of voluntary turnover not only involves direct costs, like cost per hire and first-year orientation and training, but also includes the interim reduction in labor costs and lost productivity costs. In total, organizations lose around $100,000 for every employee who leaves. And this doesn’t include other indirect costs such as lost client relationships, institutional knowledge, and previous training for the employee leaving.

Employees who have been recognized with service awards tend to stay longer with their employer. For instance, a survey conducted for OC Tanner Institute in 2012 found such employees stay around 40% longer with their employer. This leads to significant cost savings and productivity benefits to the employer and more stability and satisfaction to the employee.

The BetterUp 2018 study, discussed above, concluded that:

“Additional organizational value comes in the form of retained talent. Employees who find work highly meaningful are 69% less likely to plan on quitting their jobs within the next 6 months, and have job tenures that are 7.4 months longer on average than employees who find work lacking in meaning. Translating that into bottom line results, enterprise companies are estimated to save an average of $6.43 million in annual turnover-related costs for every 10,000 workers, when all employees feel their work is highly meaningful.”

Offsetting workplace loneliness

A 2017 cover story in the Harvard Business Review (“Work and the loneliness epidemic”) and other articles elsewhere in the management literature highlight the feelings of loneliness and isolation experienced by many employees around the world. Loneliness affects employee health and well-being, which lead to significant workplace costs. Employee recognition is one way that helps workers improve relationships with their peers.

Research shows that loneliness has the same effect as 15 cigarettes a day in terms of health care outcomes and health care costs. Lonelier workers perform more poorly, quit more often, and feel less satisfied with their jobs — costing employers upwards of £2.5 billion ($3.5 billion US) in the UK alone. Former US Surgeon General Vivek Murthy calls loneliness “the most common pathology”, with nearly 40% of Americans reporting being lonely.

Positive social support makes a big difference to lonely workers. For instance, research had found that opening a conversation with a small offering of peer-based praise can be sufficient to forge a lasting social bond. Over time, these prosocial nudges can steer a workplace in the right direction, creating a healthier, more supportive culture.

Positive suggestions to improve your work and personal life

What should we do to improve the situation? We can’t eliminate the negativity bias, but we can certainly reduce it. The brain has the ability to change. Brain scans show we can rewire our brains (a process known as neuroplasticity) by routinely using cognitive behavioural therapy (CBT) exercises. CBT helps you to put your thoughts on trial, to recognize that negative thoughts drive negative feelings, and that these negative thoughts often have little grounding in reality.

In the office and working from home

New York Times writer Alina Tugend wrote in a 2012 article that Professor Teresa Amabile, (pictured) co-author of the popular book, The Progress Principle: Using Small Wins to Ignite Joy, Engagement and Creativity at Work, found the negative effect of a setback at work on happiness was more than twice as strong as the positive effect of an event that signaled progress. And the power of a setback to increase frustration is over three times as strong as the power of progress to decrease frustration. “This applies even to small events,” she said. If managers or bosses know this, they should be acutely aware of the negative impact they have when they fail to recognize the importance to workers of:

• making progress on meaningful work
• criticism
• taking credit for their employees’ work
• passing on negative information from on top without filtering
• and not listening when employees try to express grievances.

The answer, then, is not to heap meaningless praise on our employees or, for that matter, our children or friends, but to criticize constructively — and sparingly.

My article, “A useful ratio for giving praise,” gives further insights on the benefits from consciously offering praise at work and home.

Another thought for a happier home front

Also, employees tend to be happier both at home and at work when they receive recognition in the workplace. In a 2014 Globoforce workforce mood tracker survey, 73% of employees reported that being recognized increased their happiness at work and 35% said being recognized increased their happiness at home.

Use this data to make your case

The data featured in this article equips you to make a really strong business case to introduce employee recognition in your area, or even to top management to support an organizational employee recognition program if you don’t already run such programs. If your organization doesn’t run all three broad types of recognition (years of service, workplace achievements, and notable efforts), you can seek to persuade management to run all three – because of better results when you do. In addition, it is important to regularly reinforce to senior management the compelling data highlighted in this article so they continue to support the value of implementing employee recognition activities in your organization.

Unintended outcomes

As Gallup consultants observe: “Great managers know that they can never give too much recognition as long as it’s honest and deserved.” And employee recognition has many overwhelmingly positive attributes. Nevertheless, some care needs to be taken about unexpected consequences. Some negative factors may possibly be experienced through the variability of human nature. It is possible that negative impacts like unfairness, favoritism, and bias in giving due recognition to employees may be experienced to some extent in some work environments. These effects can lead to poor performance and reduced employee productivity.

Attitudes from some employees about recognition could be inappropriate because they may be actively seeking to be praised and appreciated, and so they may be working too hard to get their ‘pat on the back’ compared with peers and their normal work rate. Other employees who don’t receive recognition may feel neglected. These inequalities may damage relationships within the workplace.

Another possibility is gender inequality in the workplace. Women being less recognized than men may create feelings of neglect and mistreatment, which could lead to reduced productivity in female employees, lower job satisfaction and therefore lower job performance. All these possibilities should be understood by people giving recognition, and these issues should be raised transparently in regular review-discussions about recognition management with staff.

What you can do from here

You can read more about top ways to introduce employee recognition activities in your work area or whole organization in my helpful, detailed Kindle book, Employee Recognition: The secret to great team performance.