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Here’s detailed proof that employee recognition creates better workplace performance

01 Jun, 2020 Employee engagement, experience, satisfaction, Employee recognition

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 proof is in the detailed data outlined in this article.

Benefits of good employee recognition

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 are 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 the benefits

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 performance

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 engaged employees as those who are involved in, enthusiastic about and committed to 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 15 years because it believes engagement is the key factor influencing employee – and therefore organizational – performance. Gallup says in its 2017 State of the American Workforce report:

“Simply put, engaged employees produce better business outcomes than other employees – across industry, company-size and nationality, and in good economic times and bad.”

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

  • 41% lower absenteeism
  • 24% lower turnover of employees in high-turnover organizations
  • 59% lower turnover of employees in low-turnover organizations
  • 28% less shrinkage (employee theft)
  • 70% fewer employee safety incidents
  • 40% few quality incidents (defects)
  • 17% higher productivity
  • 20% higher sales
  • 21% higher profitability.

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

Crucially, social recognition is one of the key drivers of engagement.

Proof

  1. The Aon 2018 Trends in Global Employee Engagement survey, conducted in 1,000 companies employing 8 million people globally, showed rewards and recognition as “the strongest driver of engagement,” and that recognition for contributions (apart from pay and benefits) was the key factor in the rewards and recognition component.

The O.C. Tanner and Aon Hewitt Study on Recognition Trends in 2016 found:

  1. The O.C. Tanner and Aon Hewitt Study on Recognition Trends 2016, conducted among 3,496 employees across a broad range of industries, found that employees who always give recognition achieved 26% higher engagement scores on average than employees who ‘never/rarely’ give recognition to their peers.
  2. Similar findings came from OC Tanner research published in 2014, which found performance recognition for great work was strongly associated with significantly higher employee engagement among the 2,415 employees surveyed in 10 countries. Around 79% of employees who received strong recognition were highly engaged compared with 25% of employees who received weak recognition.

Recognition is the key motivator

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?

It’s not about the pay – financial rewards are not the biggest motivator

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.

A 2018 BetterUp study, reported in the Harvard Business Review online, 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.

Creating more 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. 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.

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.

Happier on the home front

Also, employees tend to be happier at home and 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.

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.

If you enjoyed this article, we recommend this book

Employee Recognition: The secret to great team performance Employee Recognition: The secret to great team performance

About the author Kim Harrison

Kim Harrison loves sharing actionable ideas and information about professional communication and business management. He has wide experience as a corporate affairs manager, consultant, author, lecturer, and CEO of a non-profit organization. Kim is a Fellow and former national board member of the Public Relations Institute of Australia, and he ran his State’s professional development program for 7 years, helping many practitioners to strengthen their communication skills. People from 115 countries benefit from the practical knowledge shared in his monthly newsletter and in the eBooks available from cuttingedgepr.com.

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