Are employee recognition and rewards programs more feel-good or morale boosters? Do they generate a return on investment?

Although employee rewards programs and recognition are two separate things, both can provide the following benefits:

  • Increased motivation and engagement
  • Improved productivity
  • Higher employee retention
  • Greater sense of appreciation

The bottom line is the bottom line: employee rewards programs and recognition can lead to greater profitability.

Whether formal or informal, rewards and recognition can make a significant difference in an organization.

Understanding Rewards and Recognition 

Poet Maya Angelou said, “I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.” The sentiment applies equally to organizations. While many people think of rewards and recognition as similar, it’s helpful to understand how they differ. They’re important in different ways.

Recognition is typically emotional, not financial. It involves appreciation for particular actions and behaviors and has emotional value. Typically, recognition can happen at any time and is a surprise to the recipient. Often recognition is based on an organization’s values, such as teamwork. The message is, “We see and appreciate what you did.”

Recognition, especially if it’s public, can drive behaviors. In one example, an employee identified and implemented a solution to a work process that was creating delays in customer communications. That solution was not part of the individual’s responsibilities. The manager publicly recognized the employee for taking the initiative, and now other employees feel encouraged to also take the initiative in solving issues.

Recognition can be as simple as one co-worker sending a thank-you email to a colleague who dropped everything to help and CC’ing the co-worker’s manager. 

More formal programs can include thank-you cards provided to each employee or thank-you dollars that employees and supervisors can give each other to spend on items from the company store, for instance.

Rewards can also have an emotional impact, but they typically include a financial reward.   They are tied to a specific achievement, such as attaining specific metrics or implementing a new program or process. Some are based on tenure, such as a five-year employee reward. Most are clearly defined, such as a sales or productivity metric.

Rewards are usually given by managers or the organization, often at a quarterly or annual awards ceremony or another event. Rewards are transactional.

How and When to Reward and Recognize

The things employees value most have changed within the past few years. Each industry and every organization is different, but cash rewards are no longer always the highest value rewards. Many employees would place greater value on paid time off, additional flexibility, or even rewards related to health and wellness, such as gym memberships. Employee surveys can help determine what each organization’s employees value most. (And this may vary within an organization, such as lower-paid employees preferring cash rewards and higher-paid employees valuing paid time off.)

Recognition works best when it’s given as often as possible. Recognition should be part of the culture, where people recognize and value their co-workers daily, whether that’s with a note or even a small token or gift. (Chocolate is often an excellent choice!)

Recognition works particularly well when it’s given for demonstrating behaviors that are important to the organization, especially when people go above and beyond their job descriptions or their roles.

Rewards programs also work well when they happen more often, such as quarterly.

However, managers should be sensitive about how each employee wants to be recognized. Some like to be lauded publicly, while others would prefer a private conversation or personal email over public praise.

Fairness is Mandatory

Rewards and recognition programs only work well and achieve an organization’s goals when employees perceive them as fair and transparent. This is especially true when the rewards are significant, especially if they’re monetary.

Rewards programs should have clearly defined criteria about which achievements qualify. Ideally, having a rewards committee review the candidates can help remove bias. Cross-functional teams may be recognized and rewarded for accomplishing their goals at the end of the year. If rewards have a monetary value, they should be reviewed by a committee; HR should review final submissions and recommendations because they may have information that may disqualify someone from a monetary reward.  

Above all, managers should make sure that they don’t play favorites when singling out employees or teams for rewards or recognition.

Measuring Impact

Several metrics can help measure the effectiveness of a rewards or recognition program. Ideally, measure these before beginning a program to establish a baseline, and then track changes. Those metrics include the following:

  • Attendance
  • Turnover 
  • Productivity 
  • Employee satisfaction (measured by employee surveys)  
  • Potentially profitability tied to sales targets

The Lindenberger Group can help organizations build, manage, and measure employee rewards and recognition programs that best fit an organization’s industry, employees, and culture. For more information or to discuss your HR needs, please contact us at 609-730-1049 or send us an email.