4 examples of how to prove the ROI of recognition

By: Mitch Stearns

The insights drawn from analyzing employee data are critical to creating experiences that will help you compete in the war for top talent.

Gathering employee data is also an invaluable way to drive recognition program success by identifying optimization opportunities. If you’re able to tie your programs’ impact to organizational success measures, these insights can even help you justify the strategies you’re offering employees.

It makes sense then that while 34% of HR leaders are dealing with budget cuts, only 9% expect those cuts to reduce their HR analytics budgets, according to Gartner research.

Changing philosophies on how to measure employee engagement programs

In the employee experience solutions we provide, we’ve seen proof of this shift, as our clients increasingly rely on analytics to demonstrate the impact of their programs on larger measures of organizational success. That includes evaluating metrics like talent retention, eNPS, financial performance and customer experience.

To do this, transactional measures like how many recognitions were issued or how many points were redeemed are significantly less important. Instead, clients are asking deeper questions like:

Is my solution driving desired behaviors among my people?
Is the data showing us that our leaders are becoming more effective?
Is this solution helping me keep my talent?
What’s the next area of opportunity for impact?

The underlying inputs that inform answers to these deeper questions will vary for each organization. That’s because factors like the desired behaviors they’re looking for, how they characterize “effective leadership” and the attrition trends they’re trying to correct will vary.

To help bring clarity to this somewhat murky territory, I’ll take you behind the scenes of several client solutions to show you how they validate the impact of their solutions (and gain buy-in to continue expanding them).

Case study #1: Valued-based recognition diversified recognition type issuance and strengthened the culture

Recognition programs can be viewed as set-it-and-forget-it strategies that only require upfront planning and technology implementation without ongoing operational support. This allows organizations to “check the box” for having a program in place while overlooking improvement areas.

If you’re using recognition as a strategy for encouraging desired employee behaviors, and improving culture and other business outcomes that matter to executives, it’s necessary to continue maturing the program by proactively optimizing strategies.

At ITA Group, we incorporated our five core values into our existing recognition program to track team member engagement and see how well team members internalize the core values when connected to the specific behavior of sending recognition.

employee recognition program progress to goal

Using a combination of cross-media communication, leadership enablement, and monthly and yearly team member challenges to recognize each other for a specific core value, we saw significant improvement in valued-based recognition issuance—and greater acceptance of our brand’s core values.

chart highlighting recognition issued by value

These results highlighted which core values team members most often used for recognitions. By challenging team members to issue one recognition per core value a month, we increased their awareness of our core values and increased the likelihood of team members issuing recognitions associated with those core values. This led to diversified recognition type issuance among all core values.

Takeaway: Use recognition strategically to help employees internalize the behaviors you expect and create a groundswell of support and enthusiasm at your organization around a specific behavior to ultimately improve culture.

Case study #2: Manager adoption led to stronger employee engagement

We all know how important leaders are in guiding employee behaviors. But, proving that with data can present a challenge. That’s why helping a client do just that was an empowering win.

chart illustrating correlation between recognition issuance by managers

We were able to prove a positive correlation between manager participation and team member engagement.

For managers issuing 0 recognitions, their team members issue an average of 2.5 recognitions (and receive 2.6). For managers issuing 1+ recognitions, their team members issue an average of 5.8 (and receive 6). Employee engagement continues to grow the more engaged the manager.

Takeaway: When a manager adopts a recognition program and consistently issues recognitions, their team is also more likely to engage with the program. Not only did this give our client hard data to prove the ROI of recognition, it’s given them a solid case to ask leadership for additional funding, as the correlation is getting stronger quarter-over-quarter.

Case study #3: Recognition supported retail location’s financial performance

Not many metrics speak as loudly as financial performance when you’re building the case for your recognition program.

We helped a retailer with more than 2,200 stores show the impact of their program by evaluating the relationship between issued recognitions and store financial performance.

When we compared stores in the top and bottom quartiles, we found a correlation between recognitions issued and store profitability, across every region.

Takeaway: Despite natural market fluctuation, the top quartile stores continue to outperform the bottom quartile counterpart stores when viewed over multiple years. The stronger a store’s recognition program is, the more likely it is to see a strong bottom line.

Case study #4: A consolidated recognition program saved the company $38.9M in turnover costs

It’s no secret turnover costs harm an organization’s profit margin, from hard costs like recruitment and onboarding to less quantifiable costs like decreased productivity and added stress on team members, who pick up extra duties.

This client’s employee recognition programs weren’t working. Besides lacking connection to the organization’s values, programs were siloed by business unit and geography, and administrators were bogged down with manual processes. Additional acquisitions amplified issues, resulting in a fragmented culture without a sense of shared purpose and behaviors. This all impacted turnover of new hires. Keeping new hires engaged—and employed—was a top priority.

To meaningfully connect and engage their people, they needed a big change. And with more than 163,000 employees around the globe, the change had to be universal. The solution? Focus on consistent reinforcement of core values while prioritizing flexibility in when and how employees could recognize and be recognized based on business unit and geography.

chart showing employee recognition program impact on retention

In fact, when team members were recognized—even just once—in their first two years, they were retained at a 26% higher rate at year 2. With each additional recognition received, the retention rate increased an average of more than 2%.

Takeaway: This trend toward higher retention of new hires has saved our client $38.9M since the program launch. It highlights not only that giving recognition matters but also the quantity of recognitions received positively impacts retention. In other words, the more recognitions the better!

Break the mold to validate the ROI of recognition

The days of writing off recognition as a “soft” benefit without quantifiable impact are gone. Organizations have more data available now than could have been imagined just a few years ago. The combination of improved data and better understanding of the metrics that matter most to your organization’s success is the key to validating your investment in this critical component of your culture. These examples are just a few of the ways we see HR leaders exercising creativity and strategic thinking to validate the need for and continued evolution of their recognition programs.

If you’re looking for a place to start, check out our Engagement Savings Calculator. By entering just a few figures specific to your organization, you’ll receive an estimate of just how much savings you could capture (and reinvest!) by using recognition to improve employee engagement.