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How Recognition and Rewards Impact Employee Engagement and Performance

Posted by Stephen King
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41% of companies that use peer-to-peer recognition have seen positive increases in customer satisfaction (from: Globoforce)

Companies with recognition programs that are highly effective at improving employee engagement have 31% lower voluntary turnover (from: Bersin & Associates) (1)

Salary, benefits, and other financial incentives aren’t the only things that employees are looking for in a job. So how does recognition and rewards impact employee engagement and performance?

 

An employee can earn the same amount of money with you as with your competitors. But when it comes to belonging to a strong, fun team; earning respect; and having opportunities for career growth and personal development, employers aren’t all created equal.
Download The CEO's Guide to Increasing ProfitsIn fact, career development is the primary reason people join a company and stay with it. Think of Maslow’s hierarchy of needs: An individual’s fundamental needs must be met for him or her to survive.

Financial remuneration—in other words, salary and benefits—provides physical safety. However, once the basic survival needs are met, then respect, recognition, reward, and ultimately, self-fulfillment become important.

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Career Development is a Benefit

Let’s say you’ve found a good candidate for your IT company’s contact center support role; an aspirational individual who meets all your “ideal candidate” requirements. However, she’s also interviewing with your competitor. You’re both offering comparative salaries, benefits, and perks.

But while your competitor doesn’t make any mention of career paths, in your company, you provide career development from day one to help employees advance their skills and meet their personal career goals. Since this candidate is looking for a job with a future, which job offer do you think she’ll accept?

Incentive Compensation

Career development becomes even more powerful when combined with incentive compensation—i.e. when you add financial rewards to the practice of recognizing individuals or teams based on their performance.

If you use incentive compensation, it’s important to give your employees a clear line of sight as to how their objectives contribute to the company’s overall objective. Use written goals and scorecards to provide them with real time feedback. By doing this, their goals become controllable and they feel empowered. If, in contrast, there’s no clarity about how they’re contributing to the larger objective, then they’ll feel like the company’s goals are non-controllable, which in turn may result in disengagement.

Recognition-Based Incentives

But even more powerful than incentive compensation are recognition-based incentives. Recognition among peers and co-workers can have a long-term impact on employee work engagement and job satisfaction.

A cash bonus is a one-time incentive. In contrast, being recognized among your peers and fellow co-workers for going the extra mile and contributing meaningfully to the company is a lasting achievement—and as we’ve seen, once our fundamental needs are met, we all want to make a difference in our lives and/or in the world.

That’s why recognition is such a powerful motivator. Titles such as “employee of the month” and “top performer” offer fulfillment to people who are already passionate about your mission—plus, they can be key accomplishments that make all the difference when the individual applies for a specific role or promotion. It’s always great to give recognition to employees who delight your customers, but another way to give recognition is a “kudos” program.

Noticing and acknowledging when an employee does something great, whether it is helping someone else or accomplishing goals out of their comfort zone.

ROI on Recognition and Engagement

Employee engagement represents the level of commitment employees feel toward their employers and their jobs. The higher the level of engagement, the more likely an employee will go the extra mile to perform well and be an advocate for the company.

A 2009 Gallup poll(2) about recognition and engagement showed some surprising insights:

  • When a manager focuses on someone’s strengths, the likelihood of that person becoming disengaged drops to a mere one percent.
  • When a manager focuses on someone’s weaknesses, the likelihood of disengagement rises to 22 percent.
  • When a manager ignores someone, the likelihood of disengagement rises to 40 percent.

Another report, this time by the Society of Human Resource Managers(3), showed the impact of recognition on employee engagement. It found that companies with employee recognition programs and good career development guidance saw a 63 percent increase in employee productivity, a 58 percent return on their profit margins, a 52 percent increase in customer retention, and a 51 percent increase in employee retention.According to Maslow’s hierarchy of needs, self-actualization—fulfillment of potential—is the highest level of personal satisfaction.

Earning recognition and having a sense of belonging are important. When you hire passionate people with the right behaviors and empower them to meet all these needs by fostering a culture of recognition and engagement, you’ll greatly improve your company.

Provide Recognition, Rewards, and Career Development

What all this shows is that if you carefully define who you are and what you want, if you select your people to be aligned with your core values, if you listen carefully to what they want from their jobs, if you provide them with the guidance they want, and if you give them the recognition and rewards they deserve, you can greatly reduce turnover, enhance engagement, and improve productivity. And that is proven to increase profits.

At 48%, nearly half of employees reported that management's recognition of their job performance was very important to their job satisfaction.(4)

Monetary incentives can be effective, but recognition-based incentives such as a feeling of belonging to something bigger than you, are long-lasting and fulfill a need for self-actualization.

Recognition and rewards are critical to enhancing employee engagement and performance.

Research shows that employers with good recognition and career development programs scored significantly higher in terms of productivity, revenue, customer retention, and employee retention than those that didn’t.

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Sources:

(1)12 Mind-Blowing Stats on Employee Recognition You Need to Know (by Sabrina Son)

(2)Employee Recognition Low Cost High Impact (Gallup)

(3)2015 Job Satisfaction and Engagement Report (SHRM)

(4)2016 Employee Job Satisfaction and Engagement Report (SHRM)