Is There Really an ROI in Employee Recogniton?

© iQoncept - Fotolia.com
© iQoncept - Fotolia.com

I’m often asked, “Where’s the ROI in recognition?”

One answer is in the dramatic, double-digit boost strategic employee recognition regularly gives to employee engagement. (Towers Watson reported a 15 percent increase in employee engagement correlates to a 2 percent increase in operating income.)

Another less obvious but more powerful impact on revenue is having a strategy for improving company performance through your people.

Mark Harbeke reported on analysis of companies who applied for Winning Workplaces’ Top Small Company Workplaces award that those how had such a strategy had a 41 percent higher average revenue in 2010 than those who did not.

Empowering employees through performance management

Mark’s research into small companies is born out in CEO research conducted by Hay Group, reporting:

  • Some 13 percent of firms align their performance management system to company strategy.
  • 93 percent of U.S. business leaders stress that culture has an important influence on the effectiveness of performance management.
  • Only 27 percent of firms align their performance management strategy to company culture and values.
  • 36 percent of U.S. business leaders believe managers in their firms fail to use their performance management process effectively.
  • 40 percent do not actively support the performance management process.

Katie LeMaire, vice president at Hay Group, commented: “Most organizations view performance management as a process for controlling compensation. Leading organizations treat it as a management process that empowers employees to drive performance and creates discretionary effort.”

Article Continues Below

Deep understanding of company values is key

The disconnect in poor performance management practices is clearly significant. The Hay Group research has born out our findings that a deep understanding of the company values and strategic objectives – to a level that it matters to employees in their work – and a company culture of appreciation based on mutual respect is foundational to company success.

Blending detailed, specific employee recognition data with performance management processes not only adds data points to a performance review. It also ensures the performance management system clearly reflects how individual employees (and even teams and divisions) are producing to deliver the strategic objectives in line with the company values.

Be sure to read my colleague Carol Meyers’ post on these research results to see how this is critical to increasing productivity when employees are already producing beyond capacity but executives are not yet ready to increase hiring.

This originally appeared on Derek Irvine’s Recognize This! blog.

Derek Irvine is one of the world’s foremost experts on employee recognition and engagement, helping business leaders set a higher vision and ambition for their company culture. As the Vice President of Client Strategy and Consulting at Globoforce, Derek helps clients — including some of world’s most admired companies such as Proctor and Gamble, Intuit, KPMG, and Thomson Reuters — leverage recognition strategies and best practices to better manage company culture, elevate employee engagement, increase retention, and improve the bottom line. He's also a renowned speaker and co-author of Winning with a Culture of Recognition. Contact him at irvine@globoforce.com.

Topics

2 Comments on “Is There Really an ROI in Employee Recogniton?

  1. I’m a bit surprised by the low percentage of companies that
    align their performance management strategy to company culture/values. Mutual
    respect in the workplace goes a long way. When your employees are happy and
    care about their work, they produce better results, which is reflected in the
    performance of the entire company. On the other hand,  some employees simply don’t care about the
    quality of their work because they know their effort goes unnoticed by their
    bosses, and when this type of attitude infects a workplace, morale drops and
    culture suffers. I’ve always believed that there’s an ROI in employee recognition
    – thanks for sharing these survey results!

    1. Thanks for the comment, i-Sight. I argue it’s far more effective in nearly every aspect to track, measure and appraise behaviors (based on company values) than it is results. After all, Results-Behaviors=Enron

Leave a Comment

Your email address will not be published. Required fields are marked *