Why is Employee Recognition Important?

A well-implemented employee recognition program has the power to impact many aspects of a business including engagement, turnover, productivity, morale, and purpose. A non-existent, unintuitive, or poorly-implemented employee recognition program can have the opposite effect, decreasing motivation and even pushing good employees away. 

Meanwhile, engaged employees are beneficial for workplaces in every way: they’re higher performers, they’re connected and committed to their company, and they’re willing to go above and beyond their role. In organizations that put a heavy emphasis on praising and recognizing employee achievements, engagement levels, productivity, and performance increase by between 14-60%.

According to Bonusly’s Employee Engagement and Modern Workplace Report,
highly engaged employees are over two times more likely to work for a company with an employee recognition program than actively disengaged employees. As well, 84% of highly engaged employees were recognized when they went above and beyond at work compared to only 25% of actively disengaged employees. It’s no wonder that successful organizations across the world prioritize engagement through recognition. 

But the needle hasn’t moved much: 63% of employees feel unappreciated by their employer on a daily basis. Here’s what those organizations stand to lose when they don’t prioritize employee recognition:

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Retention

Do you know how much employee turnover costs you each year? 

You and your team no doubt monitor spending on advertising, software, and professional development, but you may not know the true cost of employee turnover—which is why it’s probably costing more than you think. 💸

Between writing and posting job descriptions, time spent on screening and interviewing candidates, negotiating salary and signing bonuses, the cost of just finding a new employee adds up. Not to mention the time and effort it takes to onboard a new employee. You can use our cost of employee turnover calculator to understand your baseline, but it's important to remember that like an iceberg, much of the cost associated with turnover is hidden.

Indirect costs of employee turnover include decreased productivity, lost historical knowledge, and lower morale. When an employee leaves, the team absorbs additional responsibilities which leads to burned out, unhappy team members, and a bruised company culture. Even once an organization has hired someone to fill an open position, that new employee needs to be oriented and trained. While welcoming a new team member is typically an exciting time, it’s important to note that productivity will likely drop with the addition of a new team member before it goes up. 

Fortunately, recognition is something all employees appreciate and respond to. It’s a critical step in reducing turnover.  

In a study by Bersin & Associates, organizations with recognition programs that were highly effective at improving employee engagement had 31% less voluntary turnover than those with ineffective recognition programs. Furthermore, 46% of workers say they have left a job due to feeling unappreciated.

Productivity

Productive employees benefit companies in every way, from increasing profitability to optimizing resources. Productivity is very closely tied to companies’ profitability, and is a top driver of success at modern companies. According to Bain & Company, the best companies are 40% more productive than the rest, and have operating margins 30%-50% higher than their industry peers. 

What this means is that taking the time to appreciate employees pays huge dividends to your bottom line. Recognition boosts employee engagement, which then increases productivity. One study referenced in Inc. even discovered that 78% of employees would work harder if they were recognized more often. When you add inspiring employees to do their best into the mix, productivity skyrockets:

If satisfied employees are productive at an index level of 100, then engaged employees produce at 144, nearly half again as much. But then comes the real kicker: inspired employees score 225 on this scale. From a purely quantitative perspective, in other words, it would take two and a quarter satisfied employees to generate the same output as one inspired employee. –Eric Garton and Michael Mankins, Harvard Business Review

Giving employees the right feedback to know which of their efforts are most appreciated helps everyone better understand the impact of their work and what to prioritize. This doesn't mean you need to give a standing ovation to every employee who made it to work on time, but it's crucial to let everyone know exactly how (and how much) each of their contributions move the organization forward.

Morale

Employee morale is the glue that holds your company together. It’s a crucial part of any organization, and should be a top concern on your priorities list. With low morale, nearly every aspect of an employee's contributions will suffer. Increased morale, on the other hand, inspires greater productivity, creativity, and overall satisfaction.

What’s the difference between employee morale and employee engagement? Although they’re related, they’re not the same thing. Employee morale is typically associated with feelings of well-being and job satisfaction. Meanwhile, here’s how Bonusly co-founder and CEO Raphael Crawford-Marks describes employee engagement:

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“Engaged employees are typically described as passionate, committed, and enthusiastic—not just about their job, but the company they work for and its overall mission and goals. An engaged employee is aware of both immediate, tactical goals, as well as long-term, strategic ones, and proactively works to advance both.”

It’s a subtle difference, but it’s there. Engaged employees may be satisfied with their jobs, but contented employees are not necessarily engaged with their work. These workers risk losing any emotional connection to their work that they may have had, and their teams suffer from poor productivity. These are the “clock-watchers” and the “hangers-on.” They can become dead weight for the company. Thus, having high employee morale is the foundation upon which employee engagement can grow and thrive.

So how do you build that foundation? A SHRM report found that 65% of employees agree respectful treatment of employees at all levels is a significant contributor to their job satisfaction. Because respect can be shown in many ways, personalized approaches make a considerable difference. For example, frequent and visible praise promotes inclusion and a sense of belonging at work that increases job satisfaction. Along those same lines, another research study revealed that, 60% of employees value recognition as much as they value money. 

That’s why you feel great after a high-five. 👋

Purpose

Recognizing employees’ work and their impact on the team encourages a sense of purpose. This type of transparency helps employees understand how their work ties into the bigger picture of the company and how their contributions matter. Purpose at work is important. In fact, 70% of employees agree that their sense of purpose is defined by their work and 90% say that they would be willing to take a pay cut to do more meaningful work. 

As humans, we’re motivated by knowing how our work helps others, and recognition is a key part of that. This idea applies anywhere from working toward a company’s broader mission to promoting cross-team collaboration. 

It’s easy to get caught up in day-to-day work. Frequent and visible recognition reminds everyone that they’re all working toward a shared goal. 

Communicating clear team goals and values through public recognition also fosters a sense of community, which helps keep employees engaged and alleviates some uncertainty about roles and responsibilities. By recognizing someone for embodying company values, you develop your organizational culture and reinforce objectives in an intentional way.

Next steps

Building a culture and environment based on employee recognition improves each of these important areas, but it's crucial to understand how the foundation fits together before starting to build the rest. In our next chapter, you’ll learn about how recognition can take shape at your organization.

We also invite you to start a free trial or join us for a demo to learn more about how you can start building a recognition-rich organizational culture.