6 Things Every Great Leader Should Know About Recognition

A recent study found that just 40% of US employees worked for a company with a recognition program. 

This tells us that there's an opportunity for leaders to use recognition programs to differentiate in the competitive labor market. Great leaders effectively leverage recognition—both for the benefit of their team and for the business. Here are six things every great leader knows about recognition, and that you should know, too:

1. Employee engagement drives business performance

Towers Watson has studied employee recognition and engagement extensively, summarizing years of analysis in its Turbocharging Employee Engagement: The Power of Recognition From Managers white paper. Some key findings were:

Companies with highly engaged employees generate more marketplace power than their competitors.

The financial performance differences in operating and net profit margins were significant (5.75% and 3.44%, respectively)—as were the 9.3% higher shareholder returns produced.

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2. Recognition plays a crucial role in engagement

In an earlier global survey of nearly 90,000 employees, Towers Watson identified some of the factors that lead to a rise in employee engagement: "effective and caring leadership, appealing development opportunities, interesting work, and fulfilling tangible and intangible rewards."

Two strong drivers of employee engagement were: sincere interest in employee well-being from senior management and personal development opportunities.

3. The source of recognition matters

Recognition from immediate managers can boost two principal engagement drivers: opportunity and well-being. Towers Watson published another study on employee recognition which reinforced its earlier work.

This study found that manager-delivered employee recognition boosts employee engagement, especially in the personal development opportunity and sincere interest for the employee's well-being categories.

In high-engagement workplaces, manager-delivered recognition led to a favorable engagement boost of 20%. In low-engagement environments, the engagement boost was nearly 60%.

4. The most meaningful recognition comes from peers

It feels great to be praised for your work and have your boss show a genuine appreciation for your efforts. It feels great to be noticed and acknowledged. It is meaningful.

At the same time, have you ever been acknowledged from afar—say from HQ for reaching a milestone like a 5-year work anniversary? It feels good, but not nearly as good as it does when it comes from a close colleague who sees and appreciates your hard work day in, day out.

Recognition from peers is particularly meaningful.

In fact, Towers Watson found that the most fulfilling recognition experiences came from within their teams or workgroups or at the department level. In other words, from peers.

At the risk of sounding really gushy here, as a team lead, the best thing about Bonusly is that I can see what my team is doing, know whether their contributions are being noticed (both inside and outside our department), and trust that everyone feels appreciated day-to-day.

I love that everyone in the company will see when my direct reports receive recognition, unlike the kinds of thank you's that get shared in an email or said in passing.
–Colleen Smith, Reach Engine by Levels Beyond

5. Inclusiveness, communication, and trust are essential

As a leader who understands the role that employee recognition plays in engagement and business performance, you need to know that it's not just about doling out rewards and praise.

Towers Watson's report on manager-delivered recognition identified three requirements for effective recognition from managers:

1. Inclusiveness. Recognition is given frequently, and all employees have the opportunity to be recognized. Employee recognition is crucial to inclusion.
2. Communication. The immediate manager communicates openly and is receptive to new ideas.
3. Trust. Employees trust their immediate managers and feel that management trusts the judgment of their employees.

When these three ingredients come together, the end result is an engaged employee who feels that their organization recognizes and appreciates good work.

6. Money isn't always the answer

Our joint research with SurveyMonkey around appreciation in the workplace shows that money isn't the sole answer to the employee engagement question. How do employees prefer to be recognized at work? It depends – usually a mixture of Words of Affirmation, Acts of Service, and Gifts. 

In conclusion

Let's take a moment to sum it up:

• Engagement drives performance.
• Recognition boosts two principal engagement drivers.
• The most meaningful recognition comes from peers.
• Effective employee recognition programs are built on inclusiveness, communication, and trust.
• Employees go the extra mile for peers and camaraderie.

You can use this knowledge to start recognizing the efforts of your peers more effectively right away.

Even better, work to establish a formal peer-to-peer recognition program so that your team has the tools they need to deliver the most meaningful recognition there is — then watch performance and engagement improve.