Recognition Deficit: The Million-Dollar Mistake

When Will gave his two weeks' notice, he walked away without a full-time job lined up. Just an internship, and a baby on the way.

From the outside, it made no sense. Will had been praised as a high performer at his manufacturing job. He took on responsibilities well beyond his title. Leadership told him, “You’re one of the best people here.” 

But when he asked for a path forward, he got nothing. He didn’t feel meaningfully recognized for his work; the praise was vague and empty. Eventually, that emptiness became too much. 

Will's story isn't uncommon. According to Gallup, employees who don’t feel recognized are 45% more likely to leave.

The company in this story fundamentally miscalculated the value of recognition. Leadership assumed generic praise was enough, and loyalty was a given. They were wrong.

And it was a six-figure mistake.

For easy math, let’s assume Will was earning $100,000. At that salary, his departure likely cost the company $150,000 or more.

And that's a huge cost problem. Here's what that math looks like on paper.

The Math Is Rough

The math is sobering (at best): replacing an employee costs 1.5 to 2 times their annual salary. (That’s how we came up with the $150,000 turnover cost for Will’s hypothetical $100,000 salary.)

Beyond funding a new hire, companies absorb recruiter fees, interview cycles, increased market rates, and the inevitable productivity gap that forms when your new hire draws a full salary while learning the ropes. 

And that's if a company fills the role promptly and if the new hire works out for the long haul. In today's market, positions remain vacant for 44 days on average, stretching beyond 120 for specialized roles. In the meantime, while you’re understaffed, deadlines are shifting, and teammates are being stretched thin. 

Let’s scale that.

Say you run a 100-person company, with an average salary of $100,000. You’ve deprioritized recognition because it feels optional. Voluntary turnover hovers at 30% annually, which is relatively standard in low-recognition environments.

That means 30 employees leave every year. At $150,000 per exit, that’s $4.5 million in turnover costs annually.

It may be hard to believe, but there’s even more bad news. 

Globally, only 23% of employees are engaged at work. That means most teams operate with less than a quarter of their full potential. A disengaged employee earning $100,000 can quietly cost you between $3,400 and $17,000 per year in lost productivity. When multiplied across your 100-person company, you could be wasting an additional $1.7 million.

The biggest irony? The investment to keep people engaged is remarkably modest by comparison.

Effective employee recognition is a practical investment in performance and retention with measurable returns. The numbers tell a clear story, one that smart leaders are increasingly paying attention to.

“It’s time for leadership to take action and be intentional in rethinking how to drive performance in our new way of work,” said Radhika Samant, CFO of Bonusly. “In total, recognition done right (in that it reinforces culture and values, motivates employees, and empowers managers to succeed) costs under $1,000 per employee per year.”

That math adds up. A well-designed recognition program (including the cost of rewards) typically costs between $100 and $1,000 per person annually. Let’s say it lands somewhere in the middle, around $500 per employee. For a 100-person company, that’s a $50,000 annual investment. And that’s just our napkin math.

A $50,000 investment to dampen a $4.5 million loss? Beyond simple math, it's common sense. 

Recognition Has Always Worked

We’ve known for decades that recognition drives results. Gallup reports that companies with high recognition cultures see 37% higher productivity. And that higher productivity equals more value creation.

The value of recognition isn’t new. What is new is our willingness to acknowledge its power.

For decades, corporate America approached recognition with all the imagination of a participation trophy ceremony: service anniversaries marked by dusty plaques, employee-of-the-month programs that pitted colleagues against each other, and annual awards that arrived long after the achievement was made. 

Today's recognition looks fundamentally different: real-time celebration that happens in the moment, connected to specific contributions, visible to peers, and explicitly aligned with what matters to your organization. 

It’s simply more meaningful.

“Effective recognition fosters both positive and constructive feedback loops and clarifies expectations as work on key projects unfolds,” explained Debra Squyers, CCO at Bonusly. “It moves beyond superficial rewards, transforming recognition into a structured practice that drives individual and organizational success.”

Today's workforce, particularly younger generations, enters with a clear-eyed view of the relationship between employer and employee. They see requesting appreciation for their contributions as a reasonable expectation in a healthy professional relationship. And when that expectation isn't met, they're increasingly comfortable saying so, whether through engagement surveys, direct feedback, or the ultimate message: a two-week’s notice. 

Recognition is Basic Neurobiology 

As work becomes more collaborative and purpose-driven, employees seek feedback loops that help them understand their impact. Recognition is one of the most effective ways to close that loop.

Recognition taps into something fundamentally human. We're wired to seek validation for our efforts. When someone acknowledges our contributions, our brains release dopamine and serotonin, the same neurochemicals associated with satisfaction and motivation. It’s basic neurobiology.

The impact doesn’t stop at feeling good. Consistent recognition builds the mental connection between effort and outcome, encouraging people to repeat high-performance behaviors. Over time, it creates a rhythm: contribute, be seen, contribute again, with greater confidence and engagement each time.

Dr. Nicole Eisdorfer, an I/O psychologist and organizational development strategist, pointed to Affective Events Theory as a key framework for understanding why recognition lifts entire teams.

“If recognition is done right, then it’s an emotionally positive event. And when other people witness emotionally positive events, the effect spreads. Employees are more likely to put in extra effort—discretionary effort—and bring more energy and enthusiasm to work. It’s a virtuous circle.”

Kamaria Scott, also an I/O psychologist and employee engagement expert, echoed this sentiment: 

"Recognition is the identification and amplification of valuable behaviors someone has demonstrated. When you recognize someone, it sparks in others the thought, 'maybe I can do that,' and 'maybe I can try that.' And when you do it through story, you're also giving people a mental road map of something they might try themselves," she said.

The Performance Case for Recognition

Let’s look at profitability.

Gallup reports that organizations with strong recognition cultures see 12% higher profitability than their counterparts. When applied to our 100-person company, where the average salary is $100,000, we’re looking at a $10 million payroll. 

A 12% profit lift on the productivity and performance tied to that investment could mean $1.2 million in additional annual value.

Now weigh that against a recognition program that costs just $500 per employee per year. For a 100-person company, that’s a $50,000 investment, less than 5% of the profitability gains.

Need we say more?

The data cuts across industries and company sizes. Research from Deloitte shows that companies with strong cultures—where employees live organizational values—perform better financially. Employees in these organizations consistently display behaviors aligned with company values, reinforcing a high-performance environment.

“Do you want to see more of the behaviors that help your business be successful? Do you want to see projects that execute because people push through the hard parts to get it done? That's the case for recognition," Kamaria said.

Yet skepticism persists, often from leaders who've seen recognition done poorly or fundamentally misunderstand human motivation.

Some argue that "our employees should be self-motivated," as though external validation somehow undermines internal drive. This perspective ignores basic psychology. Even the most intrinsically motivated people benefit from external validation. 

Others contend, "We already pay competitive salaries." But compensation and recognition serve different psychological needs. Your salary confirms your market value; recognition confirms your human value. Research consistently shows that while inadequate compensation will certainly drive people away, competitive compensation alone won't keep them engaged.

Perhaps most troubling is the belief that "Our annual awards program is enough." When recognition is reserved for rare, ceremonial moments, it sends the message that only a select few contributions are worthy of being seen. Said otherwise, it leaves the everyday impact unnoticed.

You Don’t Need a Bigger Budget. You Need Better Priorities

The question of affording a recognition program obscures the fundamental reality your company faces: recognition is essential, not optional. Continuing to treat it as a discretionary expense carries substantial hidden costs to your organization.

Let’s return to the numbers for a final time. Effectively recognizing an employee like Will costs on average $500 per year, which is less than $2 a day.

Now, picture three Wills, making $100,000 a year, walking out your door this quarter. That’s $450,000 in preventable turnover costs.

While leadership teams agonize over a $50,000 recognition platform, they quietly lose nearly 10 times that amount in compounding turnover costs.

It’s a bit ridiculous, and a bit sad. Even non-math people like me can see how the numbers aren’t adding up.

​​"Recognition should be telling the story of how people matter at work," Dr. Eisdorfer said. "If you're thinking of recognition entirely from the cost of running a platform and not from the impact of training your leaders to pay attention to their employees doing good, then you're completely missing the point."

The companies pulling ahead in 2025 create environments where people feel genuinely seen for their contributions and connected to something bigger than themselves. Best yet, you don't need to overhaul your entire culture overnight. Start with what matters:

• Train your managers to recognize specific contributions, not just outcomes. Acknowledgement that names the behavior and its impact resonates far longer than generic praise.
• Create visibility channels where wins travel beyond team silos. Recognition that remains hidden might as well not exist.
• Align your recognition directly with your company values and goals. Make it clear how individual efforts advance the collective mission.
• Measure the changed behaviors, not just the recognition activities. Track engagement scores, productivity metrics, and retention patterns to assess business impact.

While recognition might feel optional in your budget discussions, the million-dollar mistakes that follow are anything but theoretical. They ultimately show up in a company’s ability to deliver to customers, shareholders, and team members.

Recognition represents a fundamental business necessity, and treating it as anything less than essential comes at a cost your organization simply can’t afford.

If you're ready to invest in recognition that's meaningful and affordable, get started with Bonusly.

‍