ROI of Employee Recognition

Have you ever been asked, “Yes, I see why recognition may be helpful in boosting employee morale, but what’s the value of the program? Where’s the ROI?”

An interesting report on The Value and ROI in Employee Recognition, recently issued by The Forum for People Performance Management and Measurement, the Incentive Research Foundation, and the Human Capital Institute, offers interesting insight.

In a concise format, the report offers clear definitions for recognition, incentive, engagement, total rewards and other often misused terms. These definitions are derived from summaries of the research in this space in the last two decades from Watson Wyatt, WorldatWork, Towers Perrin, Gallup and others, offering a nice overview of the relevant research and findings in this space.

The report also positions the role of recognition in a total rewards program, how to measure the ROI of recognition and suggests the need for a VALUE on Investment (VOI) metric for recognition programs. VOI considers both the financial and the intangible benefits of recognition. Employee Lifetime Value would be one example of a VOI metric.

I was particularly pleased to see how completely the researcher’s “best principles” for implementing recognition align with our own best practices:

• Build a culture of recognition
• Provide a wide variety of recognition rewards to appeal to individual preferences
• Recognize workers regularly – sporadic recognition may be worse than no recognition
• Link reward activities to business objectives and/or cultural values
• Measure the cost of the recognition reward system and the benefits gained

Take a read through the research and let me know what you think.