What is employee recognition and what are its benefits in the workplace?

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September 22, 2021

Everyone likes a thank you for a job well done, but this recognition is so much more than good, old-fashioned politeness. According to Gallup research, employee recognition helps to reinforce a sense of purpose and drives engagement in the workplace. Despite all this, only 49% of UK workers are employed at companies that actively promote employee recognition, and one third wished their manager showed more appreciation for their work.

Promoting a culture of employee recognition doesn’t need to be complex or especially expensive, but it does need to be sincere and consistent. In this article, we’ll take you through what employee recognition is and provide multiple examples of employee recognition and actionable tips to create and promote a culture of employee recognition.

What is employee recognition?

Employee recognition is a process of expressing gratitude and appreciation for work and effort by peers and leaders. This is different from ‘employee engagement’, which defines how actively committed and enthusiastic an employee is to their role and tasks, and also ‘job satisfaction’, which describes how content an employee feels with their job. Of course, employee recognition impacts both engagement and job satisfaction because the more genuinely appreciated we feel, the more likely we are to be happier in our role and enthusiastic about our work.

When recognition is lacking, however, we usually feel unvalued and demotivated. In a study of reasons why employees feel demotivated, 40% of employees gave ‘lack of recognition’ as their top reason for being demotivated. According to Gallup, disengaged and demotivated employees cost U.S. businesses between $450bn and $550bn in lost productivity each year.

What type of recognition do employees want?

Employee recognition can take many forms and is successful when it comes across as an authentic and sincere expression of gratitude. Ideally, the gratitude that is expressed should match the performance of the employee and the culture of your business. For example, working over a weekend to hit a tough deadline can be met with informal praise, while securing an important account could be rewarded with formal, public thanks from leadership, an award, or a bonus.

Typically, employee recognition takes two forms – structured and unstructured.

Unstructured employee recognition

This is a spontaneous and informal form of appreciation, and it is surprisingly effective because it can feel very genuine when done right, even when they are simple and inexpensive. These rewards are flexible and can be delivered as and when they are deserved by the manager's discretion. They also don’t need to be expensive at all - in fact, 65% of employees prefer non-cash incentives.

Unstructured employee recognition ideas:

  • Thank you – Simply saying thank you when it’s been earned is a great way to start creating a culture of recognition. For 48% of employees in the UK, a simple verbal thank you is sufficient.

  • Small rewards – Ordering in dinner for a team that is working overtime, earning a half-day of leave, or buying drinks after work are all great ways to show appreciation while still keeping things informal.

  • Gamification – Gamification helps to tap into our innate sense of fun and competitive natures, creating a way to bring people together under the company banner and rewarding them at the same time. Examples of ‘gamified’ recognition may include earning prizes, badges and other rewards for completing training, reaching goals or finishing the onboarding process.

Structured employee recognition

These are the formal programs, incentives, and paths that an organisation lays out for employees at all levels. These are usually linked to particular KPIs and company-wide values. They are not designed to be spontaneous or overly personalised, but they are a highly appreciated part of the recognition process.

Structured employee recognition ideas:

  • Yearly or quarterly performance reviews – This means actively ensuring that positive recognition is incorporated into formal HR processes. These processes need to include positive as well as constructive feedback, noting when an employee has gone above and beyond or tackled a difficult issue successfully.

  • Service or achievement awards/ceremonies – This includes programs that acknowledge long-term service and high achievers over the year at a formal, company-wide event. These are often accompanied by public recognition from leadership, an award, or gifts.

  • Bonuses – These are standardised bonuses to thank employees for their loyalty, as well as performance bonuses to acknowledge their efforts. This can be annual or in line with performance reviews and usually follow a set formula based on milestones and formal performance review processes.

  • Recognition programs – This is a formalised program that promotes a culture of recognition by giving leaders and employees access to resources and guidelines for rewarding employees. By creating more pathways for recognition, managers are empowered to show their appreciation in a way that feels authentic and shows an organisation’s willingness to make recognition a priority.

  • Milestones – Celebrating milestones inside and outside of work shows employees that it’s not just their day-to-day efforts that matter. Whether it’s a baby shower, a retirement party, a birthday, or a wedding, it’s a good opportunity to build team bonds and acknowledge an employee.

What are the benefits of employee recognition in the workplace?

Building a business case for investing in informal and formal employee recognition programs isn't always easy, but having a clear idea of the benefits can help you take a robust position. Here are the most important benefits to note, as they have a significant impact on the bottom line.

  • Improved productivity – Organisations that recognise their employees’ efforts have 14% higher productivity than those that don’t. Just a simple expression of thanks can trigger a 50% increase in an employee’s productivity, not only improving the speed with which they work but also improving work quality at the same time.

  • Higher profits – Employee recognition programs increase engagement, ensuring employees work to their full potential and are actively invested in helping an organisation reach its long-term goals. This has a meaningful impact on revenue, and just a 15% improvement in engagement can increase margins by 2%.

  • Reduced turnover – According to Gallup, lack of recognition is the leading reason why people quit their jobs, and employees who don’t feel like their work is adequately acknowledged are twice as likely to quit in the next year. Having an active employee recognition program helps to counter this, reducing turnover and team disruption while improving employee loyalty.

  • Culture of self-improvement – If you want employees to embrace continuous skills development and create a valuable talent funnel for your organisation, rewards and acknowledgement programs are invaluable. It shows that the organisation is invested in an employee’s career, that they value what an employee can offer, and that they reward continuous learning and improvement.

How can we improve employee recognition programs?

When it comes to employee recognition, the UK is not doing as well as we could be. Despite over 90% of respondents stating that recognition was important to them, just 60% say they are satisfied with the level of appreciation from leadership, and 11% say they have never been recognised. So, how do we improve this?

  • Frequency – Recognition shouldn’t be reserved for a quarterly or annual review but delivered when earned. 58% of employees think that performance reviews are not adequate for reflecting the job that they do, which means there are opportunities to bring in more frequent moments for appreciation.

  • Creativity – Don’t fall into the trap of thinking that employee recognition means more bonus cheques - in fact, being creative and personalising your approach can be far more genuine and effective than money. While financial remuneration is important, almost half of UK employees said they’d prefer more frequent recognition than a yearly bonus.

  • Technology – We live in a digital age, so why not bring this into your employee recognition program? Gamified platforms and employee recognition software can be customised to your organisation’s culture and goals, creating a fun way of introducing rewards and recognition.

  • Personalisation – A personalised thank you is always more valuable than a generic recognition, so don’t let these opportunities pass you by. Managers and leaders should be encouraged to personally recognise efforts and achievements by employees in informal or formal settings, and the higher up the source of this acknowledgement, the more powerful it is.

How can we measure the impact of employee recognition?

Navigating an employee recognition process can be a steep learning curve, but the rewards and benefits make it more than worthwhile. Knowing the success of your program and initiatives means tracking key elements, performing ongoing analysis of the programs and using data to make improvements over time.

Here are some effective ways of measuring the impact of employee recognition:

  • Surveys – This is an easy way to get both quantitative and qualitative insights into how your program is performing. Key questions should focus on how aware employees are of the program, whether they feel valued at work, if they feel motivated to reach their targets, where they feel they can be recognised more effectively, and how they like to be recognised.

  • Employee reward and recognition software – Employee recognition platforms not only provide employees with rewards and incentives but also give employers meaningful insights into how their employee recognition program is performing. 

With Totem, it’s never been simpler to track the success of your employee recognition program. Our platform is completely scalable and highly effective, giving employees a space to recognise personal and professional achievements. This helps to ensure teams are connected, unified and engaged. Get started for free today!