Incentra Insights

Employee Recognition Program ROI

Posted by Vicki Hiney on Mar 4, 2020 11:40:00 AM

Employee Recognition Program ROI

One of the most frequently asked questions that we get from clients and prospective clients is “what is the ROI of an employee recognition program?” Recognizing employees is much more than just a nice thing to do or an added perk – it is an essential business component.

However, just having an employee engagement and recognition plan in place is not enough because then you may end up investing in efforts that provide no ROI. The best employee recognition programs include a focus on employee performance indicators that can be measured.

Every organization is different and needs to have a customized employee recognition program. The performance indicators outlined below are a starting point.

Increased Employee Engagement

Studies show that employee recognition is the number one driver of employee engagement. According to Gallup’s State of the Global Workplace report, engaged employees come to work and do more work and therefore highly engaged business units realize 41% lower absenteeism, 17% higher productivity and 21% more profitable than those with low engagement.

Reduced Employee Turnover

Employee engagement programs also have a measureable impact on employee turnover. Engaged workers are more likely to stay with their current employer. Gallup reported 37% of engaged employees are looking for a new job, but 56% of disengaged workers are looking.

According to a study from the Society of Human Resource Management (SHRM), organizations with employee recognition programs have about 23% less turnover than organizations without programs.

The Center for American Progress says that it costs on average 20% of a single employee’s salary to replace that ONE person. Using these numbers, it’s easy to see how implementing an effective employee recognition program can save the company money and will positively impact the ROI.

Huffington Post shared this formula for determining the cost of turnover.

 (Cost of Hiring + Cost of Onboarding + Cost of Training + Cost of Having an Unfilled Position)
x (Number of Employees x Annual Percent Turnover)
= Annual Cost of Turnover for the Organization

More Innovation & Productivity

Innovation is a key component to any successful business, and innovation is greatly affected by employee recognition. Employees who receive effective recognition are over 30% more likely to be innovative on the job and are generating 50% more ideas per month than those employees who are not being effectively recognized.

Innovative employees are highly engaged and 21% more productive than those with lower engagement according to Gallup. The highly engaged employees are also 41% less likely to be absent from work and have 48% fewer safety incidents.

As you can see, an effective employee recognition program can positively impact a company’s ROI, and disengaged workers can have a significant negative impact. An engaged workforce will result in higher profits and productivity, more innovation, lower turnover and absenteeism, fewer safety incidents and higher customer satisfaction.

Let Incentra help your business create an effective employee recognition program that can make a positive impact on your bottom line.


Categories: Employee Engagement, Employee Recognition