8 Key Benefits of Implementing Employee Recognition Programs

The importance of employee recognition in 2020 is well documented. Yet there are still a lot of companies operating with HR policies and management practices in place that don’t seem to be aware of or acknowledge the benefits of recognizing and awarding employees for their work.

Larger corporations tend to have a lot of these programs in place but sometimes they are poorly managed and don’t produce the desired results. Smaller companies generally just don’t have the structure and resources in place to take on such initiatives. The beauty of recognition programs is, that in their simplest form, don’t have to cost a lot. A simple “job well done” to an employee in front of her peers is often more efficient than financial incentives.

Whether you’re a manager at a larger organization or the owner of a small and growing start-up here are eight proven major benefits of employee recognition programs.

Higher Motivation

Highly motivated and efficient employees are one of the key forces that drive growth and success. This applies to corporations, small businesses and charitable organizations alike. If employees get recognized for their hard work and contribution they will perform better. Praise and commendation from managers rank as the top performance motivator even beating out financial incentives.  

Lower Employee Frustration

If your workforce is frustrated and feeling underappreciated trouble is brewing on the horizon. One of the root causes of employee frustration is that they feel underappreciated for their contribution. Companies that have quality employee recognition programs in place report 28.6% lower frustration levels than their counterparts who don’t implement these initiatives. Prolonged frustration level can lead to turn-over which will be covered next.

Improved Retention Rates

Employee turnover is a huge issue for many companies, particularly in high turnover sectors and industries. As a manager, it’s crucial to understand which employee benefits help retain top talent. The cost of firing and hiring is an unwelcome expense that can significantly cut into profitability, not just due to legal and settlement costs but the time it takes to hire and train new talent. Companies with effective employee recognition programs in place report a 23.2% lower turnover rate.

Better Performance

Better performance typically goes hand in hand with higher motivation. If your employees are motivated that will directly translate into improved productivity and performance. 60% of surveyed organizations credit employee recognition as one of the most valuable drivers to boost individual performance. A performance like any of these benefits can and should be tracked. This will make it easy to measure the success of recognition initiatives.

Improved Customer Satisfaction Rates

Happy employees mean happy customers, especially when it comes to customer-facing teams. It should be no surprise that happy and motivated staff will do a better job of serving and supporting customers. 41% of companies that have tracked customer satisfaction rates prior to implementing peer-to-peer recognition and after have noticed positive improvements. Ensuring your employees and customers are satisfied is a win-win.

Increased Revenue

Besides wanting to do a good job from a management perspective, increased revenue alone should motivate company owners and executives to implement employee recognition initiatives. Higher motivation, better performance and customer satisfaction can have a significant impact on your gross sales and bottom line. Peer-to-peer recognition is the more effective method over manager-only. Peer-to-peer has a 35.7% higher chance to impact financial key performance metrics than manager-only.

Broader Engagement

Happy and appreciated employees also translate to broader engagement company-wide. Engagement is often overlooked as a key benefit but it is crucial to morale and company culture. Leading a company with poor company culture is a difficult undertaking and not sustainable. 85% of companies that allocated 1% or more of their payroll to employee recognition see a positive impact on engagement.

Enhanced Employee Satisfaction

Giving appropriate recognition ranks very high when it comes to employee satisfaction, ideally peer-to-peer but manager-only is a sufficient starting point. When employees were asked how managers could improve satisfaction and engagement 58% simply answered ‘give recognition’.

All of the benefits mentioned previously tie together and contribute to enhanced employee satisfaction.  

How to Successfully Implement and Manage Employee Recognition Programs

It’s one thing to understand the importance and benefits of employee recognition programs. It’s another to properly implement and manage them. The success of employee recognition programs comes down to how they are structured and managed. If you are in a larger organization the head of HR should definitely spearhead this initiative to ensure proper implementation and acceptance within the company culture.

If you can make the business case for recognition incentives it’s time to sit down and draft policies and design the programs. The terms should clearly define aspects such as eligibility requirements, approval process, types of awards, performance goals, the threshold for awards, etc.

There are a few factors that will increase the odds of these programs succeeding. Are the programs sufficiently funded? Are they aligned with your goals, values and mission statement? Are they timely and effectively managed? And lastly, are these programs regularly evaluated. Keep these questions in mind during the design phase.


Has your business plateaued in terms of growth? Are your key performance metrics down? When we analyze a business or business department within a larger organization we tend to focus on the symptom, not the cause. Simply injecting more capital into advertising or technology might just be a Band-Aid. The underlying cause could be unsatisfied employees.

Whenever you are facing plateauing or declining performance it’s worthwhile revisiting your employee recognition programs. If you don’t have those in place now is a good time to think about how you want to structure and manage them. Implementing such an initiative is no easy feat and takes time and resources but as the eight major benefits highlighted above indicate it’s a worthwhile investment.

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