I didn’t think so.
Not too many experts share this kind of information.
In fact, very few leaders, consultants or vendors actually tell you how you can save money from using exceptional recognition practices or well strategized and designed recognition programs. They may not even know how themselves.
But I am going to spill the beans. I will share some powerful information with you. I will tell you how recognition can help you and save you dollars, euros and pounds sterling (other currencies included too!).
Let’s save you some money with recognition.
Understanding How Recognition Impacts Results
You have to start with the understanding that giving authentic recognition in a strategic way lifts people to perform at their peak and produce the results you are looking for.
I am not talking about a magic bullet cure here or the grand fix-it-all-problem-solver.
You are going to have to invest in educating and training managers to give recognition the right way with meaning, purpose and care.
You will have to show managers and employees alike how to use your recognition programs – the technology delivered recognition – in a human manner and not just machinated transactions.
You have to use analytics with your recognition activities and correlate these numbers with your key performance indicators and HR information systems.
The Significance of the Recognition-Performance Chain®
You must learn there is a Recognition-Performance Chain®.
The Recognition-Performance Chain® follows in this way. When recognition is given the right way your actions create positive relationship strength between the giver and receiver of recognition. It‘s that positive relationship strength which increases employee engagement. And better engagement elevates key performance indicators (KPIs) and other benchmarked metrics.
To find out how you can save money with recognition you have to measure recognition activities and your KPIs.
By analyzing the correlations between your employee recognition activities and organizational KPI data you can determine the overall business impact and Return on Investment made.
Saving Money Through Recognition
Let’s take a look at employee turnover.
I’ll look at tellers or customer service representatives (CSR’s) in the banking industry.
Average salary we’ll peg at $25,000 and the annual turnover rate in 2014 in the banking industry was 17.4 percent. Turnover costs we will say are at least an average of 20 percent so that would be $5,000 for each employee who leaves.
As a regional bank in the U.S. we’ll say you have 100 CSRs.
You end up losing 17 employees per year at $5,000 turnover costs each totalling $85,000 per year to recruit, orient and train your new replacement CSR’s.
Average percent of base salary spend on recognition in the financial industry is 0.49 percent, or in the case of these 100 CSR’s, that would amount to $12,250.
If you can prevent 10 percent of your employees from leaving through better and more frequent recognition you would save $10,000, which almost pays for the entire recognition budget.
But That Is Not All…
So while this scenario only focused on turnover which brings in an 80% return on investment, recognition will also help with other important metrics too.
By educating managers on how they can become more effective with giving recognition, we’ve found there is a direct correlation with improving most KPIs.
For example Rideau Recognition Solution’s research with our clients found:
- Productivity levels increased by 5.8 percent
- Customer satisfaction increased by 4.2 percent
- Employee engagement improved by 2.9 percent
Start adding up the business impact and savings gained on these measures as well as turnover and you can well see how recognition will save you money.
The key is aligning recognition with your business strategy so your recognition programs and practices help you achieve your goals.
This is how you can make recognition an investment and not an expense.
Question: How are you making money from giving employee recognition?
Roy is no longer writing new content for this site (he has retired!), but you can subscribe to Engage2Excel’s blog as Engage2Excel will be taking Roy’s place writing about similar topics on employee recognition and retention, leadership and strategy.