10 Steps To Build An Effective Employee Recognition Program

Employee recognition programs show appreciation for your workers’ contributions. They also encourage everyone to stay motivated and continue working hard. But as you’re building your program, it’s normal to have a number of key questions buzzing around your head:

• How often should you reward employees?
• How do you decide who gets recognized? 
• What kind of rewards should you offer?

This guide answers these questions and covers everything you need to know about employee recognition programs. We'll take a data-backed dive into the benefits of recognition and 11 steps to create your own fully functioning program.

What Is An Employee Recognition Program?

Employee recognition acknowledges your workers' contributions to the company, both on a small and large scale. An employee recognition program structures this practice with clear processes and systems for how you and your company will recognize your employees' achievements and success. These programs cover various:

• Recognition methods: Verbal or written praise, including shoutouts, points-based recognition, employee awards, etc. 
• Recognition preferences: Public or private praise 
• Recognition flows: Peer-to-peer, top-down or 360-degree 
• Recognition budgets: Expensive and inexpensive options

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What Does Employee Recognition Include?

Effective employee recognition is a repeatable recipe that includes the following crucial ingredients:

• Recognizing certain behaviors your employees have exhibited or goals they’ve met, such as supporting a new team member or beating a sales target. 
• Delivering the recognition, perhaps as a public shoutout in a Slack channel or mentioning the employee's name in a town hall. 
• Linking the recognition to a tangible reward. Some employers incentivize recognition by offering cash prizes, redeemable points, or bonuses.

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Why Is Employee Recognition So Important?

Employees already receive compensation and perks in exchange for the hours they work. Yet, going the extra mile to appreciate their contributions produces the following recognition benefits for employers and their workers:

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Recognition Increases Employee Engagement

It’s no secret that the working world suffers from an engagement problem. Gallup’s research found only 33% of employees were engaged in their work and workplace in 2023, down from a peak of 36% in 2020.

Regular appreciation can turn the tide on worker disengagement. According to Nectar's recent recognition survey of full-time US employees, 81.9% of respondents confirmed that recognition for their contributions improves their employee engagement. This is backed by a recent Gallup study concluding employees who feel appreciated are more engaged.

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Recognition Boosts Motivation To Succeed

When employees are acknowledged, this boosts their motivation to perform. They want to impress their boss and colleagues and try their best daily.

Nectar’s survey confirms that 83.6% of employees feel recognition affects their motivation to succeed at work. However, it’s interesting to note how different subsets of workers respond to recognition differently. While older employees are less motivated by recognition, the following groups are most positively impacted:

• 35-44-year olds 
• Post-graduate degree earners
• Working earning $75,000-$99,999.

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Recognition Skyrockets Productivity

Unsurprisingly, when employees are engaged and motivated, this injection of energy improves productivity, both in terms of the quality and the quantity of output. Nectar’s research confirmed that 77.9% would be more productive if they were recognized more frequently.

The numbers expand to 85% of 18-24-year olds and 84% of workers earning $100,000+ who would be more productive when powered by praise.

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Recognition Enhances Job Satisfaction

Meaningful recognition positively impacts job satisfaction, according to 87% of employees surveyed by Nectar. When people are treated well by their employers and feel appreciated, their job satisfaction increases. This motivates them to continue working for the company and invest in its success.

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Recognition Improves Employee Retention

It's hard to hang onto your best workers, and top performers are constantly looking for new opportunities. Nectar's recent retention and turnover statistics reveal:

• 46% of employees plan to look for work in the next three months
• 41% are currently experiencing employee burnout at work 
• 68% of employees are confident they could quickly find a new job in today's market

Nectar’s research finds a clear link between giving appreciation and improving retention—71% of employees say they’d be less likely to leave their organization if recognized more frequently. Put simply, appreciating your employees’ achievements could save you an average cost per hire of $4,700, according to SHRM data.

Guna Kakulapati, Co-Founder and CEO of CureSkin, also reminds us that tying promotions to recognition can improve employee loyalty and help employees visualize a future at the company:

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‍"Promoting from within is the most impactful way to honor a team member's hard work and achievements. This is especially true when the move up the ladder aligns with the employee's career aspirations and long-term goals. Celebrating their contributions and advancement in front of their peers, superiors, and subordinates inspires the rest of the team to up their game."

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Recognition Fosters A Culture Of Psychological Safety

Not all contributions are successful. Some employees will suggest ideas or produce work that doesn't always pan out. However, employers who reward their employees' efforts and positive intentions and encourage them to keep going create a zone of psychological safety. The result is everyone is free to speak up, be creative, and try their best without fear of failure. 

Addie Lipson, MASJCO, PHR, Human Resources Business Partner at General Parts, explains:

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“Employee appreciation starts with the idea of psychological safety—how secure people feel to be themselves, present in ways that are comfortable, voice their opinions without fear of repercussion, feel valued for who they are as an individual.

When approaching employee appreciation, ask yourself, ‘What makes this person feel psychologically safe? What can I do to build an environment that fosters that?’”

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Recognition Builds A Sense Of Community And Culture

When meaningful recognition flows and cascades throughout your organization, this creates a sense of community, which is especially important in remote work cultures that miss out on watercooler interactions. Hanne Wulp, founder and CEO of Communication Wise, describes the social psychology behind recognition:

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“Humans aren’t a solitary species; we don’t live or work in a vacuum. One of our basic psychological human needs is recognition—being heard, seen, and valued for our performances. That is worth paying attention to in terms of setting up and maintaining an employee recognition program.”

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Sadly, Nectar's research revealed that team-wide recognition may be lacking, with 63% of employees wishing their colleagues told them “thank you” more. Companies that get this right at all organizational levels will create a positive environment where employees feel comfortable sharing ideas and helping each other grow. In particular, Andrew Meyer, CEO of Arbor, describes the domino effect that happens when leaders buy into sharing recognition: 

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“We’ve noticed that when leadership recognizes teammates, employees follow suit. They’re more encouraged to shout out their coworkers’ contributions and achievements because they see their managers doing the same. It creates a very welcoming, positive environment that has increased our employee satisfaction and retention.” 

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Similarly, Liza Farm, an HR Manager at Master Builder Solutions, suggests that while establishing an employee recognition program at work can build a strong workplace culture, the acts you recognize also play their part in shaping that culture:

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“Peer-to-peer programs are great for eliciting culture and the right behaviors at work. Recognition programs should be a strategic value—[they should] add to what the company is trying to achieve in regards to engagement, behaviors, culture, and values.”

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10 Actionable Steps To Create Employee Recognition Programs

Setting up your employee recognition programs from scratch can feel daunting. Use the following eleven steps to build a program everyone in your organization is excited to participate in:

Step 1: Determine Your “Why”

Understand "why" you want to invest effort and energy into your employee recognition program. Remaining grounded by your "why" as you plan and roll everything out prevents you from becoming demotivated if your program encounters some bumps in the road. 

Start by taking a few moments to write down why your team members would benefit from this program. Nancy Stewart, HR Leadership Consultant at Talent Alchemists, describes the importance of pinpointing your motivation: 

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"Without a "why," you'll never know if you succeeded. The "why" could be anything from improving employee retention to driving a team-centric culture. This purpose provides direction and prescribes the metrics needed to gauge the program's progress." 

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Step 2: Include Best Practices For Giving Recognition

Nectar’s approach to recognition is rooted in the principles of neuroscientist Paul Zak, as detailed in his book Trust Factor. When Zak talks about recognition, he often refers to a concept called “Ovation,” which is when people experience a release of the neurotransmitter dopamine.

Dopamine is important in the working world because it improves people's moods while increasing their focus and energy on projects that matter to them (and the company's bottom line.) Dopamine is released when your employees anticipate rewards. So, if you use the anticipation of rewards positively, you can build a workforce that's excited and focused on creating stellar work.

According to Zak's research, recognition will have an optimal effect when it is:

• Unexpected
• Personal
• Tangible
• Prompt
• Frequent
• Public or visible
• Values-based (we added this one)

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Unexpected

Zak said, "The brain loves surprises because it means something new has happened, and this focuses our attention on it."

Add small, unexpected rewards like quick handwritten notes to supplement bigger, consistent ones, such as celebrating employee milestones or years of service. Aim to find little ways to delight and encourage your team. Zak recommends you schedule out unexpected rewards.

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Personal

Every individual in your organization is unique, and as you work with someone, you get to know their quirks, likes, and dislikes. Incorporating these personal tastes into your employee recognition program is the best way to make it flourish.

Zak outlines the power of personalization: "The personal part is important. If a team member receiving Ovation is a chocolate lover, purchase a fancy box of chocolates as a gift. Then, present the Ovation at your next all-hands meeting or the day the project finishes."

Some ways to add personalization to your incentives program include: 

• Creating forms during onboarding to learn what staff members like or dislike 
• Sharing documents with managers to collect employee preferences 
• Offering a buffet of rewards for your employees to choose from, as you can with Nectar’s redeemable points-based system

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Tangible

Tangible rewards have a powerful impact on the human brain, which is hardwired to want to replicate the achievement and receive the reward repeatedly. Zak explains:

"When the reward is tangible, seeing it after the initial Ovation and showing it to colleagues or one’s spouse strengthens the neural pathways linking the achievement to the reward."

Some examples of tangible rewards include:

• Gift cards
• Company swag (like a t-shirt or backpack)
• Products on Amazon
• Trophies & award certificates
• Experiences (concert tickets)

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Nectar Tip: Tangible recognition doesn’t have to be expensive. As long as you show your appreciation in a way that can easily be shared with others, your rewards are tangible. Check out these employee reward examples and ideas for further inspiration.

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Prompt

Awards like "Employee of the Year" are great for recognizing general employee awesomeness, but they're infrequent. Rewards must be prompt for maximum impact so employees associate a particular action with specific rewards. Jeff Mains, CEO of Champion Leadership Group, agrees: 

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“Prompt and immediate recognition is a fundamental aspect of our employee recognition program. We have created a culture of appreciation where expressing gratitude and acknowledging achievements are ingrained in our daily operations. Additionally, our internal communication platforms enable quick and accessible avenues for employees to celebrate their peers' accomplishments."

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Frequent

Nectar's research reveals that people receiving weekly recognition are 153% more likely to feel valued at work than those receiving yearly recognition. Paul Zak explains, "Ovation for small things is very important; it should become a constant practice in your organization."

Even if it's just a high-five and a job well done, make sure you’re keeping up with how often staff members receive feedback and praise, and deliver reminders accordingly. Oliver Goodwin, CEO of Synthesys, notes the results of incorporating frequent praise into your daily work: 

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"Giving your employees frequent small gifts for recognition demonstrates appreciation for their efforts, boosts morale, and reinforces positive behaviors in the workplace. It creates a culture of appreciation, leading to increased employee engagement and job satisfaction."

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Public Or Visible

Praise that is public or visible to other coworkers and company stakeholders serves a few purposes:

• It builds attachment to other team members
• It makes work more enjoyable
• It raises the performance of people not being recognized (who want to get in on the action, too!)

Mark Pierce, CEO of Cloud Peak Law Group, weighs in on why public trumps private recognition:  

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"Public recognition encourages employees to step up their work performance because everyone wants their chance of being featured in the spotlight. When we switched from private to public recognition, overall performance improved, and employees were more motivated to go above and beyond rather than just doing the bare minimum."

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Values-Based

Most organizations have a list of company core values, but it’s challenging to determine how those values play out at the individual level. Using core values in your rewards program tracks and activates them to become an integral part of your culture.

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Nectar Tip: Consider setting up a system to allow peers to recognize each other. For example, you could allow employees to award points to their colleagues, who redeem these for rewards of their choice. Companies like Statista, PropLogix, and Sparks use Nectar's recognition platform to praise employees who live the values of their respective organizations.

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Consider Potential Employee Recognition Mistakes

Once your employee recognition program has launched, don’t feel discouraged by any bumps in the road. Even leaders with the best intentions can fall victim to employee recognition mistakes. Recognition can do wonders for your team, but simple mistakes like not getting the proper buy-in from company stakeholders or infrequent recognition make it hard to get your program off the ground. Thankfully, companies like Nectar have studied employee recognition programs, and we have a ton of advice to help you create a successful program from the ground up.

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Step 3: Carve Out A Budget

Effective recognition is an investment that delivers a return in the form of increased productivity and better peer engagement. Unstructured approaches to recognition often involve spending hundreds or thousands of dollars on gift cards or bonuses, but they have one thing in common—they aren’t moving the needle. The alternative is to create a set rewards and recognition budget, however small.

What costs should you expect to incur?

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Cost Of Rewards

The cost of rewards depends on:

• The number of employees in your organization 
• Your points limit (how many points employees can give out)
• The points-to-dollar ratio your system uses (for example, Nectar uses 10 points to $1)
• Any discounts or special deals you have with retailers

Expect a boost in rewards spending around holidays and birthdays, when people are most likely to treat themselves.

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Administrative Costs

The time and energy your HR staff and leaders spend managing your recognition system comes at a cost. Factor the following into your admin costs: 

• How long it takes to roll your program out to staff members
• The time spent on answering staff queries 
• Any troubleshooting of rewards redemption processes, etc.

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Employee Recognition Software

Although you can run a recognition program without technology, investing in a dedicated platform helps you see the bigger picture and analyze your strategy’s effectiveness. 

An employee recognition software program like Nectar is the easiest way for companies to manage appreciation. Our software administers all the rewards and provides detailed analytics about your program and its effectiveness. 

With Nectar pricing starting from $2.75 per user/mo, the subscription cost typically offsets the costs of managing the program internally.

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Step 4: Define Clear Recognition Program Objectives And Criteria

Companies can define their appreciation strategy in granular detail using an employee recognition program policy. Your document should include guidelines on the following key points:

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Who Should Receive Recognition?

Regardless of your employees' rank, role, age, or experience, recognizing everyone's contributions proves they matter and encourages them to give even more effort. Ryan Faber, Founder and CEO, describes how this style of recognition inclusivity is a priority at Copymatic: 

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"We're aware of the significant benefits of showing our staff we value and appreciate them. No matter their position or degree of expertise, we truly believe everyone deserves to feel significant and respected. By recognizing their accomplishments, we confirm their value and kindle a strong flame within them."

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When Should Employees Receive Praise?

Your employee recognition program should include regular praise and positive feedback. Special occasions such as birthdays and work anniversaries also deserve appreciation. Automate these crucial milestones so you never miss an important date.

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How Often Should Praise Happen?

Consider how frequently your employees should exchange praise and how you will enforce this. Plan frequent check-ins to ensure recognition is consistent across departments. It's also worth exploring what you'll do if certain departments aren't participating as readily in your recognition program as others.

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What Type Of Rewards Will You Offer? 

Recognition programs can run without rewards, especially if your employees are intrinsically motivated. However, it's worth including more tangible items such as gift cards, swag, or experiences in your rewards program. Jenna Nye, CEO & Founder of On The Strip, offers some considerations for doing so: 

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“Rewards should be commensurate with the recognition they’re being given for. For example, when an employee’s performance is exceptional and plays a large role in a project’s success, they can be rewarded with something like a $100 gift card, whereas recognition for small, everyday tasks can be done without tangible rewards. This makes the tangible rewards more meaningful and impactful.” 

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Nectar’s approach to rewards: At Nectar, most recognition is tied to points. A small task might net 5-10 Nectar points (equal to $.50-$1.00.) Employees save up these points for larger rewards. Smaller events might not be immediately redeemable for a prize, but every action adds up to something bigger.

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Step 5: Involve Managers

Manager involvement plays a gigantic role in your program's success. If your staff see their managers enjoying the program and using it to give feedback, they'll do the same. Follow these best practices to achieve manager buy-in and ensure they stick to the rules of your program:

• Select a group of managers to champion your recognition program 
• Pick influential managers already rewarding their team frequently 
• Discuss the importance of frequent feedback with your managers
• Create a practical, budget-friendly approach your managers can understand 
• Start building a culture of recognition by appreciating the work your team is currently doing
• Stress the importance of all rewards and appreciation going through your program rather than managers paying for additional gift cards and bonuses on company cards, for example.

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Step 6: Keep Your Employee Recognition Program Top Of Mind

The key to ongoing participation in your recognition program is staying top of mind with the employees you expect to use it. Here are a few ways companies can keep their program visible:

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Bake Recognition Into Your Workflows 

As you build a culture of recognition at your company, make it easy for employees to give and receive praise where they're already spending their time. If people need to download a new app or navigate to a new tab or site, they may be less likely to use your program. Cynthia Davies, CEO of Cindy’s New Mexico LLC, explains how integrating recognition with their current tech stack has been essential:  

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"We use a Slack channel for employee recognition because that's where the majority of our communication happens. We emphasize peer-to-peer recognition, and this makes it easy for colleagues to write a quick note and post it on the channel. It ensures all recognition is public and visible, which makes it have more of a positive impact."

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Make Praise Visible 

Decide where your positive feedback will live at your organization so it's visible to your team and managers. Some ideas include:

• Streaming it on monitors/TVs around the office
• Using a Slack channel to host your recognition as it comes in
• Including recognition in public and internal newsletters

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Alex Alexakis, CEO of PixelChefs, agrees with the importance of making praise public: 

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“For your program to succeed, you must constantly promote it. Put up flyers in common areas and send email reminders when the employee nomination deadline is approaching. Also, include information in your employee manuals."

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Remind People Often

It's easy to slip back into old habits when you've been using specific methods for years. Keep your people on track by reminding them how you'd like them to recognize each other in your organization. Ryan Faber, Founder and CEO of Copymatic, suggests: 

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“Allow the echoes of appreciation to resound across the company as a gentle reminder to shed your old ways and adopt a new appreciation-centered culture. Harmonize your voices in the symphony of shared success, encouraging one another to rejoice and pull one another up and ensuring acknowledgment becomes an essential part of your group's path.”

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Step 7: Make Recognition Simple

One of the most critical parts of building a program for team recognition is making it simple. Giving praise to a colleague should be simpler than writing an average email. You'll also want to ensure your employees can do it from several devices so they can quickly give praise from the palm of their hand, at their desk, or in front of their TV. 

Nancy Stewart, HR Leadership Consultant at Talent Alchemists, confides: 

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“One recognition program I launched was a massive failure because of the bureaucracy involved. Instead of being handed a new iPad in the moment, a deserving employee had to wait weeks for their iPad to arrive and then had a tax adjustment made to their paycheck. Everyone was frustrated and angry, the exact opposite of what we were going for. After one quarter, we pivoted to a new program.”

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Any friction that causes people to stop and think about giving appreciation is deadly to your employee recognition program. To ensure it becomes a regular part of their daily routines, train staff to give praise and use a simple process anyone can follow (even the tech-averse!).

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Step 8: Trust Your People

There's a fine line between wanting an employee recognition program you can control and micromanaging it to the point where you exhibit distrust in your employees.

Trust impacts many workplace experiences. SHRM states, "If employees don’t trust their leaders, they won’t operate efficiently."

Create an employee recognition program with trust at its core by removing approvals from the process. What does this mean? Instead of a manager or administrator approving every reward or gesture of recognition, give your employees the freedom to choose how they use their points and awards budget for the best results. 

As an option, platforms like Nectar allow companies to build guardrails into their program to monitor or prevent employees from abusing the system by giving too many points to the same person. Trust your people to do the right thing and allow them to appreciate the colleagues who support and collaborate with them the most.

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Step 9: Kick Off Your Employee Recognition Program

Program kick-off is essential to a well-oiled employee recognition program. If your staff members aren’t used to praising one another, you can’t just unleash the program without any fanfare. Instead, announce the program in a way that the whole company can hear and connect with. Some options include:

• Using multiple communication modes such as meeting announcements, emails, internal newsletters, and Slack/Teams messages
• Providing video guides with screen recordings demonstrating how to use the software within your company's ecosystem. 
• Distributing any vendor training materials 
• Creating FAQ documentation

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Nancy Stewart, HR Leadership Consultant at Talent Alchemists, agrees with this last point: 

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“I swear by the efficiency and effectiveness of Employee FAQs and include them with every HR program launch. I create a shared document with anticipated questions from employees and corresponding answers. As new questions arise, I’ll add these to the documents.”

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Above all else, HR leaders are in the unique position of being able to use and explain employee recognition programs. Make sure you publicly use the program you expect others to adopt and become its biggest champion by praising your colleagues—actively and frequently. Ensure your fellow managers are on board with using the program from the beginning so others follow suit.

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Step 10: Measure Your Employee Recognition Program Effectiveness And Make Adjustments

Monitoring the effectiveness of your program ensures that people are participating in it and that recognition in your workplace is working as you hoped and expected. Employee surveys are an essential way to gather key data. A straightforward process to execute this is by doing the following:

• Sending surveys out before program launch to learn where your organization falls short of appreciating its workers
• Repeating the survey a few months post-launch to measure any improvements
• Taking action on the results

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“Actually listening to what employees have to say is another great form of recognition. It isn’t enough to collect data for collection’s sake; that’s a waste of resources. When your talent sees their voices are heard, valued, and acted upon, it creates buy-in for future work culture changes,” says Tarai Kemp Brown, Work Culture, HR Consultant, and Owner of Tarai Alexander, LLC.

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Lean On Survey Analytics

Employee recognition platforms like Nectar provide automatic data. Analyze it to answer the following questions and reveal data trends highlighting larger cultural issues like:

• Are employees using the application?
• What are they saying about each other?
• Who is getting recognized most often?
• Are employees using it enough for low-level staff?
• Does anything stand out about usage numbers between and inside different departments?

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Build Winning Employee Recognition Programs With Nectar 

Creating a successful recognition program might seem daunting initially, but it's easier than you think. By following our 11-step process, you'll be well on your way to recognizing your employees for their fantastic work. Take your time, recognize your team, and create a culture of recognition your organization can be proud of. There's no better way to improve the employee experience, increase engagement, and boost employee morale.

If you're ready to create a stellar recognition program, we have some great resources for you. Feel free to check out our guide to employee recognition software selection or our breakdown of the 15 top employee recognition platforms on the market.

Once you're ready to learn more about Nectar, be sure to book a demo.