Measuring the Effectiveness of Rewards & Recognition Programs

Recognition programs have existed for a long time and have become a staple in the modern workplace. Just like snowflakes, no two programs are exactly alike. So, what goes into making a best-in-class rewards and recognition program? Knowing what’s working and what’s not.

Why Measuring Recognition Effectiveness Matters

Peter Drucker once said, “If you can’t measure it, you can’t improve it.” Like any initiative in your organization, measuring the success of your recognition program can help you make refinements to make it more personal and impactful. 

The Shift From Perks to Strategic Recognition

In the 1980s, the concept of employee recognition was starting to become more mainstream. During that time, employee recognition was still in its infancy and limited to plaques for employee of the month, or a pat on the back and a gold watch after 30 years of service.

Now, companies are shifting from recognition being a “perk” to viewing it as a strategic lever to increase retention and productivity. Nearly 80% of employees said having a recognition program had a favorable effect on their engagement and motivation. In a market where having “the best” on your team can make or break your company, retaining your top employees is vital.

What “Effective” Recognition Looks Like

So, the million-dollar question: what does effective recognition look like? This will look different based on every company and what it thinks is important. Each leadership team will value certain aspects differently. However, there are some core pillars that it follows.

1. It happens often - Recognition isn’t just a once-a-quarter type of event. It’s something that happens consistently and in the moment.
   
2. It’s authentic - Recognition ties back to specific moments, and the feedback that they get is heartfelt - not generic “atta boys.”
   
3. It’s company-wide - Recognition is happening at all levels of the company. Manager to employee recognition, peer-to-peer recognition, and celebrating career milestones.
   
4. It matches your company values - Recognition should tie back to your company values. Consistently highlighting your company values reinforces them with your employees.
   
5. You’re feeling the impact of it - An effective recognition program will start to show tangible signs that it’s working. For example, increased engagement scores, lower turnover, decreased absenteeism, etc.

The Core Measurement Model: Leading & Lagging Indicators

To understand if your program is working, there are two parts that you’ll want to focus on. Leading indicators and lagging indicators. These indicators act as checkups and warning flags on how your recognition program is going. Watching these can help you make small changes that lead to success or prevent disaster.

Leading Indicators (Behavioral & Program Signals)

The leading indicators are the signals that you want to watch as the program is happening. Leading indicators are the “behavioral signals” of your program. They will tell you if your employees, managers, and leadership team are actively participating in the program.

Some of the important indicators that you should be tracking are:

• Frequency of recognition: Are people actually recognizing each other? You want to measure that recognition is happening on a frequent basis in your company and isn’t just a “once a month” type of activity.
  
• Participation by team: Recognition should be a company-wide activity. Look to identify teams, departments, or leadership levels that need to be more involved. Is the accounting team shouting people out? Or maybe the C-Suite needs to be more consistent in sending shoutouts.
  
• Core values: With a digital platform, teams can measure the core values that are being used when shouting out employees. Are employees giving generic “good jobs,” or are they tying shoutouts to your company values?
  
• Reward Redemption: Part of incentivizing employees to give shoutouts is tying them to rewards. This boosts employee participation in the short term while building long-term habits of employee recognition. Measuring where employees are redeeming their points (global rewards catalog, custom rewards, or in a swag store) can help you plan for the future.

Lagging Indicators (Business Outcomes)

Lagging indicators are the “bottom-line results” of the program. These are the numbers that the CFO and C-suite will care about. Essentially, we’re trying to answer the question, “Did this move the needle?”

While these numbers take longer to move, they are the ultimate proof that your recognition program is an investment. Commonly tracked lagging indicators include:

• Voluntary turnover reduction - This is a huge one for companies. You won’t eliminate all turnover, and you need some while you “manage out” underperforming employees. However, this is a great metric to monitor for companies that are struggling with high turnover. Over 70% of employees said that they’d be less likely to leave if they were recognized more.
• Increased eNPS and engagement scores: The impact of consistent recognition can be seen through eNPS and Engagement Survey scores. Employees who feel appreciated are more likely to respond favorably in employee engagement surveys compared to employees who don’t feel appreciated.
• Productivity lifts: Recognition can also have a tangible impact on productivity. Recent studies show that engaged employees are 18% more productive than unengaged employees.
• Customer or patient satisfaction: Another common indicator is customer and patient satisfaction scores. It’s been shown that when employees are engaged and feel valued, they transfer those same feelings to the customers and patients that they interact with. Companies that had a successful employee recognition program reported 10-20% higher customer satisfaction ratings compared to companies that didn’t.

Data Sources: What to Track and Where to Get It

Now that you know the signals that you should be tracking, it’s time to get to the source - the data source. The more complete picture of the data that you have, the stronger your reporting will be to the C-suite and board of directors. You’ll want a blend of qualitative (feelings/open-ended comments) and quantitative data (the numbers) to help you understand how things went and what narrative to share.

Quantitative Data

Your quantitative data are your hard numbers. These are your surveys, graphs, and pretty reports that executives love. These numbers can usually be pulled directly from your recognition platform. Generally, the first level of quantitative data that you’ll look at is things like:

• Employees logged in
• Percentage of employees who were shouted out
• Managers shouted out

You’re not going to see any improvement to company-level metrics if employees aren’t using it, and employees aren’t going to use it if they’re not even logged in.

Second-level quantitative data is data that is tied to those business outcomes. These are usually lagging indicators and tie closely to business outcomes. Tools like Nectar Engage can help survey employees through multi-channel distribution to track these outcomes. 

Qualitative Data

Having the raw data is great, but data without context is pointless. Qualitative data is where you gather the context around how employees are feeling. It’s important to gather both confidential/anonymous feedback about the program and public information about it.

Confidential or anonymous surveys allow employees to speak freely about their feelings. When employees take an eNPS or Engagement survey, they have the ability to add a free response to their scores. This allows employees to speak freely about the good, the bad, and the ugly without the fear of retaliation.

Gathering non-anonymous feedback is also helpful to hear directly from employees on what changes you should make. This format allows you to gather valuable data while being able to dig deeper and ask clarifying questions on how to improve. 

Combining Data for Real Insight

Raw data is a lot like a pile of LEGO bricks - there’s limitless potential in what you could create. The real power is in the ability to take that raw data and tell a story with it. As you sift through the data, you start to understand trends and themes about what is going on, and the picture starts to become clearer. 

Now, we have to combine the quantitative data with the qualitative data. This is where the magic begins to happen. Instead of piles of red bricks, blue bricks, and yellow bricks, you start to see a door, a roof, and walls coming together.

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Analysis Frameworks for HR Teams

The next step in your plan is to turn those insights and stories into a plan. How will you take what you’ve learned and make changes? Here are three specific frameworks you can use to analyze your Rewards & Recognition (R&R) program and prove its value.

Recognition Habit Analysis

Identify ways that recognition is happening across the organization. A simple way is to monitor a leaderboard of users who have a weekly recognition streak going. You can also analyze shoutouts happening across your organization and break them down by peers, managers, or executives. Combining this data will help you understand if recognition is just a once-a-month activity or if true recognition is happening consistently and has become a habit.

Program Maturity Benchmarks

With any good recognition program, you will launch it and learn what is working and what isn’t. You’ll make changes and tweaks throughout the life of the program. Your recognition program is a journey, not a destination. Along that journey, you may see some benchmarks to help you gauge where you’re at.

• Basic - You’ve just rolled out a system, but it’s still manual and mostly top-down recognition.
• Intermediate - You’re now on a recognition platform and have some peer-to-peer recognition happening, but managers and/or executives still struggle with consistency.
• Advanced - You’ve integrated your recognition platform with daily tools (Slack or Teams) and have consistent buy-in from leadership on the value and impact of it. The usage and feedback you get from your program guides discussions about culture and engagement for your leadership team.

ROI Calculation Framework

To get to that advanced level, your executives want to see a return on investment (ROI). First step is to align on what metrics your team cares about (e.g., voluntary turnover, engagement, productivity, etc).

If you wanted to calculate the ROI of your voluntary turnover, you would take the reduction in turnover percentage and multiply it by the average cost to replace a staff member. For example, if turnover of a 100-person company dropped from 35% to 30%, and the average cost to replace an employee was $50,000, that would equate to approximately $250,000 saved.

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Employees saved X Cost per Replacement = Total Savings

5 (Employees Saved) X $50,000 (Cost) = $250,000

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Reporting Insights to the C-Suite

Numbers alone won’t win over the C-Suite. Translating that data into a narrative that aligns with your business's priorities is crucial to getting a seat at the table and being taken seriously. Your executive team isn’t looking for a list of who sent the most shoutouts, but wants to see how recognition is moving the needle.

Executive Dashboards

An executive recognition dashboard should go beyond activity and show impact. They are a great way to take the quantitative data, combined with your lagging indicators, and present them to your leadership team

Key metrics include employee and manager participation, recognition frequency, and signals of quality such as peer-to-peer activity and alignment with company values. Trends over time help leaders understand whether recognition is becoming a consistent, meaningful behavior across the organization.

Storytelling With Data

When you combine your raw numbers with visually appealing charts and a carefully thought-through narrative, it can take your recommendations to the next level. This is your chance to take the dashboards and show them how this is impacting the business.

Look for opportunities to report out on this consistently and share the impact the program is having. Opportunities like quarterly readouts, all-hands meetings, or a culture Tiger Team.

How Nectar Simplifies Measurement

Measuring the effectiveness of your recognition shouldn’t be harder than running the program itself. Nectar makes it easy for HR teams and people leaders to gather recognition data and turn it into actionable insights. 

Whether it’s pouring over the shoutouts report to see how many people and which teams are utilizing shoutouts. Or, analyzing trends in the employee Net Promoter Score (eNPS) survey to track employee satisfaction and uncover important workplace trends. Nectar helps your team make better culture decisions faster.

Common Pitfalls (And How to Avoid Them)

Even the most well-intentioned plans can have shortcomings if they’re not planned for. Here are some common pitfalls to watch out for and what you can do to save yourself a major headache.

Over-Reliance on Volume Metrics

Many companies rely solely on the numbers (e.g., total number of shoutouts sent, percentage of managers sending shoutouts, etc). They fail to look deeper than the surface-level numbers and hear from employees on how the program is actually doing.

Solution: To avoid this pitfall, combine your participation and usage data with your open responses feedback from your engagement surveys. Those additional context clues can help you paint a more complete picture of the state of your recognition program. Also, consider bringing in groups of your best (and worst) power users to see how it’s going for them.

Inconsistent Manager Participation

The managers are the lifeblood of your program. If your managers aren’t actively participating in recognition, it’s going to fail. Inconsistent manager recognition can lead to pockets of poor engagement across the organization.

Solution: Visibility for managers on how they’re doing makes it easy to see who’s bought in and who might need some additional coaching. The manager report can display participation rates, employees who haven’t received a shoutout, and other relevant information. HR should look for ways to make recognition a standard part of their training. You can also look for ways to incorporate regular reminders through your internal comms strategy.

Tracking Rewards But Not Recognition

Another common pitfall is focusing too much on rewards. Teams get hyper-focused on if employees are redeeming points for swag more often than gift cards or other items. While these are important for tracking your budget, they are only one piece of the recognition experience.

Solution: Remember that people don’t stay at your company for a $25 gift card. They stay because they feel valued and appreciated. Your goal with building a healthy, sustainable recognition program is to focus on getting employees to give authentic recognition consistently. 

Measuring Once Instead of Continuously

Sometimes recognition is a major priority for an executive team for a quarter or two, but then it falls off their radar, and they never look at it again. What worked in month one might not work in month 12.

Solution: A good recognition program should continue to evolve over time. The leadership team should be constantly tweaking and making small adjustments to do better, just like with any other department in the company.

The companies that get the most value from rewards and recognition programs are the ones that treat measurement as a compass, not a report card. They use data to understand what's working, course-correct when needed, and continuously improve the employee experience.

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