Cost Benefit Analysis of Employee Recognition

10 December, 2014

The cost of a recognition system is quite small and the benefits are large when implemented effectively. Meta-analysis conducted by the Gallup Organization in 2003 of the results from 10,000 business units in 30 industries found [a meta-analysis is the statistical analysis of results across more than one study]:

Benefits

  • Increased individual productivity – the act of recognizing desired behavior increases the repetition of the desired behavior, and therefore productivity. This is classic behavioral psychology. The reinforced behavior supports the organization’s mission and key performance indicator

  • Greater employee satisfaction and enjoyment of work - more time spent focusing on the job and less time complaining.

  • Direct performance feedback for individuals and teams is provided.

  • Higher loyalty and satisfaction scores from customers.

  • Teamwork between employees is enhanced.

  • Retention of quality employees increases – lower employee turnover.

  • Better safety records and fewer accidents on the job.

  • Lower negative effects such as absenteeism and stress.

Costs
  • Time spent in designing and implementing the program.

  • Time taken to give recognition.

  • Dollar cost of the recognition items given

  • Time and cost of teaching people how to give recognition.

  • Costs of introducing a new process. 2

 

Individual Performance-------Recognition-------Increased productivity & satisfaction-------Increased value to your organization

 

Measurable improvement in profitability

Measuring the direct impact on profitability is difficult because it is only one of many factors influencing employees in every workplace. However, case studies make a persuasive case that bottom line benefits have been achieved through recognition schemes. The Walt Disney World Resort established an employee recognition program that resulted in a 15% increase in staff satisfaction with their day-to-day recognition by their immediate supervisors. These results correlated highly with high guest-satisfaction scores, which showed a strong intent to return, and therefore directly flowed to increased profitability.

Likewise, Sears, Roebuck & Co. found for every 5% increase in employee attitude scores, they saw a 1-3% increase in customer satisfaction and a 0.5% increase in revenue.

On the other hand, the cost of extremely negative or ‘actively disengaged’ workers comprises about 10% of the US Gross Domestic Product annually, including workplace injury, illness, employee turnover, absences and fraud.

 

REFERENCES: excerpt from "Why employee recognition is so important", by Kim Harrison, Consultant, Author and Principal of www.cuttingedgepr.com

 

 

« previous post   |   next post »