What Is Employee Recognition? Here’s Everything You Need to Know

Businesses depend on their employees. Whether it’s creating culture or dealing with adversity, employees drive it all. That’s why it is so important to make sure your employees feel valued and recognized for their work and contributions.

Common questions about workplace recognition include:

• What is employee recognition?
• What are the different types of employee recognition?
• How can you build an effective recognition program?
• What are your options when it comes to employee recognition software?

In this guide, we’ll explore all that and more as you create or grow your employee recognition programs in 2024.

Ready to see how an integrated employee recognition program can help you achieve your HR goals? Check out the Culture Cloud platform from O.C. Tanner—designed to help your teams thrive at work.

What is employee recognition?

Employee recognition is the act of acknowledging and rewarding an employee for their contribution, effort, or innovation. It doesn’t just have to come from leaders of the company either. Some of the best recognition can come from peers, partners, or even customers.

Employee recognition is typically given as verbal or written praise, posts on internal or external social media, or through tangible rewards like bonuses, points that can be redeemed for gifts or gift cards, awards, or trophies.

Organizations use employee recognition to:

• Improve the company’s culture
• Drive employee engagement
• Boost morale
• Reduce burnout
• Raise productivity
• Develop loyalty
• Increase employee and customer referrals

Why is employee recognition important?

As entrepreneur Richard Branson once said, “Take care of your employees and they will take care of your business.” Our research backs him up. Organizations with strong employee recognition programs report an increase in great work by 1,181%, high engagement by 784%, and thriving culture by 648%.

Employee recognition is an essential part of any organization’s talent strategy. That’s for good reason. When employees are asked, “what is the most important thing your company could do to cause you to produce great work,” their most common response is recognition.

When employees feel valued and appreciated, they not only become more engaged and less likely to leave, but they are also motivated to perform at their very best. For organizations, that means better performance in customer-facing roles, fewer safety incidents, more innovation and invention, and overall higher performance across all aspects of work.

Employee recognition is always changing. Are you keeping up? Freshen up on what employees really want from recognition this year.

What are the benefits of employee recognition?

We’ve covered some of the benefits of an employee recognition program. Now let’s go into more detail.

Improved employee engagement

Recognition is one of the most important places to start for organizations that want to improve employee engagement. That’s because it works. Creating a culture of consistent recognition and appreciation—an environment where employees feel valued and appreciated—is key to improving employee engagement.

Increased productivity

Employee recognition can lead to marked improvements in productivity. When employees feel valued and that their contributions make a difference, they are more likely to go above and beyond.

Reduced turnover

The most productive organizations don’t have enormous turnover. Employees who feel valued and appreciated at work are far less likely to leave. So that’s why the best organizations rely on recognition to sustainably reduce turnover rates.

Better customer experience

Dissatisfied and disengaged employees won’t provide a great customer experience. When organizations appreciate and recognize workers, those employees are more likely to go the extra mile for customers. These interactions improve the customer experience, leading to improved customer satisfaction and loyalty.

Read about how these 5 top companies are building strong workplace communities with employee recognition, leading to retention, engagement, and so much more.

How do you give recognition to an employee?

Everyone is different. That’s why the best employee recognition is tailored to each individual.

Some of your employees might welcome a quiet note and thank you more than an announcement at a big meeting. Others prefer more public shows of recognition. Here are some options for you to provide the right kind of recognition:

Verbal praise

Words are the simplest way to recognize and appreciate people. That can be as simple as saying “thank you.” But the more specific the praise is, the more likely it will be to make a difference. Explain exactly what you are recognizing them for and why.

Written praise

While some employees like verbal praise, others prefer something written. These notes can be shared privately or publicly—and personalized notes work best.

Tangible rewards

Many employees love tangible rewards, especially when coupled with written or verbal praise. These can include monetary rewards or points that can be redeemed for gifts or experiences. The more you connect the reward to the work, the more impactful it will be.

Public recognition

Some people love the spotlight. While not all organizations hold formal award ceremonies, that doesn’t mean there aren’t ways to share employee recognition widely. Try a public announcement during a meeting or a post on social media.

Employee recognition software

Digital notes of appreciation and award nominations are just as meaningful as their verbal and written counterparts. Employee recognition software can make it easier to send consistent, personalized appreciation to teammates no matter where or when they work.

Once the recognition has been sent, employees can also complete their experience with tangible rewards from an online catalog of gifts. Software like Culture Cloud by O.C. Tanner allows companies to combine the best of written praise, tangible rewards, and public (or private) recognition into a single platform for all employees to access.

The types of employee recognition

You’ll find many examples of great recognition programs that you may want to try. Most organizations use a combination of recognition, knowing that the goals they are hoping to achieve can’t be driven by a single type of recognition.

For example, Capital One worked with O.C. Tanner to synthesize data, technology, and humanity in their company’s recognition efforts. This resulted in their ONEderful recognition program, through which 75% of associates in 145 different business units have been recognized. According to feedback on an associate survey, recognition at Capital One “motivates people and puts the organization at the same level as some of the other well-known technology companies that reward associates.”

Here are the most common types of employee recognition organizations integrate into their recognition programs today:

Peer-to-peer recognition

Peer recognition is often the most effective way to show appreciation. That’s because it comes from colleagues who have first-hand experience with the impact that the honoree has made. Peer-to-peer recognition also helps organizations create a consistent and sustainable culture of recognition.

Leader-to-employee recognition

Leader-to-employee recognition is also common. And that’s for a good reason. Leaders who recognize employees see better performance and more longevity. On the other hand, when employees leave an organization, they often point to a lack of recognition as one of the motivations driving them away.

Achievement awards

Achievement awards can be given at the end of a project or at a critical milestone as recognition for contributions that go into achieving those goals. Leaders can give them to everyone who helped on a project team, especially as part of a broader organizational initiative.

Service awards

Service awards for significant work anniversaries honor an employee’s achievements over time, serving as recognitions for loyalty, longevity, and sustained performance.

Performance-based rewards

Performance-based recognition is often focused on sales performance, but in reality, it can be given to anyone who demonstrates exceptional performance or overcomes adversity. These rewards often involve tangible rewards like bonuses or gifts.

See how the best companies give recognition to their employees and leaders.

Budgeting for employee recognition

Based on our work with thousands of clients around the world, O.C. Tanner recommends companies budget $200-$350 per employee per year on recognition. This includes things like:

• Daily formal and informal recognition
• Service award recognition
• Employee appreciation events
• Holiday recognition
• Onboarding recognition
• Specific recognition initiatives and challenges
• Company-wide celebrations

If companies spend any more or any less, there are diminishing returns on employee engagement and feelings of recognition authenticity.

Learn more about the best practices for budgeting for employee recognition at your organization.  

How do you measure the ROI of employee recognition?

Now that we've covered how much to spend on employee recognition, how do you track the ROI of employee recognition?

It can be hard, but it is not impossible. For example, Navy Federal Credit Union measures employee experience every 18 months through an enterprise engagement survey, as well as more frequently with pulse surveys.

Here are some ways to measure the ROI of employee recognition:

Experience impact

A culture of recognition, supported by effective recognition program, should generate hundreds, if not thousands, of positive employee experiences every day. Organizations can measure the impact on employee experience by tracking how many people are being recognized, participation trends, program satisfaction, and inclusivity.

Culture impact

While experience is focused on the individual employee, culture is focused on the organization as a whole. Connecting an individual to the broader purpose and success of an organization is one measurable way that recognition can make a difference for the organization. Six elements that organizations should track are:

1. Purpose—How connected do people feel to it?
2. Opportunity—Do people feel like they can develop and grow?
3. Success—Do people feel like they are doing meaningful work?
4. Appreciation—Do people feel valued for their contributions?
5. Wellbeing—Are people’s physical, social, emotional, and financial wellbeing taken care of?
6. Leadership—Do employees feel they have leaders who support and mentor them effectively?

Business impact

While some people may look at employee recognition simply as a cost, that would be a mistake. A well-designed recognition program can affect many business outcomes. For example, absenteeism and turnover are often tied to lack of recognition. Recognition can also effect things like engagement, satisfaction, productivity, and development growth.

How do you build an effective employee recognition program?

When it’s time to build an effective employee recognition program, prepare for some careful planning and execution. Here are some key steps to get started:

Figure out what you want to recognize

What do you want your program to recognize? Think of the behaviors, actions, and work that drive a positive and productive company culture. Recognition can also help encourage employees to embody your organization’s purpose and values.

After that, you can think about how everyone in your organization can contribute to that and get recognized. It’s important to be as clear as possible about this and to be inclusive of employees across demographic categories, locations, levels, and so on.

Provide the right tools for recognition

You figured out the why. Now figure out the how. You can take several approaches. One is to build recognition into the tools employees already use or to offer an experience unconstrained by those tools.

It’s very important to find a recognition program that isn’t one-size-fits-all. Every employee has different preferences—not everyone wants a gift card.

Consider cultural differences with recognition

If you lead a global workforce, you already know that cultural differences have a huge impact on policy and program effectiveness. Employee recognition programs can thrive or fail based on cultural differences as well.

Make sure you gather feedback from your employees across teams and countries to understand their current feelings about employee recognition so you can best meet their needs and wants with a recognition program.

Read how Dow Chemical reworked its employee recognition program to meet the diverse cultural needs of its employees across the globe.

Get the word out

It’s easy to overlook how important it is to communicate about a program and training people how to take advantage of it. Employees should know exactly how the program works and be excited to be part of it.

Give them tangible and practical advice on how to give awards. Share support and reminders. And don’t forget to train your leaders. Leaders need to model the recognition practices they want to see from every employee.

Support recognition from the top

An employee recognition program can’t succeed without executive support. How do you keep leaders engaged? By highlighting the impact of employee recognition programs on internal culture and employee experience, as well as critical business metrics like retention, customer satisfaction, product quality, and sales effectiveness.

Read how Dow Chemical reworked its employee recognition program to meet the diverse cultural needs of its employees across the globe.

Find a partner that fits you

You want an employee recognition partner familiar with companies like yours and the challenges you might face. A partner should provide best practices in program design, awards, communication, training, and measurement, as well as be able to act as a broader consultant if needed.

Because it’s much easier to start a recognition program by choosing an industry-leading solution, look for top-tier partners that have maintained long-term relationships with their clients.

Start your employee recognition journey today

Successful organizations need employee recognition programs with the features and capabilities that can truly impact their employees' lives at work.

The right program can improve employee engagement, increase productivity, and reduce turnover—evergreen issues that any organization may face.

By choosing the right partner to build an effective employee recognition solution, organizations create a culture of recognition that has a meaningful impact on employee experience and business results.

If you’d like to talk to the employee recognition experts at O.C. Tanner about how we can help craft a solution for you, please reach out to us.