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The Financial Case for Implementing Employee Recognition Software

Posted by Greg Jacobson

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Jun 24, 2014 1:00:00 PM

employee recognition softwareBusiness leaders and HR professionals now, more than ever, are challenged to get the most productivity out of every staff member so that teams can be kept lean and efficient.  With budgets tight everywhere, investments in programs and tools that support “soft” goals like improved employee morale and engagement can be difficult to justify.  Employee recognition software can end up on the list of “should do,” not “must do.”  But, if you look closely at the financial impact of things like employee engagement and retention you might find that employee recognition software has a positive ROI and should make the jump from column B to column A.

The Engagement Equation

The evidence is clear that companies with engaged employees outperform those without.  The Hey Group’s Insight study looked at the impact of both engaged and enabled employees on revenue and found that organizations with the highest scores for engagement achieved revenue growth 2.5 times those with the lowest.  If you add enablement to the equation, the highest ranking companies boast revenue growth that is 4.5 times greater.  

How can employee recognition software help?  The study found that “respect and recognition” was among the top drivers of employee engagement.  Investing in a recognition solution both signals commitment to employee recognition and provides the structure to make sure it happens consistently and effectively.

Turnover Tally

Employee turnover is expensive.  How expensive exactly?  According to the Bureau of National Affairs, employee turnover costs companies $11 billion annually.  What does that mean for you? Thirty case studies taken from the most relevant studies on the cost of employee turnover conclude that the cost of turning over an employee is approximately 21% of that employee’s salary.  Of course, that is just the cost to recruit and train a replacement.  Other costs are more difficult to measure, such as: lower productivity of the new staff member, lost engagement of other employees who are discouraged by turnover (see above), customer service errors and lost tribal knowledge. 

To understand how employee recognition software can help reduce turnover, it is important to look at why people leave.  Believe it or not, “Feeling devalued and unrecognized” ranks higher than wanting better pay or benefits.  People need to feel that their contributions are valuable and that management is aware of their effort and achievement.

Culture Currency

A landmark study by Kotter and Heskett looked at 207 US companies in 22 industries over an eleven-year period found that companies that managed their cultures well saw revenue increases of 628% vs. 166% for the companies that did not.   The net income increase difference was an astounding 756% to just 1%.  It’s no wonder that, “Culture eats strategy for breakfast,” has become a mantra for business leaders.

Employee recognition software helps to instill a “recognition culture.” It was described by Bowing’s Recognition Programs Specialist as one in which, "Employees feel appreciated and understand how their efforts contribute to the success of their program, business unit and company on a daily basis.”

The data is clear that the cost of doing nothing to integrate employee recognition into your company’s culture and standard way of doing business is steep.  Employee recognition software is an investment that has a provable ROI in hard dollars as well as immeasurable impact on morale and good will.  It is simple.  Invest in your employees and they will become more invested in the success of your business.

Get involved in the conversation: How do you recognize your employees for their contributions?

Topics: Leadership, Collaboration

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