If you’re like many business leaders, in a tough economy, you’re tasked with tough conversations around finances. A recent Gartner survey found that many CFOs plan to cut costs as the primary way of combating inflation and economic uncertainties.
When companies are hit with rising costs and less purchasing power, “extras” like employee appreciation or recognition programs can be the first to go. A recent McKinsey study found that employers tend to over-index on employee recognition, calling it an “intangible” benefit. But it’s not that employees do not want recognition (they do!); it’s that well-intentioned employers so often miss the mark when it comes to how they show employee recognition.
Given the economic uncertainty, it may be tempting to nix your employee recognition program—but to cut rewards during a time when employee engagement is at a record low would be a mistake. According to Forrester, employee engagement fell from 2022 to 2023 and is predicted to continue to slip in 2024.
Why do workers stay anyway? (5 research-backed ways to keep employees happy)
When you’re looking to make cuts, and it comes time to assess the value and benefits of your employee recognition program, remember the goal: How can you keep employees happy and engaged so they want to stick with your company for the long term?
Sure, you can (and should) survey your workforce about which benefits are important to them. But despite all of this listening, there can still be a disconnect between you and your employees. At its core, it’s a trust issue. Employees tend to be suspicious of HR surveys, fearing they’ll get in trouble if they give honest feedback—even if they’re told their answers will be anonymous. An AllVoices survey of 1,000 U.S. employees—to learn about and identify disconnects and opportunities to improve relationships between HR teams and the employees they support—found that more than half of employees aren't sharing the whole truth when giving feedback to HR. On top of that, many employees experience survey fatigue—especially when they’ve taken surveys before and haven’t seen employers act on their feedback.
As a supplement to your employee feedback gathering efforts, here’s what we know employees want and what drives their company loyalty, based on research:
1. Compensation gaps are the top driver of turnover.
Lattice’s State of People Strategy 2021 Report on the primary drivers of employee turnover revealed compensation as a top reason employees churn from companies. Fifty-five percent of employees left their company for one that offered higher pay.
2. Employees look for good benefits when deciding on their next job.
Employee benefits such as health insurance, 401(k) matching, flexible schedules, and dedicated support for mental health matter a great deal. Sixty percent of employees say they’ll consider mental health benefits when deciding on their next job, according to a recent Paychex survey. Plus, 80% of employees would choose a job with benefits over an identical one that paid 30% more but had no benefits.
3. Workers want to know their company cares about employee wellbeing.
Gallup asked employees what they look for most in an employer, and all generations ranked "the organization cares about employees' wellbeing" in their top three. Gen Z and Millennials ranked it as the number one factor.
Of course, wellbeing in the workplace is much broader than physical health. As Gallup puts it: “Wellbeing is about how our lives are going. It encompasses all the things that are important to each of us and how we experience our lives. It's not only about happiness and health but also about living life to its fullest potential.”
4. Employees will think about leaving if they don’t feel a sense of connection at work.
While workplaces continue their best efforts at adapting their employee engagement strategies to contend with the impacts of the global COVID-19 pandemic—and plenty is written about retention struggles and The Great Resignation—the way employees feel about connection in their workplace hasn’t been explored as deeply.
Connection to company values, mission, and leadership vision
Connection to coworkers and managers through authentic relationships
Connection to their work, meaning they have a positive impact on company goals
Connection to their personal aspirations, as in, they're making a positive impact overall
Focused on exploring these areas of connection, especially the role of employee appreciation and recognition in positively impacting staff connection, the survey found that 58% of employees would think about quitting if they didn't feel connected at work.
5. Meaning and purpose at work boost employee retention.
A BetterUp report found that U.S. employees with the highest sense of meaning are 69% less likely to quit. Further, BetterUp found that employees value meaning so much they’re willing to give up an average of $21,100 every year of their salary if it meant their hard work would always be meaningful.
When talking about workplace incentives, it’s important to remember that what matters most to hourly workers will differ from what matters most to salaried workers. When salaried managers are making decisions for their hourly direct reports—it can drive a disconnect.
As Jon Schlossberg, founder of financial benefits platform Even, writes in a Fast Company article: “Those in charge of choosing benefits are typically salaried, while those who desperately need them are traditionally not.”
Schlossberg goes on to say that, for hourly and gig workers, one of the biggest hurdles is unpredictable wages, as it's tough to know when they'll get their next gig or pick up a shift. Because of this income volatility, top perks for them include things like guaranteed schedules and payment on demand.
While recognition and rewards can’t (and shouldn’t) replace fair wages and income predictability, they can provide three of the five advantages we looked at above: wellbeing, connection, and meaning. And those are elements that every worker—no matter how they get paid or what title they hold—needs in order to be happy and engaged.
Employee recognition best practices for your hybrid workplace–now and in the future.
Employee recognition and rewards are an essential supplement to compensation (not a replacement!)
Compensation may be the top driver of retention, yet no amount of money is enough to be the only reason an employee stays happy and engaged. Ground down by a pandemic and economic uncertainty, today’s workers are particularly seeking meaning and connection.
The solution? Balancing compensation and rewards—both are needed. An American Psychological Association survey found that one of the drivers of feeling undervalued at work is a lack of non-monetary employee awards.
There also seems to be a disconnect between what workers want and what employers think they want. In a McKinsey survey of more than 2,100 frontline workers, 65% named employer recognition as a career advancement need. Seventy-eight percent named pay, making it one of the top five needs. Employers, however, tend to place more importance on forms of recognition like higher job titles that aren’t as important to employees as an accommodating, stable workplace culture and environment.
What’s driving the disconnect? It might be more about employers trying to cut costs and less about employers not realizing that competitive wages and meaningful non-monetary rewards are important to employees—and the key to keeping them.
Is recognition as reward really intangible?
It could also be that we need to reframe and take a more nuanced approach to how we think about employee rewards. A “thank you” or a shoutout in a weekly meeting—while important, these could be considered a more “intangible” form of recognition. If employee awards are branded pens, gift cards, and cash, they can feel impersonal and lose their novelty quickly. But if rewards are personalized experiences that an employee chooses from among a wide range of exciting options—these feel more meaningful and offer a tangible reward that lasts beyond the experience itself.
What if, instead of cash, a top salesperson has the chance to hang ten during a surfing lesson? Or if, instead of a gift card, customer support agents who stayed late are rewarded with a parasailing adventure? These experiential rewards are a way to upgrade any employee recognition program, sparking delight and fostering closeness.
4 benefits of employee recognition—no matter the economic situation
With a global pandemic and the Great Resignation still in full swing, employees and employers alike are struggling. Economists are baffled too, as all signs (declining GDP, falling stock market, and lower consumer spending) seem to point to a recession—except that job openings remain high. And another thing: Workers’ pay has risen significantly in the past few years (though, to be fair, it’s yet to keep up with record inflation rates).
Together, these factors paint a clearer picture: Compensation alone is not enough to keep employees happy and engaged. Workers who have felt the brunt of 2.5 years of COVID-19, staff shortages, layoffs, supply chain issues, and overall burnout need purpose and meaning at work more than ever before. McKinsey & Company research found that the COVID-19 pandemic caused nearly two-thirds of U.S. employees to reflect on their life's purpose, and prompted nearly half to reconsider the hard work they do.
Likewise, companies also face renewed pressure to review their employee recognition approaches to compete for—and keep—talent. And what’s essential to switching up those employee reward strategies?
As Blueboard CEO and cofounder Taylor Smith discusses with Employee Benefit News, the answer lies in the lasting impact of rewarding employees with memorable experiences. Even more important in times of inflation or economic uncertainty, gifting experiences fills a crucial gap for people that might use a gift card or cash for something more routine like “groceries or a haircut rather than something really for them. They're not going to remember it a week later, or tell their friends about it—and it's not going to make [these employees] more loyal."
Here’s how the benefits of employee recognition can help meet the needs of an adaptive workforce as companies continue to navigate the impacts of the global pandemic and economic uncertainty:
1. Employee recognition cultivates connection.
The Blueboard State of Workplace Connection Report also found that companies that invest in different types of employee recognition are nearly twice as likely to feel they’ve “adequately addressed employee connection challenges” compared to the average organization.
There are two potential reasons for this: One, even if coworkers don’t join an experience together in person, an individual’s sharing of stories of the memory can foster connection no matter where colleagues are located. Who wouldn’t feel closer to a coworker who lights up when talking about the time their manager rewarded them with the experience of handcrafting a wedding ring for their spouse? Science shows that storytelling can boost oxytocin, a hormone associated with bonding.
And two, the very act of rewarding employees with an experience of their choosing can create a connection in ways gift cards and cash simply can’t. Trying new experiences—like learning to make cheese, or fly a plane—creates an “afterglow” effect (as we call it here at Blueboard) that reaches far beyond the experience itself and is associated with the employer.
3. Employee rewards and recognition improve wellbeing.
The American Psychological Association found that wellbeing is one of the five key components of a psychologically healthy workplace. As employers come to realize the importance of wellbeing, more and more are offering travel as a benefit because it reduces stress: A Syracuse University study found that people's risk of cardiovascular disease decreased the more they went on vacation, and another study found that people experienced improved wellbeing immediately after a vacation and even 45 days after.
As you can see, employee morale, wellbeing, meaning, and connection are top drivers of retention—and a good recognition and rewards program boosts all of these. On top of that, motivated employees are more likely to stay. Incorporating both spot recognition and experiential rewards maximizes the benefits of employee recognition programs, helping your team feel appreciated in the moment and beyond.
Want to keep employees happy and engaged? Rethink employee recognition and rewards.
During economic uncertainty, incentives often land on the chopping block—but there are many reasons to reconsider axing employee recognition. Sure, you might save money in the short term, but what’s the cost of cutting employee recognition programs in the long run? A burned-out workforce that ends up leaving no matter how much you increase their salary.
On top of employee burnout, HR teams have been through the wringer over the past few years, with the pandemic and the Great Resignation adding to the burden. Investing in workplace recognition also benefits them as employees, ensuring they get the support and praise they’ve earned.
Because of everything we’ve been through in the past two and a half years, now is not the time to cut workplace recognition perks—but it is time to rethink them.
"Recognition is a necessity—even more so when a company is facing a tough time. You can really stand up and step up by investing in your employees." –Taylor Smith, CEO and cofounder, Blueboard
Instead of removing an existing employee rewards program, consider shifting to one that provides more connection and value to both you and your employees, such as experience-based rewards. By doing so, you’ll elevate employee recognition to something that is fresh and meaningful, and you’ll keep your employees happy and engaged along the way.
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