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How to estimate employee recognition ROI with metrics that matter (and speak to your CFO)

About the author: Scott Broomfield is a seasoned business leader and Chief Financial Officer (CFO) at Blueboard.

As an HR leader, you focus on cultivating a workplace culture that supports employee well-being and fosters a sense of connection to meaningful work. This helps you attract and retain great people. But we know we have a problem in business today when it comes to retention, quiet quitting, and employee engagement.

Engaged and motivated employees who feel valued and supported are more productive and contribute to a better work environment. Retaining employees also maintains a consistent company culture and preserves institutional knowledge (which can suffer in a high-turnover culture). 

A Gallup study found that companies with high employee engagement outperform their peers by 147% in earnings per share. Plus, being listed as a "Great Place to Work" can attract top talent, and improves your company's reputation as a place where employees know they’re appreciated. 

To create a supportive and inclusive workplace culture, you need to offer competitive compensation, provide ongoing opportunities for professional development and upskilling, and support employee well-being through things like flexible work arrangements and company-sponsored events. By doing so, you show employees that you value their overall well-being, not just their job performance, which goes a long way towards improving employee morale, job satisfaction, and motivation.

But is effective recognition in your toolkit? While implementing recognition and rewards programs can be a significant investment, effective recognition is proven to have a major impact on employee engagement. A pay and benefits report by The Josh Bersin Company found that the most successful organizations take a systemic approach to employee rewards. And the outcomes speak volumes in terms of ROI: organizations with systemic recognition are 1.7 times more likely to exceed financial targets.

Although we can address areas where we can make investments, we also need to understand why there is such a lingering connection gap between employees and their workplaces and what we can do about it. According to a U.S. Surgeon General report, nearly 50% of U.S. adults reported experiencing measurable levels of loneliness even before the pandemic-induced periods of forced isolation. These findings highlight the critical role that connection plays in our individual, community, societal, and workplace health.

One powerful way to combat loneliness and cultivate a workplace culture of connection is to prioritize employee recognition programs that facilitate opportunities for employees to connect both in and outside of work. Providing experiences as rewards supports employees to spend quality time with loved ones, rediscover passions, and learn new things, all of which contribute to a sense of connection and well-being. 

In this post, we’ll cover what you need to know to prove the return on investment (ROI) of employee recognition, including:

  • How to determine the key People metrics that most impact your business
  • The quantitative ROI of recognition (countable and numbers-based, like percentage increase in savings from employee turnover) and qualitative ROI of recognition (subjective, observational, and interpretation-based, like anecdotal feedback from employees who receive recognition) metrics to consider and measure.
  • How to identify recognition metrics that matter and map your recognition goals to The Blueboard Method™, our step-by-step, proprietary framework designed to help you operationalize recognition throughout every part of your business. 

This preview of our ultimate guide for estimating your recognition ROI will help you develop these programs and assist you in communicating these strategies and investments with your leadership team and CFO to get the buy-in for recognition and rewards.

Understanding the People metrics that drive your business.

To build a business case for better employee recognition, it’s important to first zero in on the key People metrics that impact your company’s bottom line: employee engagement, employee productivity, and employee retention. Fortunately, these three metrics are deeply linked. Consistently engaged employees are more productive and more likely to stay at your organization longer, both of which save your company money. And that should be music to any CFO’s ears.

So what’s the current state of employee engagement?

A 2022 Gallup survey of 67,000 people found that engagement has been declining every year since 2020, with only 32% of workers saying they’re engaged with their work compared to 36% in 2020. This means increasingly large numbers of people are not engaged with their jobs or at work.

But this same Gallup survey also found that companies that invest in their organizational culture and company values to keep collaboration, employee wellbeing, and the customer at the center of how work gets done managed to actually increase engagement during this same time period.

Strong employee engagement leads to increasingly positive business outcomes. 

Employee engagement is not only a great indicator of how your company is delivering on employee experience (EX) goals. When healthy, your organization’s employee engagement success can lead to: 

  • Sustained employee productivity and performance. Engaged employees increase sales by 20% and productivity by 17% according to Gallup.
  • Increased customer satisfaction. Organizations with more engaged, customer-facing employees generated a 50% increase in revenue.
  • Reduced voluntary turnover of top talent. Teams ranking in the top quartile of employee engagement outperform bottom-quartile units by 24% in employee turnover.
  • Increased profitability. According to Gallup, companies with companies with highly engaged employees have 21% higher profitability.

Employees are the heart of your company, and connected, engaged employees are one of your strongest business assets. To swing the pendulum towards higher engagement, companies need to first commit to measuring employee engagement rates (how engaged your employees are) on a regular basis.

Everything you need to make the business case for recognition programs to your executives and CFO.

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Rallying around recognition metrics that matter.

At Blueboard, we use a proprietary employee recognition methodology—The Blueboard Method—to help our clients:

  1. Identify their most pressing recognition goals,
  2. Map those goals to measurable metrics, 
  3. Use those goals to build their ideal recognition program mix, and
  4. Amplify each recognition touch point.

For the purposes of this guide, we’ll focus on identifying recognition goals and mapping those goals to measurable metrics and possible recognition programs. 

By defining your employee recognition goals, you can align on key metrics to track, benchmark, and evaluate success. You’ll want to be as specific as possible as these goals will inform the types of recognition programs you’ll want to introduce, and how best to mature your approach to recognition. 

To define your employee recognition goals, consider two main inputs (and an optional third!):

  • Key business objectives: What is executive leadership trying to achieve this year? In the next 3  years? In the next 10 years? Particularly in the realm of the employee experience, are there key focus areas? 
  • Employee feedback and engagement surveys: Top-down information is critical but bottom-up insight is just as important. Look to employee feedback to help you diagnose and articulate your most pressing EX gaps.
  • (Optional) Input from a third-party partner. Employee recognition and rewards vendors often have internal consultants who can support you in identifying your goals and measurable metrics, as well as designing your overall program. If you’d like to learn more about how Blueboard can support you with recognition program planning, schedule time to connect with our team!

Here are select recognition programs mapped to specific goals and measurable outcomes to consider. 

Documenting planned recognition impact against clear goals helps to build credibility with executive leaders. This prep work also sets you up to unlock additional budget and resources to continue to develop your employee recognition program and approach. 

Below are a sampling of a variety of employee recognition and rewards programs that drive impact, along with relevant goals and metrics to measure. 

Year of service awards (Formal)

Some of the most impactful recognition goals a year of service awards program can meet: 

  • Improve employee morale
  • Celebrate tenured employees to foster loyalty/reduce turnover
  • Deliver company culture and rewards at-scale
  • Compete for top talent as an employer of choice 

Some related measurable metrics/outcomes to consider:

  • Employee retention rate
  • Employee disengagement rate
  • Average employee tenure
  • Number of employees recognized
Two smiling people in sunglasses on a boat sailing on the ocean.
April J. sets sail with family on the Ocean Quest Experience, a year of service award to acknowledge a work anniversary from her employer, EPR Properties: “We loved our sailing day and really enjoyed the kayaking and snorkeling!”
A color photograph of a painting with brushes and a paint palette.
Claudia K. tried something new with a painting experience, a work anniversary reward from her company, The Trade Desk: “Cannot wait for my next experience!”

Spot rewards (Informal)

Some of the most impactful recognition goals a spot rewards program can meet:

  • Strengthen manager/employee relationship
  • Motivate employee performance
  • Connect individual performance to company goals

Some related measurable metrics/outcomes to consider:

  • Employee retention rate
  • Employee disengagement rate
  • Average employee tenure
  • Manager utilization percentage
  • Promotion rate percentage

Peer-to-Peer (Day-to-day)

Some of the most impactful recognition goals a peer-to-peer awards program can meet:

Some related measurable metrics/outcomes to consider:

  • Employee retention rate
  • Employee disengagement rate
  • Average employee tenure
  • Number of employees recognized 
  • Most recognized employees
  • Employees who give the most recognition
  • Number of shout outs per cycle and per company core value 

Don’t forget about the impact of employee feedback on your recognition efforts!

Along with measuring metrics like those outlined above, make sure to keep a pulse on employee feedback specific to your recognition efforts. For example, Blueboard enables clients to send a post-reward survey to every employee who receives a Blueboard reward to evaluate their:

  • Feelings of appreciation post-reward,
  • Motivation to perform post-reward,
  • Plans to stay at your company post-reward, and
  • Whether the recognition program promotes company culture

If you don’t have an automated way to track this kind of feedback, consider weaving it into your recurring employee surveys and feedback touch points. While aggregate data is important, some of the most compelling anecdotal (or, qualitative) evidence comes directly from your employees.

The key takeaway here: When estimating the return on investment of your employee recognition program, it’s critical to consider the short and long-term impact of different types of rewards on the employee experience and, therefore, employee engagement, performance, and retention. By showing a variety of outcomes based on different types of rewards and reward values, you’ll be able to make a more informed investment decision—and build credibility with your CFO and leadership team. 

Estimating your recognition ROI to unlock CFO buy-in (and become your organization’s recognition champion).

If you’re looking to unlock budget for a new employee recognition and rewards line item, or looking to make a change to your current efforts or expand your investment, it's helpful to bring hard numbers to your executive team to show estimated impact.

An ROI calculator can be an incredibly helpful tool in this respect. A good one will help you show the possibilities of investing in effective employee recognition, as well as the cost of not acting.

At Blueboard, we use an in-house ROI calculator to help companies get a sense of how much return on investment they can expect when they implement a Blueboard recognition program. HR and People leaders can take these numbers directly to their leadership team and CFO to: 

  • Ground any ask for recognition investment in a realistic estimate on return 
  • Hold themselves accountable to report on impact to these metrics and prove the return on investment post-program launch

In a webinar on this very topic of getting buy-in and approval for HR initiatives, I had the opportunity to talk with Sayle Hutchison, CFO at 15Five, about best practices for making your ask to the CFO. 

Here are our recommendations from that conversation:

  1.  Set the context.
  2. Be reasonable. Frame the most probable upside and downside.
  3. Be prepared to discuss the most probable outcome. Make the argument that even in the downside case, your proposal still makes sense to do.
  4. Name the business impact.
  5. Approach the conversation as a partnership.
“Sometimes HR programs don’t have an immediate ROI. It has to be a multiyear journey, and we have to be ok with knowing what success looks like in the short, medium, and long term. When requesting budget, stay in that practicality and be a partner to the CFO. Being open, curious, and ready to go there with any questions is important to being effective.” –Sayle Hutchison, CFO, 15Five

So, congratulations! You’ve already taken the first step: Getting curious about how you can recognize and appreciate employees with truly meaningful rewards, personalized to their interests—that are easy to implement and manage, and that actually drive business results. 

Equipped with the buy-in tools and communication you need, here’s where you go from here:

  • Meet with executive stakeholders and take a closer look at your current employee engagement and pulse survey questions and make sure you’re accounting for employee engagement and recognition sentiment. Prioritize your recognition and rewards strategy accordingly.
  • Identify the key employee recognition metrics to measure to drive the business outcomes you're looking to achieve and work with a Blueboard expert to estimate your organization’s recognition ROI using our custom calculator.
  • With the help of our recognition ROI guide, build your business case—talking points, ROI calculations, and goals based on what you’re looking to accomplish with recognition—and wow key decision makers with the impact you’ll gain from an effective culture of appreciation and more meaningful, impactful employee rewards.  

Curious how real companies like yours are using Blueboard to improve engagement, performance, and culture? Download our complete recognition ROI guide, with a glossary of the most helpful, relevant financial terms you’ll need to speak the language of your CFO.

And if you’re ready to learn more about Blueboard’s experiential employee rewards, request a demo with an experiences expert or reach out to us at hello@blueboard.com

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