How To Create a Competitive Edge with an Employee Recognition Program

What comes to mind when you hear the phrase “Employee Recognition Program”? The company-wide e-mail you sent out that praised your top sales team? The holiday party? A not-exactly-current “Employee of the Month” plaque?

Or is it more along the lines of “That management tool that I probably should use…” And then the more “important” aspects of running a business take over: responding to client requests, making sure the product ships on time, checking in on the most recent data migration. —

Instituting an employee recognition program may seem like a warm and fuzzy, low-priority item on your “To Do” list. But the reality is that implementing an effective program can be a critical factor in giving your business the competitive edge. Smart managers know they shouldn’t push this item down the task list, because recognizing employees is anything but warm and fuzzy — it’s about the thing you care most about when it comes to your business: growth and the bottom line.

Why is that? Because an effective program helps address a variety of issues that either prevent companies from successfully growing their business, or cost them valuable resources, and upset their cash flow projections.

Increase Employee Engagement

One of the major gains of implementing an employee recognition program is an increase in employee engagement. “Engagement” sounds really good, but what does that mean? Depending on whom you ask, everything from “involved” to “committed”, to “passionate” to “enthusiastic” employees.

What more and more studies agree is that —however you define it — engagement is widely associated with higher corporate performance. As recently cited by Tony Schwartz and Christine Porath in The New York Times, a Gallup meta-analysis of 263 research studies across 192 companies found that “companies in the top quartile for engaged employees, compared with the bottom quartile, had 22 percent higher profitability, 10 percent higher customer ratings, 28 percent less theft, and 48 percent fewer safety incidents.”

An additional study by Towers Watson revealed that even the degree of engagement affects performance, with companies staffed with more deeply-engaged employees producing higher operating margins.

Reduce Employee Turnover

As a business owner, you already know the high cost of losing an employee, and that the more skilled a departing employee is, the more costly it is to operate without them and fill the resulting vacancy. Recognition programs that the employees themselves rate as excellent, help companies retain employees and dramatically reduce the associated costs.

Bersin & Associates’ recent “State of Employee Recognition” white paper found that organizations with highly effective recognition programs experience 31 percent lower turnover. Retaining a third more staff sounds pretty good, doesn’t it?

The increasingly popular peer-to-peer or social employee recognition model is found particularly effective in addressing the needs of highly skilled technology workers and millennials. With the shift to a flatter, information-based workplace, and the demographic inevitability, the number of these types of employees joining companies is on the rise, and will only increase sharply. (It may not be a shock to learn that in addition to a need for frequent feedback and flexibility, millennials also bring to the workplace lower levels of engagement.)

Drives Business Results

The right kind of recognition program can directly drive business results such as sales, customer experience, productivity, and accuracy. The “old guard” of employee recognition programs rewarded tenure, or years of service. (Gold watch, anyone?)

Not only have these types of awards often been shown as ineffective in terms of motivating exceptional performance, but the majority of a company’s employees are often not even aware of their existence. In contrast, current employee recognition programs can be customized to specifically and immediately recognize key business objectives.

Helps Manage Corporate Culture

An unhealthy corporate culture, especially in the increasingly collaborative, team-based workplace, is a fiscal liability. Teams that don’t work well together don’t communicate, they miss deadlines, they hinder rather than help each other.

One of the hallmarks of a healthy company culture is one in which people feel appreciated and yes, recognized for their contributions. Bersin & Associates’ study found that in companies with highly-regarded employee recognition programs, employees felt the company’s culture supported recognition; those organizations without one, cited a culture that did not reinforce recognition, and viewed it as a top challenge.

Recognition programs that enable fellow employees to acknowledge each other’s contributions — as opposed to ones that place senior management in the role of bestowing awards — can further foster an atmosphere of appreciation, cooperation and collective problem-solving.

Originally published on August 17, 2014 → Last updated August 24, 2019
Raphael Crawford-Marks

Raphael Crawford-Marks is the Founder and CEO of Bonusly, an enterprise platform that helps companies create high-performance, high-engagement workplaces. He's passionate about building products that help people connect with their work and each other in meaningful ways.


Bonusly is a fun, personal employee recognition and rewards program that helps people feel engaged and successful at work. ✨