Employee Benefits

Creating an Employee Recognition Plan That Actually Works

In the face of evolving employee expectations and costly turnover, businesses are tasked with creating an employee recognition plan that works. While this can be a formidable challenge, the following steps can help ensure their success.
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Companies often invest heavily in recruiting new talent, yet many underestimate the value of retaining their current workforce. 

The truth is, turnover is expensive.

According to Gallup, replacing leaders and managers can cost up to 200% of their salary. For technical employees, it costs 80%, and for frontline workers, 40%, which doesn’t take into consideration morale and knowledge losses.

Their recent study also shows that retention depends on getting recognition right, highlighting the need for a well-thought-out employee recognition plan. 

The study identifies five pillars of strategic (high-quality) praise:

  • Fulfilling employees’ expectations
  • Authenticity
  • Personalization
  • Equity
  • Integration with company culture

Employees who received strategic recognition were 45% less likely to leave their jobs after two years. 

Moreover, those who received recognition that met at least four of these pillars were 65% less likely to seek new job opportunities. Other organizational aspects, from motivation to performance, are also largely influenced by a company’s efforts in acknowledging and rewarding their workers, or lack thereof.

So, what does an employee recognition plan that reflects these pillars look like?

Creating it is the central part of a detailed, multiple-step process. 

Below, we analyze every stage before, during, and after the plan’s creation to ensure its success.

The Science of Recognition

Step 1: Understand why and how recognition works.

The first step in creating a plan that works is to understand the science behind the why and how.

Workplace recognition is the acknowledgment of an employee’s contributions and achievements as an individual or part of a team. It creates immediate gratification that bolsters a sense of pride and career accomplishment. 

However, beyond the fleeting feel-good moment lies long-term possibilities, from greater productivity and motivation to a sense of purpose and connection to the job.

A deeper understanding of this psychological reaction, grounded in scientific findings, can help companies develop a robust employee recognition plan.

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Neuropsychology of Recognition

To understand the science of recognition, we look at two aspects:

The first of these is the physiological reaction.

For this, we turn to Maslov’s hierarchy of needs, a five-tier pyramid of human necessities, starting with basic survival and moving to higher-level psychological needs.

Recognition plays a significant role in the fourth tier, or the “esteem needs.” 

At this stage, it’s all about respect, achievement, and gaining approval from others. Therefore, when employees are rewarded and recognized for their efforts in the workplace, it boosts their self-esteem, confidence, and sense of worth. 

Recognition at this level is a powerful motivator and reinforces an individual’s competence and value.

The second aspect is grounded in neuroscience.

Research illustrates that dopamine is crucial in positive motivation and strongly responds to reward-seeking actions. 

When employees are recognized as a reward for their good work, it triggers the release of dopamine, the brain’s “feel-good” chemical.

The chemical creates a burst of happiness, making the person feel satisfied and appreciated. As a response, they’re more likely to work harder and contribute positively.

Impact on Motivation and Performance

In theory, recognition leads to greater motivation and, therefore, performance.

But is this true in practice as well? 

Nectar’s survey on employee recognition shows that 83% of respondents were motivated to succeed at work when their employer recognized them. 

Another 77.9% would be more productive if this were a frequent practice in the workplace.

The survey also reveals that four in five employees agree that recognition impacts their engagement, and 39% strongly agree.

Looking at other research examples, Harvard Business Review reveals that even a little recognition can lead to a big morale boost. 

According to their findings, symbolic non-monetary incentives, such as cost-effective gestures, personalized thank-you notes, certificates, or public recognition, could help boost motivation. 

Whether it’s one of these examples or other employee incentive ideas, the bottom line is – it’s not what employers do but how they do it.

Key Elements of Effective Recognition

Gallup’s pillars of high-quality recognition guarantee its success, but only if it’s honest, authentic, and individualized to how each employee wants to be recognized. 

Circling back to the insights from Harvard Business Review, we can also identify key elements that companies should consider in achieving these criteria:

  • The Messenger: Recognition from senior leaders could be more impactful than that from lower-ranking leadership positions.
  • Timing: Timing recognition at crucial moments, such as the start of a new quarter or after an important project, can maximize its effect.
  • Public vs. Private: Public recognition can boost overall team motivation, but only if handled carefully to avoid unfavorable social comparisons.

Attention to Detail: Personalized, thoughtful gestures are more impactful than generic or rushed recognition.

Common Pitfalls

Step 2: Identify the risks involved.

Despite the evidence they work, recognition programs can still be a hit or miss. 

While the intention is often positive, common mistakes in their design, execution, and overall purpose can undermine their effectiveness. 

When companies prioritize corporate greed over employee needs and use recognition as a transactional tool for performance rather than a genuine, consistent practice, their effort is likely to fail.

Therefore, understanding where businesses can go wrong can help them avoid common pitfalls and create programs that motivate and inspire their workforce.

Why Do Traditional Programs Fail?

The short answer is that the workplace has evolved from where it once was. 

Employee needs and priorities are changing, and traditional recognition programs often fall short because they fail to adapt to this shift.

However, for a more in-depth overview, we also examine the following factors, which are all closely correlated.

1) Recourse Waste

Organizations often invest heavily in elaborate programs or costly rewards, only to find that they don’t drive the expected level of engagement. 

Therefore, resource waste becomes a significant factor from generic, one-size-fits-all rewards, complex systems, and misalignment between employee and company goals.

2) Lack of Measurement

Any good corporate program requires extensive tracking of its effectiveness and clear KPIs. Otherwise, it’s impossible to know whether and how effectively it works.

3) Poor implementation

Even the best-designed programs can fail if implemented improperly. 

Poor execution, including lack of manager training, inconsistent communication, and misalignment with company culture, can lead to inconsistent recognition, miscommunication, and a lack of engagement.

It’s only fair to assume that if recognition feels like an afterthought, employees will treat it the same way, and the program won’t have the desired impact. 

So, the next logical question would be: What can employers do to avoid a potential failure?

Current State of Employee Recognition

Step 3: Assess the situation.

There is no definitive answer to the number of companies with recognition programs. 

For example, Nectar’s survey puts it at 52.6%, while WorldatWork’s Trends in Employee Recognition report reveals,more optimistically, that 88% of organizations had a company-wide program, although most were informal.

While the exact figures may vary, the accurate measure of employee recognition lies not in quantity but in the quality of its impact.

Ensuring effectiveness while avoiding the common pitfalls of traditional programs requires assessing the situation on a company level.

  • What do your employees want?
  • How much are you willing to spend?
  • What are your resources?

At this stage, conducting surveys can reveal the general sentiment regarding the topic. Then, making it regular practice could provide insights into specific types, preferred methods, frequencies, and areas for improvement.

Afterwards, budget and resource planning take center stage to ensure sustainable and effective implementation.

Employee Recognition Plan

Step 4: Create a plan that works.

After assessing the situation, it’s time to make a plan. 

A well-defined employee recognition policy can drive success by clearly outlining the critical elements. The policy guarantees that companies understand the core aspects of recognition and embed it into their daily operations and company culture.

Recognition Types

Determine what motivates employees the most.

There are many ways to acknowledge employees’ good work, but they will not yield the same results in today’s diverse workforce. 

Therefore, creating a successful employee recognition plan requires determining which fits the employees’ specific needs.

Based on the type:

  • Social recognition, which is usually done through public praise, social media, or team celebrations.
  • Monetary recognition or financial rewards such as bonuses, salary increases, and gift cards to recognize performance.

Based on the delivery:

  • Formal or structured, planned recognition, usually part of company-wide recognition events.
  • Informal or casual and spontaneous acknowledgment, like a thank-you note or a quick shout-out.

Based on who gives the recognition:

  • Peer-to-peer recognition, which colleagues give to one another.
  • Leader-to-direct recognition, which comes from a manager or a leader.

Frequency Guidelines

Set up the frequency for long-term success.

Recognition is most effective when it’s consistent. 

It shouldn’t be a one-time event or excessive everyday occurrence but a regular practice acknowledging achievements close to the moment they happen. Frequent praise helps build a culture of appreciation and drives engagement. 

However, frequency also loses its meaning if it’s not sincere. 

According to employee rewards statistics, 64% of workers prefer more meaningful recognition than frequent recognition.

Reward Structures

Establish a clear and impactful reward structure.

A good plan requires balancing short-term and long-term incentives supported by timely and meaningful recognition. 

The reward structure should also make the experience personal and impactful, which can usually be achieved by introducing tangible and non-material rewards.

Employee rewards programs are one way to approach this. 

Depending on the provider, they often present many options, from personalized gifts to memorable experiences, ensuring that rewards resonate with the individual.

Technology Requirements

Implement a recognition platform.

Success hinges on effective coordination. In this case, technology brings everything together.

Employee recognition software plays a major role in the plan’s success, but only if it meets specific criteria. For optimal performance, it should have the following features:

  • Centralized, user-friendly platform
  • Easy integration with existing HR systems
  • Easy access for employees, such as a mobile app
  • Real-time tracking of trends and engagement
  • Analytics and reporting features
  • Robust security, including secure logins and data privacy
  • Scalable platform to adapt to changing needs

It also helps when the platform includes a diverse rewards catalog, customizable choices, and seamless communication tools, ensuring ongoing support and a better employee experience.

Recognition Criteria

Link recognition to specific employee behaviors.

According to the neuropsychological principles we explored earlier, recognition and rewards reinforce positive behavior.

Consequently, employers can use this theory to direct workers’ attention to specific conduct that aligns with company values and goals, strengthening the desired actions through recognition.

  • What behaviors and outcomes do you want to reinforce? How?
  • What is the frequency and timing of recognition?
  • Who will be eligible?
  • How will recognition fit into the company culture?
  • How can you ensure fairness?
  • How can you measure success? 

Answering these questions will provide a clear framework for establishing recognition criteria.

Delivery Methods

Ensure the recognition is personalized and delivered in real time.

The final aspect of a successful employee recognition plan is deciding on a delivery method.

Personalized, real-time praise usually works best since it shows genuineness and attention to employees’ work. 

Some employee incentive programs provide a platform for instant public recognition with an additional layer of motivation by linking rewards to specific achievements or milestones.

Tailoring the method to the individual’s preferences, whether public praise or private appreciation, enhances its authenticity and relevance to employees.

Rollout Strategy

Step 5: After making the plan, it’s time to set it in motion.

A rollout strategy is an integral part of successful plan implementation. The goal is to ensure that everything is well-coordinated, organized, and successful, with a clear plan for monitoring and adjusting the process. 

As such, it should outline the following steps:

  • Program steps and a detailed timeline with key milestones, from pre-launch activities to the program rollout.
  • A clear communication strategy to create awareness and inform employees about the program, its benefits, and how it aligns with company goals.
  • Training requirements or educating managers and employees to ensure they understand the program, its tools, and how to participate.

Pilot program design to monitor, collect data, and adjust the main program as needed.

Key Metrics

Step 6: Measure key metrics before and after launching.

One of the common pitfalls of traditional recognition programs is they use the same one-size-fits-all approach. Despite a naturally diverse workforce, constant workplace shifts, and evolving worker needs, many companies cater to one employee profile.

At the same time, employees can change their priorities over time, making the program redundant even after a successful implementation.

Data can help maneuver through both scenarios.

Assessing demand and preferences before the program launch ensures a successful start. 

Afterwards, measuring metrics like participation rates, engagement, and long-term ROI determines its effectiveness and areas for improvement.

This data-driven approach demonstrates the program’s value, justifies the investment, and brings us to our last point – refining and improving recognition strategies for the best impact.

Adjustment Framework

Step 7: Review, adjust, improve.

Finally, an adjustment framework ensures the employee recognition plan works by basing its efficacy on real-time feedback and data collected from measuring key metrics.

Analyzing the results can identify engagement trends and patterns, such as which types of recognition resonate most with workers or which groups are most active and why.

Then, as the program evolves, companies should focus their resources on areas that need improvement. For example, if employees better engage with peer-to-peer recognition over manager-led initiatives, the program should be adjusted to reflect that.

Case Studies

To illustrate the impact of employee recognition plans in practice, let’s examine a few case studies of companies that have effectively implemented them.

  • Southwest Airlines

Research demonstrates the significant impact of recognition programs on Southwest Airlines employees’ engagement and motivation. 

Their initiatives, which include verbal, written, and material rewards, have created a culture of appreciation and improved worker satisfaction. 

The company’s survey results revealed that 86% of employees felt valued, and 79% saw a positive impact on their motivation. 

  • Heineken

After revamping its reward and recognition strategy to address low engagement from its previous one, Heineken experienced a 50% increase in peer recognition. 

The company expanded the range of awards, aligned recognition with company values, and created a more inclusive and timely program to serve its diverse workforce better. 

Within five months, 54% of employees received recognition, significantly improving engagement and creating a culture of consistent and meaningful acknowledgment across the company.

  • Hilton

Hilton Worldwide Holdings holds first place on Fortune’s list of the best companies to work for in 2024. A quick search into why that reveals multiple team member engagement initiatives, including their Catch Me at My Best recognition program, which celebrates exceptional hospitality on top of comprehensive benefits like parental leave, adoption assistance, and more. 

As a result, Hilton has seen significant engagement, with over 2 million recognition “catches” in 2019 and is consistently ranked among the top employers globally.

Lessons Learned

The main lesson learned is that even a minor displays of appreciation can go a long way, but only if they are sincere and authentic. 

When employers do not prioritize this, their workforce can sense the disconnect. In fact, a report on employee appreciation shows that when this is the case, workers are:

  • 28% less likely to give others recognition 
  • 38% less likely to feel apricated
  • 68% more likely to perceive recognition as “an empty gesture”

But, when done right, an employee recognition plan that reflects the company’s genuine care for its employees leads to reciprocal loyalty and organizational growth.

Disclosure: Some of the products featured in this blog post may come from our partners who compensate us. This might influence the selection of products we feature and their placement and presentation on the page. However, it does not impact our evaluations; our opinions are our own. The information provided in this post is for general informational purposes only. 

Written by Tamara Jovanovska

Content Writer at Shortlister

Sources

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