0 Comment

How Does Employee Recognition Impact Business?

Watch the Video

How Does Employee Recognition Impact Business?

Employee recognition plays an extremely important role in driving the motivation levels of the workforce effectively.  Hence, organizations need to clearly understand how employee recognition impacts their business and invest in such programs to maximize returns.

Some Important Facts about Employee Recognition

Integrate Reward and Recognition with Innovation Efforts

In simple words, recognition is the process of making the employees aware that their work is much appreciated and valued by the organization.

Recognition can either be formal or informal. Either way, it sends out a strong positive message to the employees.

So, here are a few key facts about employee recognition:

1. Effective and timely recognition is one of the top drivers of engagement in the workplace

2. Spending just 1% of the payroll budget on employee recognition can result in an 85% positive impact on employee engagement.

3. Investing in a good employee rewards program can help the organization get 12x higher business outcomes.

4. Organizations with a recognition program experience a reduction of around 29% in employee disengagement levels.

5. A good recognition policy can cause the individual productivity of employees to rise by as much as 78%.

What are the Key Benefits of Recognition for the Business?

Organizations look towards maximizing growth and profitability through optimal utilization of the knowledge, skills, and expertise of their workforce. Employee recognition plays a key role in this.

Here are the top benefits of employee recognition for the business:

How Employee Recognition impacts business?

1. Higher Business Growth and Profitability

Monetary Rewards

When the employees feel valued for their work and their contribution towards the success of the business, they are filled with a sense of pride and ownership.

This makes them work even harder to further drive business growth.

Recognition also motivates them to be more productive and cost-efficient. Hence, employee recognition can impact business growth and profitability.

2. Enhanced Innovation and Process Improvement

Recognize Innovation Efforts and Remove Fear of Failure

Recognition is one of the biggest drivers of employee engagement and motivation.

Employees when recognized for their performance develop a strong sense of belonging to the organization and this inspires them to seek innovative solutions to business problems.

Also, they would look to improve business processes to make them more efficient and cost-effective.

3. Exceptional Customer Experience

Decide On The Extent Of Customer Involvement

Also, employee experience goes hand-in-hand with customer experience

Hence, happy and satisfied employees are likely to be more committed to ensuring customer satisfaction.

Hence, employees who are recognized for their work are likely to be more driven in managing existing customers and bringing in new clients by providing a truly exceptional experience.

4. Positive Company Culture and Collaboration

Social Recognition as a Multiplier for Employee Recognition?

Employee recognition policies can contribute significantly to building a positive company culture.

Finally, a positive work culture creates mutual trust and respect among coworkers and strengthens the camaraderie between them.

This ensures that they collaborate more, show a greater willingness to share knowledge, and support each other when required.

5. Higher Employee Retention

Why switch from In-house Employee Recognition Platforms?

One of the biggest challenges faced by organizations today is that of retaining top talent. 

Therefore, proper and timely recognition can make employees feel valued and loyal to the organization. Loyal employees are less likely to seek job opportunities elsewhere.

Hence a good employee recognition program can prove effective in reducing voluntary turnover rates.  This, in turn, can lead to lower hiring and training costs.

6. Stronger Employer Brand

Today, all organizations understand the significance of having a strong employer brand to keep attracting top talent from the industry.

The employees of organizations with good employee recognition programs are more likely to spread the ‘good word’ about their organizations.

They are also more likely to refer others from their professional and personal networks.

What are the Effective Ways to Drive Employee Recognition?

An effective employee recognition program can provide multiple benefits to the organization.

Hence, they need to take the right steps to create and manage such programs.

So, here are a few tips in this regard:

How can Employee Recognition be made more effective

1. Ensure that the recognition program is specific, well-documented, and measurable.

2. Clearly define the criteria for employee recognition.

3. Offer recognition for driving results in line with the business objectives.

4 Give recognition for displaying behavior in line with the organization’s values and culture.

5. Leverage technology to make processes more efficient and experience more user-friendly.

6. Retain the human touch in the program as much as possible.

Read the Step-by-Step Guide on How to Set up an Employee Recognition Program


Organizations that have a deep understanding of how employee recognition impacts business can develop relevant programs that are aligned with their business objectives, organizational culture, and workforce profile and get the desired results.

Sagar Chaudhuri

Lead author: Sagar Chaudhuri, the Co-Founder and CEO of HiFives. He is an HR Tech Evangelist with over 25 years of experience in the corporate world and entrepreneurship. In the past, Sagar has worked with companies such as Genpact, Infosys, and ICICI Bank, in leadership roles. He has an engineering degree from IIT Kharagpur and an MBA from IIM Lucknow. Connect on LinkedIn

To stay updated on the latest HiFives blogs follow us on Twitter (@MyHiFives)

HiFives is a global employee rewards, recognition and engagement SaaS platform that enables organizations to digitize, automate and transform their employee experience. It is used by 100+ large enterprises, small businesses and startups in manufacturing, retail, technology, financial services and media, across 25+ countries.