Impact of Employee Rewards and Recognition on Retention

Most organizations today are constantly struggling to find an effective solution for employee retention. Employee turnover not only results in loss of money, time, and effort but also disrupts the smooth functioning of the organization. To counter this, organizations should asses the impact of employee rewards and recognition on retention and put appropriate programs in place.

Most organizations are often unaware of the deep connection between employee rewards and recognition and retention and lose out in the form of loss of good employees.

What is the connection between Employee Recognition and Employee Retention?


It is a common misconception in organizations that the employees seek only a good salary, benefits, and other financial incentives from their jobs. Due to this, many organizations focus only on offering these financial benefits to their top employees, but are still not able to retain them.

This is because most high performing employees crave for recognition and respect as much as they seek financial benefits. For such employees, rewards and recognition provide a sense of self-fulfillment which keeps them motivated to give their best performance.

That is why organizations that lack proper rewards and recognition programs for their employees may not be able to retain them for a long time.

As mentioned, employees need to feel valued and appreciated for their contribution to organizational growth. Having a proper employee recognition program provides an assurance of the same and enhances the overall engagement levels of the employees:


Here are the key reasons how employee rewards and recognition has significant impact on employee retention:


1. Helps Motivate the Employees

Being recognized for their efforts, initiatives and skills, makes employees feel motivated to repeat that behavior. The recognition and appreciation they receive also encourages them to further improve their performance to ensure that they are bestowed with greater rewards and recognition.

Being valued for their work by the organization, develops a sense of loyalty among the employees towards the organization. Such loyal employees are less likely to leave the organization for other opportunities.


2. Enhances Employee Happiness

When employees feel assured that their hard work is not going unnoticed, they tend to feel happier and satisfied with their jobs. Such employees are willing to take up even the most challenging tasks with a positive mindset and this resulting in improving their performance.

Most importantly, happy and satisfied employees are less likely to seek employment opportunities elsewhere.


3. Promotes a Positive Work Culture

When employees feel happy and satisfied in their workplace, it tend to develop a positive and friendly work environment. This helps in creating a fun-filled work culture based on mutual trust and understanding. Employees develop a strong sense of team bonding and comfort. Such employee feel a lesser need for leaving the organization and taking up a job with another organization.

The rewards program thus helps in improving overall employee loyalty and creating a positive work culture based on healthy competition between peers.


4. Better Relations with Superiors

One of the major reasons for employees leaving an organization is their poor bonding with their superiors. However, when employees are appropriately recognized and rewarded for their efforts, they feel assured of the support and appreciation of their superiors. This helps the employees to view their superiors from an entirely different and most positive perspective.

On their part, the managers and supervisors are able to better utilize the skills and productivity of the employees and hence are able to appreciate and acknowledge their efforts in a more open manner. This, in turn, helps in establishing a sense of mutual understanding and trust between the employees and their superiors, enabling them to share a positive relationship.


5. Increased Customer Satisfaction

When the employees are appreciated and acknowledged for their efforts, they tend to show a greater effort towards improving customer satisfaction levels. The rewards and recognition improve employee motivation levels which, in turn, results in a significant improvement in their performance and efficiency while dealing with customers.

Moreover, it also helps in improving the trust and camaraderie that customers share with such employees, which in turn improves business growth and profitability.

Such employees are often treated as the brand ambassadors for the organizations and can help in attracting more customers. They can also help in attracting top talent for their organizations and retaining existing ones.

Bottom-line

While salary, financial perks and benefits play a vital role in attracting top talent, their retention in the organization depends significantly on the effectiveness of the employee rewards and recognition program – how efforts and contribution of employees are recognized and rewarded.

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