Impact of Employee Recognition on Business Retention and Productivity Stefanini

Impact Of Employee Recognition On Business Retention And Productivity Levels

With the war for talent currently in full force, companies are looking for different ways to retain their talent. Especially in the wake of a global pandemic, many companies are struggling to retain their staff- which costs them greatly, both in capital and time.

37.4 million workers will voluntarily leave their jobs this year, up a startling 20% from pre-pandemic levels, according to new Gartner statistics. Hiring new people is significantly more expensive than retaining current staff, which makes this statistic especially worrying.

What some companies don’t realize is that salary isn’t their only “holy grail” of retention. One action that employers can take that is often overlooked is recognizing their employees’ accomplishments. Employee recognition, even as simple as a “thank you” for a job well done, can have a positive impact on retention, and in the grand scheme of things, costs very little.

In this article, we will illustrate the exact influence recognition has on a company’s workplace environment, as well as offer some suggestions to help you take the next step to implementing a recognition system- if you haven’t already.

Costs of a Recognition Deficit

By the Numbers: Financial Impact

According to studies, replacing an employee typically costs a business six to nine months of their income and costs American businesses more than half a trillion dollars annually. The costs soon add up for businesses that are currently losing employees.

A firm with 10,000 employees may save $16.1 million in turnover each year by making recognition an essential part of their culture, according to recent study from Gallup and Workhuman on the impact of employee recognition in the workplace. This is due to the stronger sense of loyalty and motivation that employees have for their employers, making them less likely to leave.

A second poll, conducted by Gallup, placed that figure even higher, estimating that sufficient worker acknowledgement could save an estimated $500 billion annually. The difference here is that they factored in how low employee morale, and high turnover creates a loss of productivity, and therefore results in lost opportunities to generate income.

Poor employee wellbeing can cost firms $20 million in lost opportunities for every 10,000 employees. Few leaders, however, are aware of the influence they have over wellbeing both at work and elsewhere.

The financial cost of failing to properly recognize your employees is profound, but there is another, less obvious cost of this shortcoming in your business; loss of productivity.


Employee turnover has corrosive impacts on an organization as a whole, reducing productivity, harming the corporate culture, and necessitating expensive replacement costs.

The data speaks for itself. Four times as many employees are engaged as those who don’t feel valued at work. Simply put, workers are more committed to their company when they sense that their employer cares about them.

Actually, according to the same study, persons who have had positive recognition experiences are three times more likely to firmly agree that they have a sense of loyalty toward their employer, and this devotion manifests itself in long-term commitment.

Employee morale and workplace productivity are tightly linked. When employers show their employees appreciation on a regular basis, morale can be greatly raised. Staff appreciation is crucial for a company’s financial line, which is impacted by employee turnover and productivity losses, as well as for making employees feel satisfied in their work.

According to a Limeade survey, workers who felt appreciated by their bosses were 38% more engaged and 18% more likely to go above and beyond in their daily activities. In addition, 80% of workers reported that acknowledgment encouraged them to work more, per a Gallup analysis.

Employees who felt undervalued, on the other hand, were twice as likely to leave their position. According to additional Gallup and Workhuman research, employees who don’t feel strongly connected to their workplace, are 12 times as likely to be disconnected from their workplace, and 5 times as likely to be job hunting for a new position elsewhere.

Not only does lacking a program for recognition result in lower retention rates, dissatisfied or disengaged employees have been reported as having lower rates of productivity. Scott Dussault, Chief Financial Officer of Workhuman, explains:

“For a long time, employee wellbeing was oftentimes considered a ‘bonus’ or ‘nice to have’ for organizations looking toward significant growth and financial success. Times have changed—with quiet quitting and disengagement running rampant, leaders should be turning to employee recognition to increase engagement, productivity, inclusivity, and overall loyalty to their companies.”

These numbers are consistent across many different countries, showing that good recognition can result in lower rates of burnout and disengagement, and higher rates of morale, productivity, and retention, no matter where you are located. And of course, on the flip side, failing to provide a good reward structure can cost your company greatly.

Steps to Mitigate these Costs

Luckily for companies, implementing a system to recognize employees does not need to be complicated or expensive. SHRM Globoforce Employee Recognition Survey found that 85% of the companies that spent merely 1% or more of their payroll on recognition saw an increase in employee engagement. When compared to the potential amount lost to burnout, turnover, or decreased motivation among staff, this small percentage to introduce a recognition system is a no-brainer. As Scott Dussault, CFO of Workhuman puts it:

“Considering that the cost of voluntary turnover due to burnout alone is 15% to 20% of the payroll budget each year, protecting and promoting employee wellbeing amounts to hundreds of millions of dollars toward organizations’ bottom lines annually. Neglecting wellbeing is one of the biggest mistakes organizations make—and a costly one at that.”

Promoting Engagement through Recognition

Seemingly Small Gestures

As we’ve established, a little goes a long way. A handshake, a high-five, a verbal “thank you” or “great job” – all of these can be very effective methods to boost morale, when delivered sincerely. Highlighting exemplary aspects of an employees’ projects, providing positive feedback without prompting, these measures make your workers feel respected and valued, not just as workers, but as human beings.

Even taking the time to ask about their personal lives, or congratulate them on achievements both in and outside of work can do wonders for their morale, and the company’s overall success.

Shifting Mindsets

Sometimes changing mindsets is the key. Ensuring that workers understand how their work directly contributes to the success of the company can lead to employees’ feeling less like cogs in a wheel and more like valued employees, making important steps to help the company.

Communicate to your workers that if they contribute to your organizations’ success, they will be acknowledged and celebrated for it. If they truly believe that the company values their work, they will put forth more of their effort and time to produce quality results.

Devising a Program

It’s critical that recognition be used consistently throughout the organization. For companies with entirely remote setups, it’s especially important to maintain the human aspect of recognizing accomplishments and contributions.

When implementing a program to recognize your workers, some companies use employee recognition software, to allow them to send encouraging messages, comments, and even post publicly on the platform to allow widespread recognition of employee accomplishments.

A way to do this in-person would be to follow the same idea of public posting, but in a physical way. Consider a board in the breakroom, where employees and managers can compliment and celebrate each other with little notes. Turn it into a game and randomly select one of these comments every month- giving both whoever wrote it and the subject of the comment a prize.

Encourage recognizing each other in your workplace, and eventually it won’t require much effort- it will just be an inherent part of your organization’s framework. A system of recognition does not have to be elaborate, it doesn’t even need to be an official program.

But be warned, utilize some creativity in your methods of rewarding and acknowledging your employees. If a strategy is seen as inauthentic or not genuine, it can have a negative impact rather than a positive one.


As we’ve established and illustrated, people want to be recognized for their efforts. That’s why according to Willis Towers Watson, recognition is one of the top factors to gain candidate attention.

While retention is critical, and more cost-efficient than hiring new people, firms everywhere are still in need of new staff. Also, with the after-effects of Covid still affecting retention rates, and the market more competitive than ever, companies have to find ways to stand out in a crowd. By promoting your recognition program, you can garner new attention and attraction for much needed candidates.


We are in the middle of a crisis of retention, and many employers are overlooking the fact that by recognizing their employees in a way that is genuine and authentic, they can increase productivity, decrease costs, and combat this crisis. Its human nature to like being appreciated. We like to be shown that we matter, in even as small a gesture as a handshake or a verbal “thank you.” And when it’s as easy as that, with undeniable benefits- there’s no excuse to not make an effort.

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