Why Is Employee Recognition Important For Retention?

Male employee shaking hands with female employee

April 2, 2024

Are you doing everything you can to retain your employees? Is morale a consistent problem leading to turnover? For a lot of businesses, this is an issue they face. Why is employee recognition important and how does it connect with retention?


The total separations rate of U.S. jobs was 3.4 percent in 2023. And, while it costs an average of $4,700 to hire a new team member, it costs up to 40% of an employee’s base salary to hire a replacement with benefits, according to Zippia. Clearly, retaining top talent is important.


Worse than that, 6/10 employees report quiet quitting, or psychologically disengaging from their work due to a lack of support or recognition.


One of the most proactive (and effective) ways to prevent your employees from checking out, aside from staffing your organization properly and ensuring an equitable distribution of labor is to recognize your employees, not just for their achievements, but also for who they are. Read on to learn more.

Celebrating a female employee

Engaged employees are more likely to stay

Research shows that employees who feel energized and excited about their work are 31% more likely to stay at the organization.


Truth be told, not all work is energizing and exciting. So, how do you make an employee feel engaged and interested in the work even if it’s boring or monotonous?


We believe recognition is an important piece of the puzzle. Recognized employees care about their work, feel their efforts make a difference and believe their company has their best interests in mind.


A study found that employees who feel adequately recognized are 2.7 times more likely to feel highly engaged and loyal to their company. Simple practices like peer-to-peer recognition, rewards, and just saying “thank you” can make employees feel their work matters. This fuels engagement and, in turn, retention.

Employees clapping for other employees

Understanding the link between morale and recognition

Morale and retention have a strong correlation. Low morale due to lack of recognition or feelings of being undervalued can lead to decreased engagement, higher absenteeism, and ultimately increase an employee’s likelihood of leaving.


However, high morale has the opposite effect. Appreciated employees find greater meaning in their work and feel more motivated to contribute. This taps into the innate human need to feel valued and builds confidence, loyalty, and resilience.


Communicate with your employees and make them feel recognized. Employees who feel included and that their voice matters will have higher morale. They are more likely to weather external stressors, setbacks, and even rival job offers that may otherwise entice them away.


The impact of recognition and performance

Recognition not only boosts morale and retention, but it also has proven links to improved performance.


There are numerous pieces of data directly connecting recognition and performance. Recognizing contributions, wins, hard work, collaboration, and innovation gives positive feedback employees can use to repeat successful behavior.


It shows them what the company values in tangible ways. This motivation and clarity around desired outcomes drive higher performance.


In addition, recognizing employees helps them feel psychologically safe to take risks, stretch themselves, and even fail from time to time. This fuels growth, learning, and creativity – all of which translate to better individual and organizational performance.


How employee recognition leads to more referrals

What do happy employees do when they feel satisfied with their work environment? They share it with their friends and family.


It turns out that recognizing employee contributions feeds directly into higher-quality referrals.


A SHRM study found that employees who feel consistently valued through recognition are far more likely to refer candidates from their personal networks. In fact, those employees provide over twice as many referrals as their counterparts who feel their efforts go unnoticed.


There are a few reasons the link between recognition and referrals makes sense. First, validating work gives employees greater attachment to and pride in their organization. They become mini-ambassadors sharing their positive experiences.


Second, recognition builds trust that the company will also appreciate the efforts of referred candidates, making employees more comfortable connecting their contacts.


The key is listening to what makes employees feel valued. Is it public praise? Rewards points? Hand-written notes? Gathering these insights tailors programs for maximum satisfaction impact.


By training leaders and providing tools to recognize achievements big and small, HR builds a more engaged, loyal workforce. Employees who feel consistently valued become a company’s best brand ambassadors.


Loyalty and confidence blossom in a culture of recognition

A culture of recognition is one where appreciation and validation are woven into the fabric of the employee experience. From new hire onboarding to company town halls to peer-to-peer interactions, recognition is shared openly and freely.


In this type of positive and supportive environment, employees feel loyal to both leadership and their colleagues. They become invested in each other’s success. Recognition boosts team morale and builds an open, appreciative company culture.


Employees also feel more confident in a culture where recognition is the norm. Confidence allows employees to take ownership of projects, solve problems resourcefully, have courage in their convictions when making recommendations, and pursue development opportunities.


These behaviors all translate to retention and fuel innovation.


5 tips for developing an employee recognition program

If you want to leverage recognition to boost engagement, performance, and retention, here are five tips:


1. Set goals and key metrics

Clearly define 2-3 goals you want to achieve through your employee recognition program. These could include increasing retention by X%, boosting employee satisfaction scores by Y%, or reaching Z% participation.


Track metrics like voluntary turnover, employee satisfaction survey results, manager feedback, participation levels, and performance data tied to recognized behaviors. Monitoring this quantifiable data over time will shed light on the impact of your recognition program and opportunities for improvement.


2. Train managers properly

Managers play an integral role in recognition. Hold training workshops to educate managers on best practices for informal and formal recognition. Provide easy resources like email templates but also expand using recognition apps and newer technology. Feedback should be specific, authentic, and tied to company values and goals.


Commendations should be as regular as critical feedback. If you find that a lot of employees are dissatisfied with a certain manager, you’ll want to treat this as seriously as you would an employee performance review.


A huge part of the manager’s job is managing the morale of your employees and ensuring that everyone is satisfied with their experience in the business.


Also, recognize managers for exemplifying the behaviors you want them to reinforce in their teams. If managers feel appreciated, they will pay that positivity forward.


3. Onboard employees

Start recognition practices from day one as part of onboarding. Explain why peer-to-peer and manager recognition matters and share stories of employees who have been recognized. Provide information on channels accessible to them for recognizing colleagues.


This builds understanding and habits right away so new hires embrace recognition as integral to your culture. Consider assigning onboarding buddies who can offer symbolic peer recognition during the onboarding period.


One caveat here. Hiring on the basis of culture is important as well. During the interview process, it’s important to find out what type of energy a person is going to bring to a workplace.


Regardless of their experience and past titles, what type of person are they? Will they show up every day interested in their work? Are they coachable?


Even the best performing employees can bring a lot of negativity to a workplace and sometimes recognition isn’t even enough to fix a bad attitude. Keep that in mind during the hiring process.


4. Use multiple channels

Variety keeps recognition meaningful and fun. Integrate formal channels like awards, points-based incentive programs, and gifts with informal mechanisms like verbal praise, handwritten notes, shoutouts at meetings, and appreciative email threads.


Public praise feeds our human need for validation from others. Rotate creative approaches – from recognition boards to digital screens featuring employees, to changeable prize offerings – so it stays fresh.


5. Gather feedback

Check in periodically with staff at all levels on how meaningful they find recognition received and mechanisms used to deliver it. Survey, hold focus groups, or simply ask during 1-on-1s with managers.


Listen, respond to feedback transparently, and refine your employee recognition program to better motivate staff. Recognition only works when it aligns with what makes employees feel truly valued.


How important is employee recognition?

The importance of employee recognition and appreciation cannot be understated. Recognizing your team for a job well done impacts retention by boosting engagement, morale, loyalty, confidence, and performance.


A strategic employee recognition program allows companies to reap these benefits through simple practices that show employees their contributions matter. Keep in mind that it doesn’t have to be super formal to increase job satisfaction.


A simple “thank you for just showing up today” can go a long way. The human desire to feel valued is universal.


Companies that tap into this innate need will be rewarded with an engaged workforce that stays for the long haul, driving productivity and profitability over time.


The effort and investment to build a thoughtful culture of recognition delivers significant and tangible business results. See how much employee disengagement is costing you.

Ready to keep your employees motivated? Contact STRIVE to build a better employee experience today!