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Tackle Turnover: Spend a Little, Save a Lot

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Your employees are your most valuable asset. If nothing else, the past two years have surely taught us that. How did organizations survive? Was it their inventory, their machinery, their equity? Those resources may have had something to do with staying afloat, but without the employees to sell, manage, and operate those assets, the business landscape would look very different today.

Knowing this, it’s not surprising the Great Resignation is top of mind. In August alone more than 4.3 million workers quit their jobs. That’s nearly 3% of the U.S. workforce leaving their jobs in search of something better – in a single month. There’s no better time to spend a little to tackle turnover, and save a lot in the long run. 

Spending a Lot on Turnover

Research conducted by Gallup in 2019 found the cost of replacing an employee ranges from one-half to 2x their annual salary. In an average year – even a good year – voluntary turnover costs U.S. businesses about one trillion dollars. 

Now take into account the massive turnover we’ve seen this year, plus the increasing labor shortage industries are facing. Recruiting is no longer business as usual, and the cost of turnover will show that. Organizations looking to stay competitive will need to utilize signing bonuses, agencies, and headhunters to recruit top talent, and it will be pricey. 

All of these costs to fill a position that ideally wouldn’t have been vacated in the first place – and there’s still a risk that the new hire you just spent thousands of dollars onboarding will leave, too! 

While this may sound bleak, it doesn’t have to be this way. In fact, Gallup also found that 52% of employees who left their role voluntarily said their manager or organization could have done something to prevent them from quitting. This “something” that could reduce your organization’s turnover by half is really quite simple.

Tackle Turnover by Reassessing Employee Value

Reducing turnover may sound daunting – after all, each employee quits for their own specific reasons. Do organizations need to have a unique strategy for each employee at risk of leaving? Luckily, that isn’t the case. Whatever the reason for leaving is – benefits, work-life flexibility, workplace safety, career development, or something else – chances are the overarching theme is the same: how valued an employee feels. 

I’ll say it again: your employees are your greatest, most valuable assets, yet based on 2021’s turnover rates, it doesn’t appear organizations are treating them as such. Now more than ever organizations must lift, connect, and engage their humans before it’s too late. Employee recognition does just that.  

A robust employee recognition program allows employees to be recognized and to recognize each other for the invaluable work they do each day. It builds a community grounded in an organization’s core values, strengthening the bottom line. When employees feel seen, appreciated, and connected to their colleagues and organization, they stay longer. 

Spend a Little, Save a Lot

How much does your company spend on turnover in a year? How much will your company spend on turnover this year, when resignation rates are at an all-time high? Even without knowing the exact number, it’s probably too much. 

Instead, consider putting a fraction of that cost, say 1% of your payroll, into building a robust, collaborative, values-based employee recognition program and watch the ROI flood in. Workhuman® research has proven recognition works again and again. 

Across industries, employees who give and receive recognition are 2.6x less likely to leave their position. Employees recognized 7 to 10 times annually (that’s less than one recognition moment a month) see 2x lower turnover than those who go unrecognized. New hires recognized in the first year leave the organization 3x less than their unrecognized counterparts. 

The Impact of Recognition

Investing in a recognition program not only reduces turnover and increases engagement, but it also leads to happier customers. A Gallup report found engaged employees are not only more productive but also report 10% higher customer satisfaction metrics than disengaged employees. Workhuman’s data backs this up. Employees who are recognized monthly with monetary value are 4x as likely to receive compliments and be recognized by customers for exceptional service. Even further, the data shows a strong recognition culture yields customers who actually spend more. 

The power of recognition impacts organizations in all industries, not just customer facing ones. A Workhuman study found that five manufacturing plants with the strongest recognition culture reported 82% lower recordable injuries than the plants with the lowest recognition reach. Strong recognition cultures also reported an average lost time incident rate that is 65% lower than plants with low levels of recognition.

The impact goes far beyond the individual recipient. Just seeing coworkers receive awards for safety-related moments encourages others to prioritize safety as well. Employees who feel safe in their environment and are appreciated for following safety protocols are more productive. It almost makes them and feel more valued and connected to their work. 

Spending Smart

There is no avoiding the inevitable, and employers now have a choice to make. The choice is simple. Do nothing and continue to fund the endless turnover cycle, or build a culture where the turnover cycle can’t persist. Strategic employee recognition increases the bottom line through engagement and connection. Spending a little will transform your organization into one where employees want to stay. What are you waiting for? 

What's More Important to Give Employees: A Gift Card or a Pat on the Back?

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While many companies use financial compensation to reward employees, there are times when these rewards lose their effectiveness. Here is when to consider ditching the bonus for a simple pat on the back.

While companies are comfortable with giving financial rewards to employees, they often get stuck when it comes to giving meaningful, genuine recognition. Yet recognition is often the more powerful reward, since it speaks to the employee in the language of meaning and personal context, rather than generic gift cards.

What speaks even more volume is creating reward programs with a social component. This approach brings the department or larger organization into the celebration of an employee’s accomplishments, resulting in the most powerful path to building a culture of recognition tied to accomplishments and employee growth.

Rewards vs. recognition – when each makes sense

For the purpose of this discussion, rewards can be thought of broadly as some form of compensation. Compensation may include salary, bonuses, stock, options or even deferred compensation. The point is there’s a formal agreement between the manager and the employee that some level of effort is required, some work product is expected, certain behavior is appropriate and results are desired.

This system works pretty well for most of us, most of the time, but there are times when financial rewards lose their effectiveness. Say your business isn’t growing due to economic or competitive pressures and you don’t have the resources to periodically review and up-level the rewards system. Many employees will find this a disincentive to keep performing at the same level. They may leave for greener pastures, they may develop bad attitudes, become resentful or cynical, even sabotage the workplace with ill-timed comments to customers.

While rewards are a necessary part of the world of work, they are not sufficient. It’s important to get them right and keep up with the market, or you’ll see retention fall and employees disengage. But it’s not the whole ball game.

This is where recognition comes in. In many cases it’s more powerful (assuming your rewards programs are in reasonable shape) to give an employee recognition when he or she excels. Recognition can be as simple as a shout out in a group email or as subtle as a heartfelt handshake. The difference here is it takes an emotional action on the part of the manager to recognize the actions of the employee.

Here are a few times when recognition makes sense:

  • When the person is well-compensated but has done something above and beyond the call of the job
  • When the person makes an effort to set a fine example, say by mentoring a struggling employee
  • When the employee invests him or herself at an emotional level to the success of the organization.

Building a culture of recognition

It’s difficult to build a culture of recognition but it can be done. Christine M. Riordan, writing in the Harvard Business Review, talks about how companies can ‘foster a culture of gratitude.” Certainly gratitude is a component of recognition: If someone helps you reach your sales goal, you’ll feel not only that you hired the right person but also grateful for their contribution to your company. Recognition is, I’d argue, bigger than gratitude alone. Recognition is a celebration of shared values and a shared sense of purpose, clearly communicated and widely understood. If you don’t convey the purpose, mission or how to achieve the goals correctly, many things can go wrong in the organization. (McKinsey Quarterly goes into this more in depth.)

Employee recognition has (at least) five attributes: it’s in the moment, in context, appropriate, authentic, and it’s aligned with the employee’s notion of value.

When financial rewards backfire – and what to do to remedy the situation

We’ve all seen rewards systems based purely on financial rewards backfire. It happens with dismaying frequency when your culture lacks a recognition component. Remember the last time you gave Jim a bonus for hitting a goal, only to find out later that Jim’s team did 90 percent of the work? Remember when you instituted raises after a two year freeze, citing everyone’s hard work? You lost 30 percent of staff within six months. Bet you didn’t see that coming.

Money isn’t everything. To fix a situation where monetary rewards have created friction, you’ll first need to check in with all your managers to get the lay of the land. Find out who’s unhappy, then go to them and ask open questions about what’s bugging them. Then acknowledge the error and fix it. It might mean giving Jim’s team bonuses (after having a few words with Jim about how he handled it), but in other instances you may be able to bring the ship aright with recognition: stand up in front of the group, admit you made an error, and recognize each player for his or her contribution.

Financial rewards put a price on doing the right thing; recognition gives the same action value. I’ll take value every day. In a healthy work culture, value should be the yardstick used to measure accomplishment and determine appropriate recognition.

This article was first published on Entreprenuer.com on May 2, 2014. 

Photo Credit: Pewari via Compfight cc

5 Ways Leaders Rock Employee Recognition

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I was grocery shopping the other day (Yes, this sometimes happens). A mom with two small kids in tow kept up a constant stream of chatter: “Great job pushing the cart, Stella, you are so smart.” “Good work picking out a pepper, Max, now put it back.” It went on and on – kids do something/anything, mother responds with a positive affirmation, kids do another something, mother reacts. This is so awesome to see in action. I’m in aisle 10 and it continues. There is a giant metaphor unfolding as I seek out my coconut water.

happy-employees411

You rock. You’re so special. Nice job putting your toys away. On and on it goes: reflexive praise for doing the right thing and, in many cases, the not-so-right thing. We’re becoming a culture in which people expect to be rewarded for drawing breath and taking up space, which makes the job of an HR pro or business leader tasked with employee retention a difficult one indeed. If many of your employees expect routine and social praise and “badges”, how can you recognize extraordinary achievement? When should recognition and reward be linked?

In many organizations recognition and financial reward are joined at the hip.  An employee does something above and beyond and receives a gift card or a lunch with the boss; a team achieves a goal and is rewarded with a party. These rewards, however, can backfire; they tell the employee that he or she is worth n dollars to the organization for some level of effort. In my opinion this approach misses the point of recognition: people are motivated by more than money. People crave positive feedback, recognition they put in extra effort, acknowledgement of leaders and peers, the glow that comes with knowing an achievement has been seen, appreciated and celebrated. I love this place. But I’m also realistic as I look at ways leaders can recruit and truly nurture current and future talent.

Financial reward is a great thing, don’t get me wrong, but it’s not the equivalent of recognition. Let’s not kid ourselves. It’s a short term solution. Neither is constant praise for average work. Recognition is a key tool in employee retention programs for a reason: people need more than constructive feedback and positive affirmation. They need recognition of extra effort. They need to “feel” it. This will never go away as a basic human need.

An effective approach to employee recognition encompasses these key points:

1) In the moment – as much as possible, be timely. Catch people doing exemplary work and acknowledge their efforts.  Don’t be knee-jerk – showing up for work on time does not count in most cases. Be specific, descriptive and measured.

2) In context – recognition is most effective when it’s given in the context of a larger goal or business-results-focused activity. Random affirmations are much less meaningful than those tied to a business goal. An employee who lands a big contract by putting in the extra effort needs to know you noticed, and understand the employee’s  effort to ensure business success. This matters.

3) Appropriate in volume/scale – think back to the mom in the market. Was the praise she doled out appropriate in scale and volume? Not really. Here again randomness is not your ally. Recognition should match effort and results, or it loses meaning. This is where the complexity lives.

4) Authentic, not automatic – you have to mean it when you give employees recognition. This is my chief worry about automated recognition systems – they remove the human touch so important to effective recognition. Can we find a smart balance? Can we make social HRTech software work?

5) Tied to the employee’s perception of value – people know when they’re valued, and they should have a good idea of their value to the organization. Monetary rewards can skew this notion of value, linking it to cash when it should be linked to appreciation of extra effort and smarts. Money is appropriate much of the time, but it’s not the only – or even the most effective – motivator. Treat employees as valued team members, not as numbers. Most  of the time it’s the best way to really recognize a valued player.

There is HR Technology that’s super sexy and relevant for engagement. I’m overthinking it at the moment. This is typical as we find the most meaningful ways to innovate the future of work. I’m excited about software and social applications for rockstar leaders and workplace culture. It’s all good. Now we seek to connect the most relevant, human and inspiring dots.

I have many thoughts about how we, as a society and a global social leadership community, handle recognition, but I’d like to hear what’s on your mind. Please weigh in and tell me what recognition means to you, and how you’ve successfully recognized your employees and co-workers. Leaders jump in here too. Lead the revolution. You Rock.

Image credit: businessnewsdaily.com

photo credit: 5 via photopin (license)

A version of this post was first published on published on Forbes on 1/13/13