About 4 in 10 employers gauge ROI – and the results look promising
"Recognition is not a perk, it is a business enabler.”
So says Laura Salvatore, executive vice-president of human capital at Centurion Asset Management, in endorsing the importance of measuring the ROI of employee recognition.
And she knows well of what she speaks: The company’s leadership behaviours tied to recognition show a “strong correlation” with team engagement, says Salvatore and departments with strong recognition patterns have seen a 1.8% improvement in retention.
The organization’s recognition programs strengthen “performance, accountability and leadership effectiveness,” she says, along with reducing turnover and operational disruption, and enhancing culture cohesion across a dispersed workforce.
Centurion is among a select group, as a recent survey from Kudos found that 40% of North American organizations are actively conducting formal ROI analyses of their employee recognition.
Similarly, a recent survey found that 37% of Alberta employers are not specifically evaluating ROI but have a soft linkage while 6% conduct detailed evaluation and justification. More than half (57%) are not evaluating or justifying their recognition program, found Vantage Circle and CPHR Alberta.
Correlating data to metrics
But Tom Short says focus on measurement is evolving.
"ROI has moved from a very simple kind of element of just putting in a program or process, whether it was manual or old school technology, to just facilitate streamlining things… to a scenario where the technology is allowing people to create stronger systems, provide more data, and… correlate that data to common metrics,” says the founder and CCO of Kudos.
Initially, organizations focused on activation, participation and reach, he says, and people are still very interested in areas like sentiment and net promoter scores. But now, it's more about impact and influence, says Short, “and moving metrics that are more measurable like retention, tenure, lost days at work, resiliency and people tapping into some of the benefits systems [along with] participation, productivity and revenue per employee.”
Recognition tools aren’t just a nice to have anymore, says Short: “They are a strategic, business-imperative, ROI-driven tool. And those who don't have it are at risk of losing good people or not achieving their goals."
According to Kudos’ survey of 355 organizations, the most common metrics used to assess recognition impact are:
- employee engagement (82%)
- retention and turnover rates (67%)
- participation rates (64%)
- ROI and cost-benefit analysis (41%)
- profitability and performance improvements (38%).
Additionally, 85% of HR leaders measure employee engagement as a primary recognition outcome, while 42% track retention and turnover rates.
According to Kudos' study, 84% of the groups say they have much stronger engagement overall after implementing a recognition program or system while 67% report measurable productivity gains.
As Salvatore emphasizes, recognition "reduces turnover and operational disruption, enhances culture cohesion across a geographically dispersed workforce, and creates a continuous feedback loop, where employee voice directly informs strategy,” she says.
"Measuring ROI ensures that recognition remains intentional, equitable, and strategically aligned with Centurion's growth ambitions."
ROI: Chicken or the egg?
The correlation is measurable, though nuanced, according to Short.
"Recognition is only one element in the entire ecosystem for driving overall corporate performance. But it's an extremely important metric. And there is, in certain situations, a straight line to see individual team or corporate performance to overall employee engagement."
He cites as an example HID, a large Kudos client with 10,000 people globally using the system, when a newly appointed senior executive wanted to cut costs and targeted the recognition program for elimination.
"HR showed them the statistics and the results on how the various groups, year over year, had performance improvements across the board. And as the net promoter score went, so did the profitability, so did the productivity," Short explains.
“Now, was it the chicken or egg? Hard to say. But the minute that he saw that, he went, ‘OK, we're keeping that. What else can we try?’ And that's what the C-suite needs to see. They need to see that this is directly correlated to the performance of the company.”
Tracking recognition outcomes
According to research conducted by Kudos with Sago and TSC across 355 North American organizations with 500 to 5,000 employees, 90% of organizations are tracking recognition outcomes.
At Centurion Asset Management, HR looks at several outcomes, such as TinyPulse participation — the company's continuous feedback tool — which increased from 11% to 37% through redesign and gamification, and sentiment trends around recognition perception, which rose from 79% to 83% year-over-year, says Salvatore.
She emphasizes the strategic purpose behind this measurement: "These insights allow HR and leadership to identify emerging strengths, diagnose cultural challenges and link recognition directly to outcomes such as performance, service excellence and organizational resilience."
Centurion’s recognition “ecosystem” includes performance, impact and values-based awards (with more than 230 formal awards issued in the past year); peer-to-peer recognition that "creates connection across functions, regions and roles”; continuous listening and “micro-recognition” through TinyPulse; milestone and service awards; and embedded leader practices where managers receive training and prompts that make recognition part of daily leadership behaviour, “not an occasional event,” she says.
As a result, recognition at Centurion is continuous, equitable, data-informed and culturally embedded, says Salvatore: “It fuels engagement and performance in ways that are aligned with both our people philosophy and our business strategy.”
