6 steps for determining the ROI of an employee recognition program

Follow this six-step process to determine the ROI of an employee recognition program

It’s a question that always comes up when companies are considering starting an employee recognition program or questioning if they should continue implementing a program:

It’s a valid and important question. Depending on the size of your organization, you can be spending an average of $125 to $175 per employee per year on award costs and another $50 to $75 per employee per year on administrative costs. For an organization with 10,000 employees, that’s an investment of up to $2,500,000. Of course, your CEO and CFO will want to know what they are getting for that kind of money.

If you can’t answer the question, your employee recognition budget could be the first thing on the chopping block when budgeting time comes around.

So how do you measure return-on-investment for a rather subjective initiative focused on recognition?

Here’s the six-step process to follow:

1. Start with defining your recognition objectives.

Recognition can be viewed simply as a “warm fuzzy” that is impossible to measure if you don’t first assign specific objectives for the program. In order to create a meaningful ROI, first determine what the real business need is for instituting a program. Common needs include:

• Improving morale
• Increasing productivity
• Improving absenteeism
• Reducing turn-over
• Reducing rework
• Reducing costs
• Reducing customer service complaints