Still haven’t invested the necessary time and resources into creating an employee recognition program for your company? Some business owners assume recognition programs are nothing more than a money pit, costing them hundreds or even thousands of dollars, while others view them as having no real benefit. The truth, however, is that employee recognition programs offer numerous benefits, one of which being much improved employee retention
When used in the context of employment, turnover rate is defined as the percentage of employees who part with the company. There are four primary types of turnovers:
- Voluntary – occurs when the employee willing makes the decision to leave the company.
- Involuntary – the employer makes the decision to fire or otherwise discharge the employee.
- Functional – the company must part ways with an employee due to low performance.
- Dysfunctional – a high-performing employee makes the decision to leave the company.
You might be surprised to learn that there’s a direct correlation between employee recognition and turnover rates. According to a study conducted by Forbes, companies that embrace a recognition-rich culture experience a 31% lower voluntary turnover rate on average. In other words, companies with that regularly recognize employees for their hard work and dedication are less likely to have their workers quit.
“On other hand, our research did find that modern, re-engineered recognition programs can have a huge impact on business performance. Companies that scored in the top 20% for building a ‘recognition-rich culture’ actually had 31% lower voluntary turnover rates! This is a huge statistic,” wrote researchers in the study.
Companies that routinely experience high turnover rates are forced to spend valuable resources finding and recruiting new workers. Each time an employee willingly decides to quit, the company must find someone else to take his or her place. This takes time, as well as money in the form of recruitment costs, training costs, and lost productivity, all of which add up over time.
The bottom line is that all companies and businesses should embrace a recognition-rich culture. Cutting employees a paycheck every two-to-four weeks isn’t always enough to convince them to stay. Employees want to feel recognized and appreciated for everything they do. When companies acknowledge this fact, they’ll reap the benefits of lower turnover rates and higher productivity.