How much should your company spend on an employee recognition and reward program?

How much you spend on an employee recognition and reward program is going to depend on a few things:

How much you’re company is ready to invest, considering the issues you are trying to address (e.g. spend time calculating the time and recruitment cost of attrition. If it’s costing you $75,000-$150,000 to recruit, replace and retrain someone each time an employee leaves, we’d argue spending this amount in a recognition program that would lead to more people staying would be a worthwhile investment!), and

whether employee recognition and reward is one of several cultural and wellbeing initiatives your company is running.

Start by working out your budget per employee

Based on our experience working with over 18,000 employees, the best performing companies invest at around $250-$300 per employee (this figure includes what the company spends on other cultural and wellbeing initiatives). Some companies kick off with a budget of $200 per employee and start seeing results, so they invest more the following year.

Spend your recognition and reward budget wisely

Rather than blowing your entire budget on big, annual awards that only recognise 4-5 of your “top achievers”, make recognition and reward available people to everyone in the company, regardless of their role or tenure. Making recognition an everyday part of your business spreads the positive morale, and makes the productivity-boosting effect of recognition last throughout the year. That way, your employees are getting regular feedback and the feeling of progress as they go through it, which helps to keep them engaged long-term.

Once you know how much you want to spend per employee, spread that budget out over the award types you chose in step 3. Use a mix of free recognition and micro and large awards.

A sample recognition and reward structure

Here’s a sample structure for an employee recognition program for a 200 person business. Unlike traditional top-down programs that recognise only a handful of people each year, this program can generate over 5,000 instances of recognition across the entire organisation within 12 months. Imagine what that would do to morale and productivity!

Budget: ~$65,000/year
$250/employee ($50,000) + admin + tech fee = approx $14,500

Effective Employee Recognition

Effective recognition and reward programs celebrate the behaviours that exemplify the values that make your business unique and successful.

Redii recommends employee-led recognition programs that make it easy for people to recognise each other spontaneously -anywhere, any time.

Saying thank you, is easy and free, and instantly boosts morale. When it’s done frequently, and from a mix of both leaders and peers, it keeps people engaged and provides continuous feedback and reinforces the progress people have made.

Recognising values lived

If you haven’t got company values, or you’re finding they aren’t resonating with your people, now’s the time to (re)visit this topic.

Your company’s core values are your guiding principles; they are what help people determine what’s right and wrong. With them, your people will know if they’re on the right path and fulfilling their goals.

But, it’s important to help people define what these values look like in action, and to build a recognition program based on specific behaviours and not just assumptions.

For example, the value “leadership” could manifest itself in different ways. Some might think that means leading a successful project. Others might think it means taking a risk and trying a new approach to solving a recurring problem.

Other people might think it means not being afraid to say “yes” to new things. It could be all or none of the above – the important thing is to understand what each of your values means for your people.

Recognise accomplishments as they happen

The key to designing an effective recognition program is to recognise and reward success in ways that reinforce the values and “ways of doing things” that make your company thrive.

TIP: You don’t need lots of different ways to recognise people. 2 or 3 recognition types are enough to begin with and, as your program matures and you see the need, you can introduce other recognition types and rewards that go with them.

For example, a tech company created a tiered recognition program that recognised and rewarded their development team based on the quality and cleanliness of their code. Both team leads and peers could recognise each other, so they got regular feedback and small, spontaneous rewards throughout the year.

The result? Junior developers worked harder to write code with less errors, and the speed by which the development team pushed code to production increased. On the other hand, had they only recognised or rewarded the speed that code was written, quantity may have increased but quality would have suffered.

Interested in learning more about effective employee recognition programs? Download now our “Building and Budgeting for your Employee Recognition Program” workbook.

The “Why” behind employee recognition

A few years ago, I spoke at a HR conference where the legendary speaker Simon Sinek (of TED Talk fame and author of Start With Why and Leaders Eat Last) joined us to talk about how the “Power of WHY” can change the way HR professionals approach their job and the projects they work on.

Simon’s was one of the first TED talks I ever watched and it is consistently in the Top 10 best TED talks (or leadership talks in general). He speaks passionately and wisely of the importance of understanding purpose – the reasons why we do what we do, and how that not only motivates us but can help us prioritise and determine what to actually spend our time on.

I’ve spoken and written about similar themes in my own presentations and posts, because purpose, vision and values all play a critical part in any change, retention or recognition strategy. After all, without understanding what it is a business is working towards, or where I fit in the puzzle, how do I know what behaviours should be recognised and rewarded?

Why successful projects ask this question first

When I first heard Sinek’s talk, I was pretty humbled; I was just about to kick off a massive change program in an organisation with over 300 IT professionals. Reporting lines, job descriptions and team structures were all about to change to align the business with a new strategy. I knew we had a long journey ahead, and being reminded of the “why” was critical for the success of the change, as well as ongoing morale.

If it is second nature for humans to ask, “why?”, why do often skirt this question when it comes to business and our everyday work? Why don’t we expect our employees to ask themselves and ask their leaders WHY that task is so urgent, or WHY the targets have changed, or WHY we’re prioritising this project over another? And when they do ask, why are so few leaders prepared to answer that question?

When I coach people leaders on communication in the workplace, I tell them it takes at least THREE attempts before people really start understanding a message. That’s THREE times, minimum.

Yet so many teams forget to talk about the “why”. They forget to remind people during the journey. And they would prefer people to just get off the bus instead of answering the question “where are we going?” and “why?”. This light-touch approach makes change — no matter how big or small — an uphill battle. Try introducing a new piece of software to a group of paper-based administrators without telling them why it’s happening, and without communicating the “what’s in it for me?”. No matter how much more efficient that software will make them, and how much easier it might make their job, they’ll resist.

Try growing a team, or motivating an individual to perform without communicating why the targets have been set or the impact that specific task will make to the business as a whole. Unless every person in your team is self-motivated and conscientious (a rare trait!), chances are you won’t get very far.

Without the “why”, there is no reason to keep going when it gets hard

I’ve learnt that understanding my key drivers – and often, having visual reminders around me – help me and other professionals working in this space to keep you focused and driven, even when project progress or individual energy stalls. It makes sense that to maintain motivation for long-term projects (like cultural change!), we should take on the advice from Steven Covey’s best-selling book The 7 Habits of Highly Effective People – begin with the end in mind.

If we fail to articulate the “why” of any journey or change project, we won’t know what our targets are. And without targets, we run the risk of trying to achieve everything at once (which, let’s be honest, often leads to you achieving nothing).

So, if you’re about to embark on a new project, stop and ask yourself, why am I doing this? What does “success” really look like? Get specific about your drivers and targets. The clearer your picture is, the better your chances are of designing something that suits those goals.

Need a hand articulating the “why” behind your employee recognition strategy? Start with our comprehensive guide to Building and Budgeting Your Employee Recognition Program.