The impact of recognition on job loyalty and employee turnover

With unemployment levels in both the UK and the US standing below 4%, the recruitment market has become increasingly competitive, meaning companies of all sizes are faced with the significant challenge of both hiring great people and retaining them.

For the likes of Apple and Google, their gravitas and pay will always attract applications, but for businesses who maybe don’t have the brand pull of the tech giants, what strategies can be put in place that will deliver a lasting impact?

One place to start is employee recognition.

Employee recognition is still the acknowledgment of an employee or team’s efforts and work, typically associated with organizational goals and values, that’s delivered in a timely manner. What has changed with the advent of a growing SaaS market is the streamlining of employee recognition logic to meet today’s business needs. For example, the reduction or removal of hierarchies and the empowering of employees to do the recognising and rewarding.

New thinking and attitudes towards employee recognition are delivering wide-ranging benefits for an organization, such as increased productivity and motivation. Employee recognition is also shown to have a significant effect on employee turnover rates too.

Here’s a look at research that both highlights employee and employer thinking around employee recognition, and the impact it can have on employee loyalty.

Less voluntary turnover in recognition-rich cultures

A research report titled The State of Employee Recognition in 2012 from Bersin & Associates found a clear link between employee recognition and reduced turnover. The research uncovered that organizations with a ‘recognition-rich’ culture see a 31% lower voluntary turnover rate – nearly a third fewer employees leaving of their own accord.

Another issue found was a disparity between what employees thought the company was offering in the way of recognition, compared to what organizations themselves were actually doing. For example, three in four companies did have a recognition program in place, yet just 58% of employees reported that their business did so.

The reason for the perception gap was that many (87%) of the recognition programs offered focused on tenure and service recognition, resulting in 70% of the employees saying they were either only recognized once per year or not at all.

This important research is now seven years old and in many ways highlights why employee recognition often ranked so poorly or attracted negative feedback from employees and leavers. A lot has changed since of course, the main thing being employee recognition is now about what you “give” and not solely about what you “get”. Companies using social or peer to peer recognition software have decided employees should drive the recognition conversation, not just managers. Any employee leaving an organization and citing a lack of recognition today have simply not participated or contributed.

Millennials most likely to job-hop, lack of recognition plays a role

Millennials have long been cast as the job-hopping generation. In fact, 52% of millennials in one study viewed the concept of employee loyalty as being overrated. And whilst a lack of training and development opportunities may be one of the biggest factors in the persistent job-hunting tendencies of the younger workforce, they’re not closed off to the idea of staying with one company for decades.

A survey by Bridge found that 90% of millennials want to grow their careers with their current companies and half would have no issues with staying with one employer for over 20 years. What this research shows is the big issue for this age group, and a primary reason why so many quit after only a few months or a couple of years, is a lack of appreciation. In fact, a study by Office Team uncovered that 76% of millennials would leave their job if they felt unappreciated.

This was subsequently supported by PwC’s findings that millennials value recognition more than any other age bracket.

Recognition supports alignment with organizational goals and values

Employees want to feel that they’re making a difference and that their efforts are connected to overall business success. Aligned organizations make this happen by connecting employees endeavors to the overall business strategy, it’s goals and core values.

Showing workers that their contribution makes a positive impact for the organization as a whole can be difficult. Through recognition, it’s far less challenging.

The most effective recognition strategies will link positive behaviors back to company goals and values and appreciate actions that align with them. Not only does this make it clear to employees what those goals and values are, it also encourages the same positive behaviors time and time again.

Employees become more engaged when they feel their role is connected to overall business objectives, and that increased engagement is a big factor when it comes to job loyalty. A meta-analysis by Gallup discovered a strong correlation between engagement levels and employee turnover rates in a study spanning 1.4 million employees.

Read more: 5 studies showing how employee happiness and business performance go hand in hand

It found that organizations with the strongest employee engagement levels not only had double the rate of success as organizations with poor engagement, they also saw employee turnover rates 40 percentage points lower than in those with poorly engaged workforces.

There are a number of ways in which an organization can look to improve staff retention and reduce turnover rates, but getting employee recognition working with high participation is a must in both attracting and retaining young talent today.