5 Reasons You Should Focus on Recognition Before Rewards

Previously thought of as something ‘nice to have,’ more organizations are jumping on board with recognition as a key factor of a broader employee experience strategy.

Recognition, as it happens, is the first driver in Marciano’s RESPECT theory, which you can read more on here.

Recognition has to be a priority in any working environment, as people crave recognition and appreciation - whether it’s for their own contributions, or the accomplishments they achieve as a team.

How organizations practice recognition, however, changes and evolves based on organizational goals, and yet, most companies focus on rewards ahead of recognition (think: bonuses or monetary gifts).

Here at Kudos, we offer the opportunity to use both rewards and recognition. We encourage organizations to take the leap towards focusing specifically on recognition. Now, what’s the difference between the two?

Rewards vs. Recognition

The concept of rewards and recognition-based programs appears to be similar; after all, both offer some form of validation for a job well done!

We can think of rewards as monetary or gift-based incentives that companies use to motivate employees or reward them for their performance, whether on an individual or group level.

Recognition, on the other hand, is psychological. It taps into the intrinsic motivations people have to succeed, perform well, and feel valued as well as trusted in the work they do.

Recognition is increasingly being incorporated into daily operations and practices by organizations. It creates a culture of respect, trust and autonomy as key drivers of employee retention and engagement.

That’s not to say that rewards-based programs don’t work; however, many studies have found that rewards often work only in the short term through temporary compliance.

For example, many rewards programs are structured to encourage employees to hit targets or reach milestones not because they want to, but because there’s a cash or gift-incentive attached to them. That is, using rewards for the number of goals teams reach as opposed to the quality of work they deliver.

Further, rewards may not guarantee that employees feel more valued or even rewarded. In some cases, rewards fail to change an employee’s perspective and attitude towards their organization. Maybe that’s why 83% of employees feel it’s better to receive recognition than a reward!

It’s important to recognize the difference between rewards and recognition, as both can be used as part of a broader employee experience strategy, but with very different end goals and results.

Does recognition work?

In a recent study, the Incentive Federation found that more employers are using non-cash rewards and recognition to encourage knowledge-sharing, inclusion, and relationship building in the workplace. Recognition plays a significant role in nurturing a 21st-century talent culture, whereby leaders are focusing more on fostering engagement in the workplace.

Other studies have shown that using cash and rewards exclusively can result in significant issues for organizations, such as employees gaming the system or competing to complete tasks for gifts alone.

Additionally, data continues to show written and verbal recognition as a more significant driver of engagement than a reward-based incentive.

Think of it this way: rewards are fleeting, but recognition is eternal.

After six years of research, Forrester found that employees thrive when they are empowered, recognized, inspired, and enabled to do their best work.  

Put simply, recognition can lead to employee success and an improved relationship between organizations and their employees.

In a study performed by Gallup, they found that money or cash rewards were not the most valuable forms of recognition, but, rather, verbal or written recognition! When employees feel appreciated and valued, they are more engaged, productive and, more importantly, happier at work.

From a customer or client perspective, happy employees are key to an organization’s success. Forrester notes that rewards-based incentives don’t always work, primarily when your organization uses them to encourage employees to nurture a better customer/client experience.

Why should leaders focus on recognition before rewards?

Recognition encourages the right behaviour - while rewards can work hand-in-hand with a recognition strategy, recognition is more psychological and can help nurture a pattern of long-term, positive behaviour. While cash or monetary-based rewards are appreciated, they don’t create long-lasting motivation in employees to engage, be productive, and care about their work.

Recognition fosters trust between leaders and employees - By providing consistent recognition, leaders can establish trust and confidence in employees while nurturing employee loyalty. Teams want and need to trust their leaders to do right by them, which includes recognizing awesome work!

Recognition creates environments for an open and transparent communication - When we recognize others, we often do so using our words and put thought into why we’re recognizing someone and what we’re recognizing them for. Leaders can, therefore, create more communicative workplace environments where people feel comfortable openly confiding in and talking to their leaders (and vice versa!).

Recognition reduces turnover and increases revenue - There’s a 31% lower voluntary turnover rate for organizations that give regular recognition, and many companies see an increase in revenue when employees are recognized and valued for their work. An older yet still applicable study from Fortune’s ‘100 Best Best Companies to Work For’ found, for example, that companies with happier employees saw an average 14% stock increase year-over-year from 1998 to 2005!

Recognition shows leaders are invested in their people - Did you know that 28% of employees feel their most memorable recognition came from their direct leaders or managers? When leaders recognize their employees, they’re not only showing that they care but are signifying that they’re invested in the success of those employees!

‍