Eighty-seven percent of company recognition programs (a $46 billion market) are focused on tenure (years of service), according to Bersin by Deloitte, a leading research and advisory firm. Yet tenure based reward systems--a 10 year pin, 20 year gold watch, etc.--have little to no impact on organizational performance.
"It turns out that many of these tenure based rewards programs are really legacy programs from the turn of the century when labor unions forced management to give employees 'service awards' and hourly raises for tenure. Most large companies still have these programs today, yet only 58 percent of employees even know such programs exist. So for the most part they aren't creating much value," says Josh Bersin, the founder and principal at Bersin by Deloitte.
Eighty-three percent of organizations suffer from a deficit in [employee] "recognition" and only 17 percent of employees believe their managers know how to recognize them well, according to Bersin by Deloitte. And according to an employee engagement report done by TinyPulse, 79 percent of all employees are feeling undervalued due largely to a lack of recognition and appreciation.
Benefits of Recognition
Recognition programs done right can have powerful impacts on business performance.
Companies that scored in the top 20 percent for building a 'recognition-rich culture' actually had 31 percent lower voluntary turnover rates and organizations with reward programs in place see a 14 percent improvement in employee engagement and productivity, according to Bersin by Deloitte. According to Glassdoor.com, more than 80 percent of employees said they were motivated to work harder and stay at their jobs longer when they received appreciation for their work.
It's clear that recognition has a significant impact on employee engagement and retention and should be considered as part of any talent management strategy.
Millennials and Recognition
According to Aon Hewitt and O.C. Tanner, one in four organizations find their current recognition programs are ineffective for Millennial workers and 38 percent of Millennials would like to see the recognition program at their current employer improved.
"Millennials are accustomed to attention and praise from their earliest days, and expect regular affirmation in the workplace. They are also prepared to switch jobs earlier and more frequently than previous generations, so employers need to take particular steps to maintain Millennial engagement," said Rodney Mason, GVP of Marketing with Blackhawk Engagement Solutions, an international incentives and engagement company.
Ultimately the purpose of recognition is to reward effort and to encourage greater or continued effort. Elevated effort and performance occurs when employees feel inspired and incentivized to do more. Being recognized in a meaningful and consistent way strengthens Millennials' connection to the organization and encourages them to become high-performing contributors.
Psychology of Recognition
Science confirms that employee recognition impacts workplace performance. When people feel loved or appreciated our bodies create Oxytocin, the well-known "love hormone." When Oxytocin is present in employees, research shows they are more trustworthy and perform better at work.
Recognition also satisfies employees on a psychological level. After the human needs of survival (food, water, sleep) and safety (economic and physical security) are met, the next needs according to Maslow's hierarchy of needs are love/belonging (social, love, family, team) and esteem (importance, recognition, respect). Love/belonging and esteem are human's most valuable psychological needs, and they can be met through recognition.
Recognizing Millennial employees boosts trust, engagement, retention, productivity, and satisfies at a psychological level.
What Do Millennials Want to Be Recognized For?
According to the 2015 Blackhawk Engagement Solutions' Employee Research, 85 percent of Millennials want to be rewarded for exceeding personal performance levels, followed by receiving a promotion and exceeding team performance levels.
Millennials are interested in meaningful recognition that helps them feel empowered. According to a 2016 Aon Hewitt and O.C. Tanner survey, the organization with effective programs for Millennials offer three key rewards vehicles: handwritten notes, experiential rewards (e.g. event tickets), and "thank yous" from peers, managers, or next-level managers or section executives.
Is using compensation to recognize Millennials effective? Yes. Compensation is associated with Maslow's hierarchy need of safety, but it's not a primary concern that Millennials are looking for their employer to fulfill. Millennials will likely cover any compensation gap utilizing their entrepreneurial spirit and resourcefulness as digital natives. Beyond the threshold of what an individual needs to support their lifestyle, compensation is a weak motivator. Compensation fulfills Millennials' basic needs, but intrinsic motivations can fulfill deeper needs.
Is using promotion to recognize Millennials effective? Yes. Promotion is associated with self-actualization of Maslow's hierarchy of needs. Career advancement satisfies the pinnacle human need of self-actualization (challenge, opportunity, learning, creativity).
It's important to note that recognition must supplement (and not replace) workplace accountability, feedback, and goal-setting.
(This is 1 of the 47 strategies Ryan shares in his new book, The Millennial Manual: The Complete How-To Guide to Manage, Develop, and Engage Millennials at Work.)