What is employee recognition and how can it impact your business?

eXo Platform Blog

Throughout the years, businesses have used a number of strategies and techniques to first attract and then retain highly qualified employees.

These strategies include promoting the employer’s brand on social media platforms, like Linkedin and Instagram, conveying a clear vision and career path, as well as providing employees with continuous training to enhance their skills set and of course promising competitive salaries and bonuses.

However, with the changing dynamics in the job market, the high competition for talent, and the new generation of employees who have different expectations to previous ones, businesses need to adapt in order to attract and satisfy new employees and to prevent losing out on the best talent to the competition.

In fact, a host of studies have been conducted to understand the impact of millennials in the workplace and what they look for in a new job.

According to a Gallup report titled “How Millennials Want to Work and Live”, millennials tend to change their jobs more often than older generations.

Furthermore, the study found that millennials often look for constant feedback, good communication and clear expectations from their management, with 44% of respondents stating that they would be more likely engaged if their manager were to hold regular meetings with them.

However, only 21% stated that they regularly meet their management on a weekly basis. Lack of communication, feedback and especially recognition contribute to low engagement rates among millennials, with only 29% feeling engaged, 55% admitting they are disengaged and 16% reporting they feel actively disengaged according to the same report.

55% of MILLENNIALS do not feel engaged at work.


These statistics show how millennials are having an impact on the workplace and how management, in the majority of cases, is failing to adapt to these demands. Misunderstanding these new generations and ignoring their needs can have huge financial consequences on businesses.

That is according to another Gallup report “The state of the global workplace”. The report found that the cost of voluntary turnover is close to $1 trillion as the cost to replace an individual employee can range from half to two times their annual salary.

With these figures in mind, it has become crucially important for businesses to adopt and deploy new strategies to stop the bleeding and to ensure millenials feel engaged.

Providing robust recognition and reward programs are among the most hyped and in-demand strategies to get employees, especially millennials and Gen Z, onboard. In this blog post, we start by defining employee recognition, then we discuss its impact on employee performance and finally how employees want to get and give recognition.

Defining employee recognition

In a nutshell, employee recognition is the act of acknowledging and rewarding employees or teams for their work, performance and effort.

Businesses of all sizes and industries are increasingly open to introducing recognition and reward initiatives to improve employee well-being and morale, which can also help to reduce voluntary turnover and improve loyalty as well as productivity.

The impact of recognition on employees

Recognition has a psychological as well as a physiological impact on employees. First, a research study conducted by Deloitte tried to place recognition within the Maslow’s Hierarchy of Needs.

Maslow’s pyramid is a motivational theory that classifies human needs in five major tiers: physiological needs, safety needs, love and belonging, esteem and self-actualization. The needs grow in importance with each tier.

Physiological needs, like eating and breathing, are at the lower level, while self-actualization, where an individual is thriving to be the best version of himself or herself, are at the top level.

Recognition with its different types can meet four of the five basic needs. If it comes as money and prizes, it satisfies our safety needs.

If it is frequent, peer-to-peer recognition, where employees feel appreciated and loved, then it satisfies our need to belong and positively affects our self-esteem.

Finally, if the recognition is constructive with constant feedback, then it directly affects the top tier “self-actualization” and provides extra motivation for employees to achieve more and to further develop their career objectives and goals.

Recognition if done right also has a physiological impact on employees. How? When we feel appreciated and loved, our bodies release a hormone called oxytocin, which is perhaps better known as “the love hormone”.

Oxytocin is directly linked to other feel-good hormones, like dopamine and serotonin.

When we feel good about ourselves, say after an enjoyable conversation with a colleague or when we are publicly praised by management, we often tend to perform better, and are more trustworthy and easy to work with.

Types of recognition and the surge of recognition solutions

The simplest form of recognition is verbal. This is where managers and employees praise peers verbally with a tap on the shoulder or a simple “well done”.

Although quite simple in nature, these words can have a great impact on workforce morale and how employees approach new challenges and set goals and objectives.

Conversely, a failure to praise employees for their work or desired behaviours can result in a high turnover rate, with a lack of appreciation often cited as one of the main reasons that lead employees to quit their jobs.

However, praise needs to be delivered effectively and in real time. Only genuine and significant achievements should result in public praise together with an emphasis on constructive and specific feedback.

On the other hand, praising employees for no apparent reason can have the opposite effect as it is often associated with complacency and a lack of purpose and does not provide employees with the feedback on which areas they need to improve.

With the rapid advancements in technology, recognition can nowadays take a variety of other forms.

More and more recognition and rewards software solutions have made their way onto the market in recent years.

Indeed, the recognition software market was valued at USD 8.10 billion in 2018 and is expected to reach USD 21.22 billion by 2025 with a CAGR of 14.75%.

Major players in the market have more or less the same features and functionalities that leverage the power of social interactions, reward and gamification. Popular features include:

  •         The ability to recognize and praise peers’ work by sending kudos and thank you messages
  •         Setting contests and competitions to promote a culture of healthy competition
  •         Rewarding employees with badges and a variety of other pre-defined rewards, like tokens, gift cards, etc.
  •         Surveys to collect valuable feedback from employees
  •         Analytics to evaluate and examine recognition trends
  •         Leaderboards to rank employees based on contests or the rewards they have received.

How do employees want to get and give recognition?

In order to effectively motivate and engage employees, businesses should distinguish between intrinsic and extrinsic rewards and decide what will work best for their workforce.

Intrinsic rewards represent inner feelings, such as personal achievement, growth and the sense of pleasure that employees experience when they accomplish specific tasks. On the other hand, extrinsic rewards are tangible rewards that employees receive for their work.

There is a common misconception that money is the greatest way to motivate and engage employees.

However, a number of research studies have demonstrated that employees often value praise and constructive feedback over pay rises and tangible rewards.

A Gallup survey found that respondents were all in favour of honest and authentic praise generally from their manager, customer or a highly ranked individual within a company, like the CEO.

When asked what type of recognition worked best for them and was the most memorable, respondents ranked their experiences and the best recognition methods as follows:

  •         Public recognition or acknowledgment with awards, certifications or commendations
  •         Private recognition from management
  •         Receiving or obtaining a high level of achievement through evaluations or reviews
  •         Promotion and more responsibilities to convey trust
  •         Monetary awards to show appreciation, like bonuses, pay increases, trips, etc
  •         personal satisfaction or pride in work.

It is also important to state that creating a transparent recognition company culture is the responsibility of managers.

Managers should provide their workforce with frequent and real-time recognition (ideally on a weekly basis) to guarantee that employees realize the importance of their achievements and stay motivated.

Employee recognition is a hot topic that is attracting close attention from both tech providers and businesses.

In recent years, recognition has witnessed a shift in focus, with a surge in recognition software designed to satisfy the ever-growing demands and expectations of new generations in the workplace.

If you would like to learn more about recognition programs in general and our built-in rewards features specifically, make sure to visit our blog and subscribe to our newsletter.

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Product Marketing Specialist

I am a product marketing specialist at eXo. My role is to assist marketing and sales teams in their operations and present our digital workplace solution to the world. I mainly blog about the latest tech trends, digital transformation, internal communication and how to navigate through eXo Platform.

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