What Is the Current Research on Recognition/Rewards and Higher Retention?

Dear Numbers Game:

Experience tells us that recognition will breed engagement, engagement is consistent with retention and—this is more than a bonus outcome—engagement correlates to enhanced organizational performance.

Disaffected employees are four times more likely to leave an organization than an average employee. Compared to employees with a strong commitment to their jobs, these uncommitted employees are nine times more likely to leave. That data comes from a 2004 report, “Driving Performance and Retention through Employee Engagement: A Quantitative Analysis of Effective Engagement Strategies,” by the Corporate Leadership Council.

There are obvious benefits of having employees whose work is guided by core organizational values. Your customers receive better service. Collaboration gains strength. Your people feel respected and empowered. Innovation flourishes. The key: Implement programs that recognize employees that model your organizational values—converting the process into a “cultural currency” that drives performance.

Yet without strategic focus on recognition, your effort risks turning into a random thing. Make recognition a cultural norm — an integral piece of the ‘Who We Are’ equation of your organization — so it becomes second nature to all employees. Your rewards should be linked to organization-wide principles that, ideally, are exhibited by all employees. This notion of consistency is based on common principles and philosophies, even if the actual reward or recognition is individualized (as it should be).

When designed and implemented effectively, your rewards programs should support engagement and its corollary of retention, though success is less dependent on specific design parameters. It depends more on cultural alignment, the perceived fairness of the offerings, effective communication, the degree of involvement in the design process itself, and — it can’t be overstated — the willingness and effectiveness of the manager in providing constructive feedback to employees, communicating the rationale for rewards clearly, and delivering messages directly and supportively.

Design and implement a rewards-and-recognition program that supports engagement and its corollary: employee retention. Poor design plan is the “kiss of death”—the program’s success hinges more on good implementation (communication, education and training) and strategic alignment (meaning rewards support what the company wants to achieve and its mission, vision and values).

Research by business professors David Allen, Phillip Bryant and James Vardaman shows that competitive pay, fairness in reward decisions, and tailoring rewards to individual preferences help lower turnover. Other factors help boost engagement: Designing work to provide autonomy and task variety, fostering a team environment, challenging goals and employee recognition.

We know that dissatisfaction with pay is linked to unwanted turnover. The context of that dissatisfaction is important, however. In his book, “Pay and Organizational Effectiveness,”Ed Lawler writes that data tend to “generally support the view that pay dissatisfaction is related to turnover.” But it’s not just about pay: Lawler cites other factors that influence engagement, including work environment, overall job satisfaction and the importance an individual places on pay.

The bottom line is this: As you revamp your rewards and recognition programs, focus less on the mechanics of program design and more on involving others in the design process and getting the desired outcome. That should engage your entire workforce around the company’s core values.

SOURCE: Sandra Sussman, Andrew Rosen, Wade Harrison, Buck Consultants, Jan. 29, 2013.

LEARN MORE: Please read Five Ways to Revamp Your Rewards System

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.