Rewards and Recognition Programs – KPIs to Measure and Their Meaning

In God we trust, all others must bring data. — American Statistician W. Edwards Deming

Related: 5 main KPIs you should be tracking:

As we gain access to more and more data, it is important to establish the right KPIs for each and every project we implement. This is especially true when it comes to projects built around such hard-to-grasp concepts as company culture, employee engagement, staff morale and the like. Otherwise, we risk drowning in secondary data and missing what’s really important. It is clear that communication is at the heart of every recognition program. Research shows that solid recognition practices help to achieve a strong emotional connection between companies and their workforces, reinforced company values and goals, and providing timely and tangible feedback on employee/team performance. The primary indicators we need to record and track to measure rewards and recognition program success are:

1. Program budget
2. Program reach among various types of company employees
3. Types and frequency of awards provided within the program
4. The link between the program scope and content and KPIs that impact the overall business performance

Recognition efforts often seek to improve in areas like morale, loyalty, and engagement, which can be difficult to track. It’s so easy to make a mistake in the evaluation here. What can we measure to get reliable and actionable insights on the performance of our employee rewards program? Concentrating on the following list of KPIs can help you paint a clear picture of program success:

• Key staff retention
• Retention by different types of employees
• Voluntary turnover by different types of employees
• Employee satisfaction score
• Customer satisfaction score
• Level of absenteeism
• Cost of absenteeism
• Productivity per employee

Let’s take a closer look at how these indicators can help us to understand the relevancy and performance of the existing or modified rewards and recognition program.

Key Staff Retention

How to calculate: Divide the number of employees with major ownership and/or decision-making roles that have been resigned during the assessed period by the total number of such employees at the end of a period. These employees are usually highly compensated and offered special privileges, but nevertheless, their decision to quit might be influenced by company culture and working atmosphere, which heavily depends on rewards and recognition practices.

Retention by Different Types of Employees

How to calculate: Divide the number of employees that resigned during the assessed period by the total number of employees at the end of a period. Given that the company offers competitive salaries and favorable working conditions, a strategic recognition program is a powerful tool for increasing this KPI.

Voluntary Turnover by Different Types of Employees

How to calculate: Turnover is the percentage of employees who leave voluntarily in the assessed time period. This indicator does not include terminations, furloughs, and dismissals. Inconsistent, non-transparent, irrelevant recognition programs stir up dissatisfaction with a job instead of mitigating the unpleasant moments that are inevitable in every position and in every company. And on the contrary, companies who manage to offer timely and meaningful recognition have significantly lower rates of voluntary turnover.

Employee Satisfaction Score

How to calculate: This indicator is calculated on the basis of employee survey results. There are a few ways you can design your survey, which are described in-depth in this article. Your rewards and recognition program should drive an increase in employee satisfaction scores – otherwise, it should be redesigned.

Customer Satisfaction Score

CSAT reflects how products and services supplied by your company meet customer expectations. It is measured through special, usually automated surveys. When employees feel appreciated, they will perform their tasks better, which will directly impact the customer experience. Here are some more thoughts on this theory.

Level of Absenteeism

How to calculate: Average number of employees multiplied by missed workdays / Average number of employees multiplied by total workdays.

Cost of Absenteeism

How to calculate: This indicator includes an average salary for each missed day, loss of potential revenue, and overtime costs. Use the formula offered by Gijs Houtzagers to get a full picture of how much the absenteeism costs to your company.

Productivity per Staff Member

How to calculate: The most generic formula for calculation of employee productivity is dividing total output by total input. The last three KPIs could be affected by many factors behind recognition efforts. But, as they are heavily impacted by employee engagement, you should track their dynamics in the context of rewards and recognition programs too.

Old Employee Rewards and Recognition Programs vs. New Ones

Measuring all the indicators described above takes time. If you’re launching a new program and want to compare it to an old one in the short run, you might rely on the following indicators:

• Number of logins
• Frequency of peer-to-peer recognition
• Frequency of recognition provided by management
• Rewards redemption
• Popularity of different types of rewards

Each company is unique and might need to pay attention to some additional KPIs (for example, safety-related ones). The relative importance of each of the KPIs described in this article might also differ. Nevertheless, we hope this article might serve as a convenient basis for your own checklist.