Budgeting for Recognition Pays Off

By Susan Adams, Senior Director of Engagement, Dittman Incentive Marketing

Recognition is an essential part of any successful engagement strategy. Directly addressing the very human need for acknowledgment and purpose solidifies the relationship of employees to the organization, and also provides direction to keep the team on track to achieve company goals.

Research shows that employees who are appropriately recognized deliver better service to customers, have longer tenure at the organization and increase productivity, among many other benefits. Given all this, it’s no wonder that employee recognition and engagement is now a valued business strategy.

So Many Variables
When it comes to designing a program, a common question many stakeholders have is: “How much should we budget for it?” By the time they speak with a potential engagement or recognition provider, most program owners have done some initial research, have spoken with colleagues and are interested in ballpark numbers for a cost-benefit analysis. With so many variables to factor in – such as developing a milestone or a manager spot-award program – it can be difficult to get an idea of the cost without going through an extensive RFP process.

Although no program is entirely “typical,” Dittman Incentive Marketing has examined our robust database of engagement programs for a better understanding. By mining this data and combining it with a few rules of thumb based on our experience, some guidelines emerge that can help provide rough pricing estimates. Here’s what we found:

Milestone (Years of Service) programs in which employees are recognized on service anniversaries, such as 5, 10, 15 and up to 40 years, will typically cost about $45 per employee annually.
Manager Spot Awards, Peer Recognition and “Living the Values” programs cost in the range of $15-$65 per employee annually.

Estimating Your Investment
With these numbers in hand, it is possible to determine a starting point for your budget. A milestone program, for example, can be estimated by multiplying the company’s total number of employees by $45 per employee. So the spend for a 5,000-person company might be in the $225,000 range, while a company with 1,000 employees might roughly spend $45,000 year.

While not every employee will earn a milestone award in a given year, basing things on a cost-per-employee-annually basis will offset the variation in award amounts at different milestones. Naturally, company-specific variables will affect the final numbers. These can include how often milestones are celebrated (every 5 years, or just on years 10 and 25) and how much is awarded.

In our white paper, Calculating the Cost of Engagement, we show typical milestone payments across 15 of our clients. For 15-year milestones, one client awards $250, and another as much as $1,000.

With the influx of Millennials in the workplace, many organizations are now awarding for one year of service, although tax laws have not yet caught up with this practice. Other companies only award years 10 through 40. The culture and goals of your organization must be carefully considered.

With proven guidelines in hand, however, it is possible to establish a baseline budget for this important employer-provided benefit.

For more details on how much an employee recognition program costs, including charts on milestone payments across 15 clients and the cost-per-employee for other recognition programs, readers can download the Calculating the Cost of Engagement white paper at: http://bit.ly/Cost-of-Recognition