by Roy Saunderson | April 28, 2010
Cutbacks to reward and recognition budgets have created greater burden of return on investment (ROI) on incentive planners for monies spent on programs. The key, however, is looking at the big picture. Make sure to look beyond simply money to prove the value of recognition. These 10 tips will enable you to develop solid ROI on your recognition initiatives:

1. Focus on “Return on Intangible.” Recognition cannot be measured solely through monetary means. There are far greater intangibles that enhance the actual face value of any tangible item or monetary reward.

2. Measure “beliefs” to determine the intangibles. How do employees feel about the recognition they received? How engaged are they, and what is their level of pride in the company? You can obtain metrics on these beliefs through surveys and focus groups and present them as part of your entire range of ROI results.

3. Look at “Return on Individual.” Are your recognition practices and programs making a difference with each individual employee? Is every leadership and management practice viewed through the lens of valuing and acknowledging people?

4. Behaviors make up a key metric. Behaviors are easy to measure; they either happen or they don’t. Look at retention rates, the number of employee referrals received, productivity levels, and career development paths and correlate these numbers with your recognition practices and program outputs.

5. Leaders always want traditional ROI. It is certainly important to prove high return on monies invested in programs. However, the bottom line is not as important as what happens above that line.

6. Recognition ROI is a measure of the overall bottom line. Recognition needs to be closely aligned with business and human resource strategies. When aligned with goals, recognition assists in achieving business results and making an impact on financial return.

7. Monetize whatever numbers you can. Make friends with the finance and accounting staff. Let them translate your metrics into dollar signs for you. When turnover rates improve after your recognition initiatives, find out the human resource costs saved.

8. Quantify what you cannot monetize. Some measures, such as employee engagement, are sufficient just as they are and do not require time and effort to crunch into dollars. Metrics like turnover, productivity, and rate of return speak volumes by themselves.

9. Create your benefits-to-cost ratio. Any recognition program must be proven as a positive benefit compared to the money spent. Divide net program benefits by the program costs. When the ratio is 1:1, the benefits equal the cost. When the ratio is higher than 1:1, the greater the benefits obtained.

10. Produce your ROI percentage. When bottom-line numbers are needed, calculate an ROI percentage. Subtract 1 from the benefits-to-cost ratio (BCR) and multiply by 100 for the ROI percentage to impress your C-suite leaders.

Incentive columnist Roy Saunderson is author of Giving the Real Recognition Way and president of the Recognition Management Institute, www.realrecognition.com, which consults companies on improving employee motivation that leads to increased productivity and profit. He can be reached at roysaunderson@realrecognition.com. Also, tune in every Tuesday to his radio show, Real Recognition Radio.