ROI + VOI: the Winning Combination for Recognition

ROI is king, but the Value of investment is just as important

In today’s competitive workplace, motivating employees and encouraging desired behaviours to improve results is vital to a company’s success. 

An increasing number of organisations are recognising the importance of such schemes, with more than two-thirds having a formal employee recognition programme in place. So, what makes a recognition programme successful? Experts suggest looking beyond the hard numbers and considering “softer” returns.

To assess the impact of their benefits and rewards programmes, leading companies have traditionally used the “hard data” approach of Return of Investment (ROI). However, the “softer measure” of Value of Investment (VOI) is now gaining ground as organisations recognise improvements that clearly exist – but are harder to quantify. A major study carried out by Sodexo supports the VOI approach, revealing that business leaders around the world see clear performance benefits from having a happier workforce.

Recognition programmes target employee engagement

In the field of benefits and rewards, studies conducted by key industry players such as Gallup, the Corporate Leadership Council and Willis Towers Watson have shown that there is a correlation between recognition and improved employee engagement. In turn, this engagement dramatically influences job performance and related behaviors. Companies that actively seek to improve engagement will also capture business value and financially outperform their competitors.

So, while the benefits of investing in employee engagement are undeniable, accurately measuring the impact of specific programmes is more crucial than ever. Traditionally, companies have focused solely on determining whether the benefits of a programme, expressed in monetary value, outweigh its costs.

In other words, determining the ROI. These measurements can include quantifiable outcomes such as turnover rates, productivity or absenteeism. While this approach has been the go-to measuring stick for years, its measurement ability is one-dimensional and doesn’t capture all the factors that impact performance. Industry experts are now signaling a need to explore and evaluate the more intangible benefits that recognition creates.

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Measuring the “unmeasurable”

The concept of intangible assets contributing to organisational performance was first introduced by Gartner, the world’s leading information technology research and advisory company. The long list of intangible examples includes knowledge building, the ability to collaborate, increased employee morale and engagement and changing cultural values and attitudes in the workplace.

But how do we assign a value to improved communication, more collaborative relationships, or being recognised as a “best place to work”? What costs are associated with losing a talented employee to a competitor? How much does a company save if employees are motivated? While intangible, this ROI delivers real value to the business and its workforce. Whereas VOI shows the “big picture” of business returns – including monetary aspects as well as “softer” measures of value.

A great example of the benefits of a “softer” measure of value is employee happiness. While it may be trickier to measure than other quantifiable ROI indicators, it can be measured and analysed through employee satisfaction surveys. Researchers have found that when recognised, 86% of employees feel happier, 85% become more satisfied with their jobs and 70% even claimed to be happier at home.

Creating this type of “best place to work” atmosphere goes a long way in making employees feel valued and can also lead to other, more measureable outcomes. For instance, companies with happy employees outperform the competition by 20%. Happy employees are also 12% more productive, produce 37% higher sales and are sick 10 times less than their unhappy colleagues.

These VOI measures came to light when Sodexo surveyed 4,805 business leaders around the world in its SME study. The study found that 9 out of 10 leaders noticed a boost in workplace ambiance and corporate reputation when they focused on enhancing employees’ quality of life at work. While these returns were qualitative, 70% also claimed that it indeed benefitted their financial turnover.

“In today’s economy, harder-to-quantify resources such as reputation, collaboration and retaining scarce skills are key to gaining a competitive advantage. While ROI may be sufficient for tactical analysis, focusing on these 'soft data' points more robustly assesses the strategic potential of recognition programmes and the total long-term value of the investment.” - Mia Mends, CEO at Inspirus

Finding the right balance

All too often, businesses zero in on the “hard data” and financial aspects when evaluating their investments however, it is only with ROI and VOI together that a company can have a truly comprehensive overview of all the benefits of its recognition programme. Once clear priorities are set and evaluated, companies can expand successful programmes, redesign underperforming programmes and discontinue ineffective ones.

Maximising Employee Rewards