Impact of peer-to-peer employee recognition on engagement

What is the current state of employee engagement? And what initiatives keep employees engaged in their work and performing at high levels? These are the questions on the minds of business leaders, after a recent Gallup study highlighted that employee engagement had declined from 23% to 21% in 2024. 

Furthermore, this disconnection cost the global economy $438 billion. Now, while this might not seem like a major problem, it represents an ongoing decline in employee satisfaction with modern workplaces. 

The value of recognition 

Can this situation be remedied? And if so, what initiatives should you be implementing? 

Today, we discuss peer-to-peer recognition as one way of tackling this issue, because research has shown that well-recognized employees are 45% less likely to have turned over after two years, and that employees are 65% less likely to be actively job hunting if they’re receiving high-quality praise. Additionally, this same research showed that by 2024, senior leaders were more likely to agree with the value of recognition. 

Five pillars of an effective employee recognition program

During the course of Gallup's study, five pillars emerged as a guide for creating an effective recognition program. [1] They are:

1. Fulfilling recognition expectations: It has to make sense and hold some value. It should encourage employees to pursue it for its value. 
2. Authenticity: It can’t just be a checklist exercise; it must be sincere and honest.
3. Personalized: One size should not fit all. Individual and team recognitions should not look the same. 
4. Equitable: The system should value fairness instead of favoritism. This approach increases team morale.
5. Embedded in the workplace culture: It should be integrated into daily activities. 

The researchers also found that recognition best practices that meet all five of these pillars have a transformational effect on employee engagement and turnover rates. 

The innovation team at BuddiesHR has developed a suite of employee engagement apps that are easy to integrate into your daily communication platforms and help you integrate the five pillars into an effective peer recognition program. Increase employee performance and decrease employee turnover by 4-8%.  Sounds good? Meet the dream team that makes this possible. 

The role of peer-to-peer recognition in a recognition program

There is a general perception that a recognition program must be mostly about monetary rewards, and come from the top down to be effective, but it turns out this isn’t the whole picture. Research has consistently demonstrated that a sense of belonging and recognition from peers enhances work performance. 

This is unsurprising since there has been a long-accepted association between thriving, a sense of belonging, connectedness to community, and being recognized as a valuable contributing member of a group. 

Scour the internet and you’ll soon find compelling reasons for why an effective peer recognition program must form part of a greater recognition program that instills company values, and a ‘community’ ethic in workplaces. 

A recent study (one of many) demonstrated quantitatively an interrelationship between subjective indices of well-being, meaningful participation, sense of belonging, and connectedness. In short, it's good for you to be part of a group that values your participation in it. 

Benefits of a peer recognition program

Apart from increasing a sense of belonging (which is very valuable) and helping you shape a company culture of connected and highly productive team members (also valuable), there are other benefits of peer-to-peer recognition.

Increases the perception of a healthy working environment

Most people’s experience of their working environment is subjective, and according to their personal expectations and desires. For example, one person could report a feeling of being accepted amongst their peers, well-liked, and connected to their team manager, while another person on the same team could report feeling disconnected and isolated from the entire team. 

Peer-to-peer recognition spreads the job of being seen and heard around a bit. It takes the pressure off management to notice everyone all the time, and puts it in the hands of the people who are much closer to the ground, and often more in touch. 

They’re also more inclined to give a ‘well-done’ or a ‘thank-you for the hard work’ kudos on a day-to-day basis. This works well because recognition is like vehicle fuel - it has to be filled regularly for the vehicle to keep going. 

Employee retention increases as job satisfaction increases, and it seems nothing is more satisfying than being valued and appreciated by your teammates, as well as manager recognition. It turns out that company culture is about belonging and catching people doing the right things. 

Decreases the costs associated with employee turnover

Decades ago, this statement would have been challenged because it would have been difficult to measure the accuracy of this statement against the facts. But this has all changed with advancements in technology, increasing the scale at which the truth of this statement can be proven. 

With reference back to the Gallup report (mentioned earlier), Employee Retention Depends on Getting Recognition Right, high-quality positive feedback made it 65% less likely that an employee would actively search for new employment. It is estimated that the cost of replacing a senior manager is 200% of their salary. 

A frontline worker costs 40% of their salary to replace, not to mention the uncalculated cost of lost knowledge and a decrease in team morale. When a top performer leaves, it has a knock-on effect, causing others to evaluate the company and their own job security. 

With the cost of replacement so high, the comparatively lower costs associated with a recognition process begin to highlight its value in decreasing employee turnover. 

Checkout this turnover cost calculator.

Brings the unsung heroes to light

Perhaps this doesn’t sound like it's that important, but it is. Every organization has a group of people who quietly get on with what they’re doing, and they excel at it without making a fuss. They’re not like the guy from sales who keeps telling everyone about his deals, but they’re indispensable when it comes to achieving company objectives. 

It's at these times when peer-to-peer recognition really shines because someone, somewhere in the trenches, has understood the value of their colleague, and that one handwritten note made all the difference. 

Managers who pay keen attention to this kind of recognition (especially when it's public) soon realize they have a much larger pool of talent than they thought - they have options for bringing people onboard for projects, and other team collaborations. 

Reduces unhealthy competition amongst team members

An unfortunate consequence of top-down recognition is that everyone is competing to get noticed by the manager or other senior staff, because it has a perceived value to it - monetary gain, better opportunities, and even promotions. 

This can encourage an unhealthy, competitive workplace environment where only the fittest survive, and this is not great for the well-being of other team members. 

Peer-to-peer recognition doesn’t remove the need for top-down recognition, but it does ensure that a range of people are consistently recognized for their contribution to the company’s goals. Unhealthy competition amongst team members or departments is often the cause of strained relationships, something that can be long-lasting and detrimental to morale. [2]

What makes a great peer recognition model?

Peer recognition models don’t have to be complicated or expensive. BuddiesHR research found that a 4-8% increase in retention rate could be achieved in a 12-month period just by using the BuddiesHR employee engagement apps.  These apps helped companies achieve the exact elements needed for a great recognition system, namely:

• Opportunities for employees to recognize one another in a communication platform like Slack make it easy to do so.
• Public recognition is given, and this increases the perceived value of the team members amongst one another.
• Peers are able to express gratitude for support with shared deadlines, goals, and projects. This increases the sense of belonging and acknowledges individual contributions. 
• It promotes a culture of recognition, and does so organically, which makes it authentic and honest.
• Cross-departmental recognition is possible, increasing the visibility of the skills of other team members, which in turn increases future opportunities to work on meaningful projects. 
• It can be used as a point-based system for rewarding employees monetarily or through increased benefits, such as extra PTO days. 
• It makes recognition fun and interesting. This in itself boosts the morale of the team and increases bonding amongst team members. 
• Regular employee feedback in the form of polls can be collected, helping to improve the employee recognition process for everyone. 

If you want to cultivate a recognition-rich culture with better business outcomes, install Clappy Kudos and encourage your team to dive into promoting organizational values and regular recognition. 

Peer-to-peer recognition does impact employee engagement

It is clear from research done on this subject that peer-to-peer recognition plays a role in greater employee engagement when it is employed as part of a greater employee recognition program. The impact it has can be summarized as follows:

• Employees who are recognized at work are less likely to seek new positions elsewhere.
• When an organization implements the five pillars of high-quality recognition programs, it has a transformational effect on employee engagement and turnover rates
• It has a positive effect on the well-being of teams because they feel a sense of belonging and believe their contribution matters. 
• Increases the perception of a healthy work environment, which in turn decreases turnover.
• It highlights the role of unsung heroes and reduces unhealthy competition, leading to more satisfied workers. 
• Reduces the costs associated with a high turnover rate, especially for highly skilled employees.

With employees around the world feeling a greater impact from remote work, advancing technology, and sudden changes in business direction as businesses strive to remain competitive, it has never been more important to put initiatives in place that increase employee engagement and create healthy work environments. 

References:

1. Getting Recognition Right

2. Unhealthy employee competition