When you invest your money, you are primarily interested in generating a good return on that money. So why don't companies that invest in employees through incentives and recognition programs expect a tangible return?

That is the question Chester Elton asks his clients. As vice president of performance recognition for O.C. Tanner, a performance improvement company based in Salt Lake City, Elton tells a hilarious story of a New York — based client who gave out $100 American Express gift certificates to recognize its employees. Thousands of dollars' worth.

“How's your program going?” he asked one day.

“Great!” the manager said.

“How do you know?” Elton probed.

“Well,” the manager said, “all the checks are gone!”

Dedicate Some Staff

That story would never happen at rental car giant Cendant Car Rental Group Inc., New York, operator of Avis and Budget. For starters, Cendant doesn't leave recognition ROI up to managers to squeeze in with all their other responsibilities; it has a half-time person devoted to the task.

“It's important that employees have a central figure to go to who owns the program,” says Steve Richardson, manager of recognition programs for RBC Financial Group, Toronto, and executive vice president of the National Association for Employee Recognition (www.recognition.org), the association for the recognition industry. “Obviously, it depends on the type of program that is put in place and how complex it is. For example, at RBC, we have five [people] on staff supporting 50,000-plus employees.”

The Jackson Organization, a Columbia, Md. — based firm that provides customized research to measure employee engagement, turnover, customer satisfaction and loyalty, and brand equity, has a different take: It recommends that companies create recognition teams of employees, rather than a single department. “Having a staff that puts recognition programs in place makes the program come from a department rather than from the heart and soul of the organization,” says Thomas S. Hutchinson, executive vice president. “Recognition must come from the leaders … at all levels.”

Get the Hard Numbers

The next step is to research how the company's recognition program is working. Some companies create their own surveys, while others choose consultants such as The Jackson Organization.

Of all the factors to measure, says Elton, “Turnover is a natural. What we've found with some larger clients, like Avis or KPMG, is that they look at turnover as one of their catalysts. Measuring turnover is a great indicator not only of employee engagement, but of the effectiveness of recognition programs.”

Another strong measure are Web-based surveys of employees, which are used to gauge the general corporate climate. “We like to do pre- and post-recognition surveys,” Elton says. “Do the surveys, then do them again in 18 months. Then ask, ‘Have you moved the needle on the dial?’”

Known as “climate surveys,” they ask questions such as whether employees have an opportunity to do what they do best every day, whether they are given measurable goals to achieve, and whether their managers do a good job at recognizing employees. According to Elton, some surveys ask employees tough questions outright, such as “Do you trust your department head?”

In one situation, O.C. Tanner conducted a survey for T. Rowe Price, before the company put a recognition program into place. The initial survey showed that employee satisfaction was low, while the post-recognition survey showed that employee satisfaction and engagement were significantly up. The only major thing that had changed was the recognition.

Avis did a similar survey of employees at its individual locations and then compared them. At locations that were high users of employee recognition programs, not only did it find high employee satisfaction, it also had high customer satisfaction and the lowest turnover.

“How would you know unless you survey?” says Elton.

However, others, such as Richardson at RBC Financial Group, say that it's impossible to prove a correlation between recognition and factors such as employee or customer satisfaction. “This is the million-dollar question,” he admits. “The problem is, you cannot say our recognition program and such-and-such initiative resulted in ‘X’ because usually there are other things at play. When we measure satisfaction, we believe that recognition has something to do with it. We try to measure, and we have some measures in place. But that is the biggest challenge.”

His advice? “If you can't do something tangible, do something intangible. Get the view[point] of some of the people you're doing the program for. You might not have numbers, but you'll have something anecdotal, where people say, ‘It's helping me in my day-to-day job.’”

WARNING: Recognition Can Backfire

Many organizations celebrate sales achievements and major accomplishments at annual conferences or sales meetings. The thrill of the reward and the public recognition appeal greatly to the typical salesperson's ego.

“However,” says Thomas S. Hutchinson, executive vice president of The Jackson Organization, a Columbia, Md. — based firm that provides customized research to measure employee engagement, turnover, customer satisfaction and loyalty, and brand equity, “not all employees have sales egos. In fact, many may not like or want to be recognized at a major event. Leaders need to be careful of this and not have a recognition event that backfires.”

Another mistake is to tie contests into recognition programs. If you're in a sales environment, competition makes sense. But if it's esprit de corps you're after, you want people to come together — not compete. Know your environment to decide which is appropriate.

“Contests are lotteries,” says Steve Richardson, manager of recognition programs for RBC Financial Group in Toronto and executive vice president of the National Association for Employee Recognition, the association for the recognition industry. “Recognition should be behavioral-based and not run as a game of chance.”

WARNING: Budget Isn't Everything

A recognition program does not need a big budget to be effective.

A “Check Me Out” program, for example, allows for peer-to-peer and/or manager-to-employee recognition, and vice versa. Employees simply get a written notice of congratulations when a job exceeds expectations. In addition, it can be announced on a Check Me Out bulletin board. Once a month, a drawing is held for all the employees who have been Checked Out. Prizes can typically be less than $100 to have meaning. “Many times, it's the Check Me Out card on the desk that does the trick,” says Thomas S. Hutchinson, executive vice president of The Jackson Organization, a Columbia, Md. — based firm that provides customized employee research.

What's most important is that recognition programs are consistent and spread throughout the year. “If you want to be happily married, would you bank on a single annual event? Instead of celebrating Valentine's Day, Christmas, and an anniversary, would you just say ‘I love you’ one day a year? Of course not,” says Chester Elton, vice president of performance recognition for O.C. Tanner, a performance improvement company in Salt Lake City.

That's the rule at RBC Financial Group, Toronto. “You don't just value your employee one day a year,” says Steve Richardson, manager of recognition programs. “That's something our company believes in. Recognition is something we try to do day-to-day. If you're only doing it once a year, you're only giving lip service.”