February 27, 2024

Return-to-office mandates have lowered workers’ morale, and some software companies think they can be the solution to that problem.

Others, not so much.

The promises of employee recognition software

At a growing number of companies, employees can earn virtual “points” from their managers and teammates for everything from delivering a great presentation, helping a colleague with a project, or otherwise tipping goodwill their way. Those points can be swapped for cash or gift cards (or sometimes they’re just a symbol of appreciation).

Called employee recognition software, these workplace perks programs were adopted by employers in the early 2000s as a way for managers to easily reward employees with points for hitting milestones, WorkTango co-founder Rob Catalano told Quartz. WorkTango is one of the handful of major employee recognition software providers, with more than 750,000 customers including large-scale organizations like Goodwill and Habitat for Humanity. Catalano says the technology is not only used to keep employees satisified on the job, but also because happier workers make for better-performing companies.

About a decade ago, the software evolved to include peer-to-peer recognition, so employees could give their coworkers points, too. And as corporate leaders struggled to keep employees feeling connected through the challenges of pandemic work, more companies adopted the software, said Catalano. Sometimes, these points translate to money, and other times they’re simply a symbol of a job well done.

The market for these programs is enormous: employee recognition software is a $33 billion industry, according to one recent projection, and is expected to grow to $46 billion by 2028. Big software companies in the game include Motivosity, Workhuman, Nectar HR, and Bonusly, in addition to WorkTango, among others. And their clients are brand-name businesses from Heineken and Chick-fil-A to KPMG, IBM, LinkedIn, and more.

The software is linked to an uptick in employee morale, though most stats that point in its favor are typically reported by the software providers themselves. One recent study by Workhuman and Gallup finds that the technology is linked to a 9% jump in employee productivity and a 22% decline in absenteeism. But management scholars say companies looking to adopt this software amid return-to-office mandates miss the point.

Automating thanks at work has its limits

One issue with employee recognition platforms is that they can reinforce old systems and structures that discriminate against historically marginalized employees, said David Kryscynski, an associate management professor at Rutgers University.

“This time in the history of the world, we’re working very hard to try to eliminate inequalities and to try to elevate people who have not had a voice and elevate people who have been structurally discriminated against in organizations,” he said. “The people who are most likely to get rewarded by the culture of the organization are also more likely to get call-outs on these platforms.” That means employees who are more likely to be on the margins at work are less likely to get rewards, he added.

“[I]f we’re not super careful about how we implement these things, the culture of rewarding and the culture of recognition might exclude people who are already on the fringes and exacerbate some of those inequalities that are embedded in the organization,” he said.

Plus, point-based rewards are little consolation for more systemic dissatisfactions on the job — say, issues with pay and benefits. In the US, employees on the whole are dissatisfied with their salaries. Although the US has made record gains in wage growth in recent years, nearly two-thirds of employed Americans say their pay hasn’t kept up with inflation. Gift cards for presentations do little to move the needle when employees are seeking raises instead.

Meanwhile, employee morale has dipped in recent years — and one reason is that many workers miss the autonomy they were afforded during the pandemic, said Julia Hood, a lecturer at Lehman College who teaches about business leadership. Employers need to take a more systemic approach to boosting morale if they want to attract and retain workers long-term, she added.

“We know a number of corporations and a lot of industries are having problems getting people and then keeping people,” said Hood. “Employees are asking for something more. They’re asking to have their humanness honored.”

Hood said companies can achieve the “something more” — which is usually, above all, flexibility — by allowing employees to be “a part of solving the problem” by offering their own suggestions for solutions.

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