Business expert and motivational speaker Bob Nelson, author of "1001 Ways to Reward Employees," advises, “Take time to appreciate employees and they will reciprocate in a thousand ways.” He is absolutely correct. Employee appreciation is an often overlooked component of effective employee relations strategies. To understand the significance of employee recognition, you must gain an understanding of what it is and the benefits it provides.

Definition of Employee Appreciation

Employee appreciation refers to efforts made by management at a company to recognize, praise and thank employees for their contributions to the company's goals. This appreciation can be expressed in a variety of ways, from rewards to verbal interaction. Some companies will host periodic meetings where they formally recognize excellent work, whereas other companies will establish a specific day or week to show their gratitude.

Increased Employee Retention

Expressing employee appreciation increases employee job satisfaction. It makes them feel as though they are contributing to something bigger than themselves, and that their work and presence are valued by management. Increased job satisfaction leads to increased employee retention, which is significant because, as Sasha Business Consultants concluded in 2007 after surveying the literature on workforce turnover, a conservative estimate for the average cost of losing one employee for a company is over $5,500. In other words, praising employees can save a company thousands of dollars in the long run.

Increased Customer Satisfaction

Individuals who are happier at work are more productive, according to CBS News. The Corporate Leadership Council reported in 2003 that happier employees result in increased customer loyalty, customer satisfaction and overall company profitability. This data supports the conclusion that happy employees are more likely to benefit a company's relationship with their clientele, fueling the bottom line of the company.

Workforce Development

Practicing high levels of employee appreciation can help improve a company's workforce in two ways. First, older, satisfied employees are more willing to share their knowledge and expertise with younger workers when they are happy with their jobs. They feel a sense of loyalty to the company and want to see it succeed. This is significant because, as a publication from the Wharton School of Business at the University of Pennsylvania explains, mentoring can help up-and-coming employees "gain valuable knowledge by interacting with many experienced people... and learn about, and become acclimated to, an organization's culture and politics."

Second, companies with high levels of employee job satisfaction are able to recruit better talent as time goes on. The University of Vermont points out that companies who develop a reputation for employing people who are very satisfied with their work climate are better able to recruit higher level talent, due to the promise of similar satisfaction taking place.

Company Reputation

Expressing employee appreciation can help to improve the company's image in the public. Failure to appreciate employees, on the other hand, can make a company look exploitative and cruel. For example, in the 1990s, McDonald's famously came under fire by two environmental activists for a host of reasons, including mistreatment of employees. Instead of responding to the allegations directly and demonstrating employee appreciation, McDonald's took the two to court, where the judge ruled that the information disseminated was accurate, creating a huge blow to McDonald's public image and profits for a period of time. The lesson learned in this case was that appreciating your employees is good for your public image.