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Molly Erfort
VP, Marketing

How to Apply the IRF’s Behavioral Economics Research to Your Company Today

The Incentive Research Foundation recently released afascinating researchstudy, Using Behavioral EconomicsInsights in Incentives, Rewards, and Recognition, which brings new insight tothe incentive industry. Traditional economics suggests people act rationallyand in their own best interest, and that money is the most effective way tomotivate employees. Behavioral economics recognizes and focuses on theopposite. Decision-making actually tends to be emotional, and businesses needto better understand their employees in order to effectively engage them. As itturns out, those emotions play a powerful role in incentives, rewards, andrecognition. 

As we recently discussed,roughly 30% of the American workforce reports being engaged in their jobs. Thatleaves the other 70% either unengaged or actively disengaged. Chances are, thatthe leaders of the 30% who are engaged,are implementing behavioral economics to better understand and motivate thoseemployees.

Using the research

The IRF studymakes some important recommendations based on their findings. It starts with thoseemotions that I mentioned earlier. In order to make the most emotional impact,incentive programs should focus on subtle incentive tools to ensure that it’suser-friendly and that the reward is remembered longer. Studies show thatstrictly using cash/moneyisn’t as memorable as other rewards. Using rewards such as a vacation, giftcards to a favorite store, or an experience like a massage or round of golf canbe used, as well as formal recognition such as a plaque.

Cooperative notcompetitive

The office “climate” will be chilly and unpleasant ifemployees are pitted against each other to compete for rewards. Instead, fosterthe positive atmosphere by rewarding the whole team with cooperative incentives. When employees are competing against eachother, emotional pressure can have a negative affect on decision-making andcontribute to lower productivity and employees becoming unengaged.

Get to know yourpeople

Let’s say the reward for a desired outcome is box seats foran NBA game. That might be very motivating for one person, but not for another.Similarly, recognizing an employee in front of others could be highlymotivating for some, but terrifying for others. Figure out what it is that willhelp your employees to maximize their potential to move the company forward.

Element of surprise

The IRF studyalso recommends getting creative with the timing of a reward. As opposed topromising something beforehand, surprise him or her after the goal has beenachieved. The unexpectedness of it will have a greater emotional impact.  They also discuss the use of “hyperbolicdiscounting,” which means that people prefer smaller rewards now over largerones later. Smaller, more frequent, and achievable  goals with coordinating rewards will createmore buzz in the office. When that positive buzz is achieved, you haveemployees who are more engaged and feel better about your brand. However at theend of the day, the study draws an essential conclusion. It states, “Many ofthese recommended practices for designing a rewards system based on behavioraleconomics require employers to actually care about their people – somethingthat can’t be faked. Pulling off emotional rewards may require cultural andmind-set changes.” Again, it’s the relationshipsthat are built that truly set the foundation for your future.

Times are changing. If you want to learn more about theshift in employee engagement and are looking for an effective incentive programthat is unique to your business, contact MarketingInnovators for assistance today.