The Incentive Research Foundation recently released a fascinating research study, Using Behavioral Economics Insights in Incentives, Rewards, and Recognition, which brings new insight to the incentive industry. Traditional economics suggests people act rationally and in their own best interest, and that money is the most effective way to motivate employees. Behavioral economics recognizes and focuses on the opposite. Decision-making actually tends to be emotional, and businesses need to better understand their employees in order to effectively engage them. As it turns out, those emotions play a powerful role in incentives, rewards, and recognition.
As we recently discussed, roughly 30% of the American workforce reports being engaged in their jobs. That leaves the other 70% either unengaged or actively disengaged. Chances are, that the leaders of the 30% who are engaged, are implementing behavioral economics to better understand and motivate those employees.
The IRF study makes some important recommendations based on their findings. It starts with those emotions that I mentioned earlier. In order to make the most emotional impact, incentive programs should focus on subtle incentive tools to ensure that it’s user-friendly and that the reward is remembered longer. Studies show that strictly using cash/money isn’t as memorable as other rewards. Using rewards such as a vacation, gift cards to a favorite store, or an experience like a massage or round of golf can be used, as well as formal recognition such as a plaque.
The office “climate” will be chilly and unpleasant if employees are pitted against each other to compete for rewards. Instead, foster the positive atmosphere by rewarding the whole team with cooperative incentives. When employees are competing against each other, emotional pressure can have a negative affect on decision-making and contribute to lower productivity and employees becoming unengaged.
Let’s say the reward for a desired outcome is box seats for an NBA game. That might be very motivating for one person, but not for another. Similarly, recognizing an employee in front of others could be highly motivating for some, but terrifying for others. Figure out what it is that will help your employees to maximize their potential to move the company forward.
The IRF study also recommends getting creative with the timing of a reward. As opposed to promising something beforehand, surprise him or her after the goal has been achieved. The unexpectedness of it will have a greater emotional impact. They also discuss the use of “hyperbolic discounting,” which means that people prefer smaller rewards now over larger ones later. Smaller, more frequent, and achievable goals with coordinating rewards will create more buzz in the office. When that positive buzz is achieved, you have employees who are more engaged and feel better about your brand. However at the end of the day, the study draws an essential conclusion. It states, “Many of these recommended practices for designing a rewards system based on behavioral economics require employers to actually care about their people – something that can’t be faked. Pulling off emotional rewards may require cultural and mind-set changes.” Again, it’s the relationships that are built that truly set the foundation for your future.
Times are changing. If you want to learn more about the shift in employee engagement and are looking for an effective incentive program that is unique to your business, contact Marketing Innovators for assistance today.
