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FEATURESTORY
You Were Always On My Mind
The psychological advantage of offering non-cash incentives
The concept of product mindshare is well enshrined in the marketing profession. Firms spend billions of dollars every year to get consumers thinking about their product and remembering their positive brand experiences. Being "top of mind," as the marketers say, leads to higher customer loyalty and higher repurchase behavior.
Why isn't the same thing done with respect to rewards and recognition programs for employees? Extensive psychological research has shown that things that are highly available or salient to the mind create great motivation to achieve them, thus the effectiveness of persuasive advertising. Can this effect be captured for motivating employees to perform better? Our research indicates that it can.
We gathered performance data on 441 call center employees from a large financial services organization engaged in collecting past-due accounts. Approximately half of them worked in pursuit of a tangible incentive administered through a points program. The other half worked toward receiving cash incentives with equal purchasing power. Halfway into the two-month promotional period, we asked these employees to agree or disagree on a five-point scale with the following statement: "I regularly thought about the potential rewards from this program while working." We also asked them to report their commitment to achieving a performance target they selected from one of three levels provided by the firm.
Our first test was to see whether or not tangible incentives were thought about more frequently than cash of equivalent purchasing power. Participants in the non-cash condition reported an average score of 3.12 on the five-point scale, significantly higher than the mean response of 2.25 in the cash condition.
We believe this is due to the luxuriousness of the awards offered.
We know from research in neuropsychology that luxurious tangible incentives trigger activity in the amygdala, the area of the brain that processes emotional stimuli. In addition, thinking about the
rewards triggers dopamine, the brain's reward chemical. All of these factors lead to increased "mindshare" of tangible incentives relative to cash.
Tangible incentives also tend to be more concrete in the mind than a cash incentive. It's simply more available in the mind to think about a trip or a home entertainment center than to think about a big pile of money. Since a cash incentive can be spent on so many different things, the imaging of the rewards in the mind is much more pallid than with a tangible incentive. Add to that, the difficulty most people report in having to justify a "splurge" such as purchasing one of the items often used for incentives, and you will get much more attention with a non-cash incentive.
We then looked at employee commitment to achieving a goal. Those who stated a high level of agreement with the statement reported an average goal commitment of 2.54 on a five-point scale. This was significantly higher than the 1.82 reported by those employees who disagreed with the statement.
We feel this is due to the added attractiveness of an incentive that will be savored in advance of receiving it. Research by Dick Thaler and George Loewenstein has shown that affectively rich items, such as the type used in incentive programs, are savored more than equivalent amounts of cash.
Finally, we measured performance of the employees on their task, converting promises to pay into electronic transactions. Those employees who agreed with the statement converted an average of 68.5 percent of promises to pay into electronic transfers while those who disagreed, converted only 63 percent of promises to pay into electronic transactions. With an average monthly promises to pay of over $25 million, this translates into an extra $1.4 million paid electronically. Show me the money, indeed!
We believe that the reason for this performance uplift
is do to the fact that incentives that are more available in the mind create the motivation to work "in the moment." When someone is tired, that is obvious to them, however the rewards for the extra
effort may not be as salient. By using incentives that are thought about more frequently, a company can encourage more effort.
Putting together all of the results, you find that non-cash incentives are thought of more frequently than cash, which in turn leads to higher levels of performance. Non-cash participants were able to convert 69 percent of their promises to pay into electronic transactions compared to 61 percent for those participants working towards a cash incentive.
Chalk up another reason why non-cash incentives have the potential to be more motivational than cash. The fact that this type of award is more easily brought to mind means that it will be that more present in the employee's mind, leading to more commitment to performance and higher performance levels.
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Scott A. Jeffrey is an assistant professor of Management Sciences at the University Of Waterloo in Southern Ontario. He performs research on goals, incentives and other aspects of employee
performance management. He can be reached at sajeffre@engmail.uwaterloo.ca.
Gordon K. Adomdza is a Ph.D. student in the department of Management Sciences at the University of Waterloo under the supervision of Dr. Jeffrey. Gordon’s work centers on the emotions of independent inventors and entrepreneurs.
Illustration by Travis Foster.
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See also in the article: Reflections on Rewards
Study Shows Increased Use of Non-Cash Incentives
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