Is Choice of Awards Important to Motivate Performance?
By Ley Borlo and Joshua Klapow, Ph.D.
Should choice be a prime consideration in determining the type of award system to use in an incentive and recognition program? If so, who should define “choice?” The sponsoring company? The award vendor? The participant?
The Science of ‘Choice’
This area is straight forward, at least from a scientific perspective. If awards/incentives are meant to drive behavior, then the awards/incentives must be deemed meaningful by the employee whose behavior we want to influence. If an employee perceives the reward/incentive as reinforcing, then it will have an influence on his/her behavior. Any time an individual is not able to decide what is meaningful, there is a chance that the predetermined award/incentive will not have the intended consequence. Without a doubt, the most powerful method for coming up with incentives/awards that are meaningful for any given individual is to let the individual freely choose. Every time we, as the developers of incentive/award programs, choose the reinforcers we run the risk of choosing wrong. And if we choose wrong, our program will not work.
What About Too Much Choice?
There are books, such as Paradox of Choice by Barry Schwartz, in which the subject of choice is discussed with a conclusion that too much choice can be de-motivational. A research paper, “When Choice is De-Motivating: Can One Desire Too Much of a Good Thing” by Sheena Iyengar and Mark Lepper, has even gone on to say that “having a limited and more manageable set of choices may be more intrinsically motivating than having an overly extensive set of choices.” These observations may be true in field or laboratory experiments. However, in the case where incentives are being used to drive behavior change in employees, how does one decide how many choices are enough? What do you cut? How do you account for different preferences and desires? There is no way to do this for every employee. From a purely behavioral science perspective, the broader the universe of choice, the greater the chance of any one individual finding what is meaningful. The more narrow the universe of choice, the greater the chance that we miss the target.
The scientific underpinnings of this question are clear: Individuals can become overwhelmed by too many options, but not within the context of “prizes” or “rewards.” Offering a universe of choices when it comes to rewards simply allows the program developers to hedge their bets in uncovering what each employee will find meaningful. We must remember that meaningfulness is not a static concept. What is meaningful to me now may not be tomorrow or next week. Our needs, wants and desires change over time and with circumstance. So, while we may offer someone a million choices, they may only find that 100 of those million are meaningful. We, as HR professionals, must get away from the notion that we know best. While we may be forced to limit our options of rewards and incentives due to budget constraints or logistics, we need to keep in mind that whenever we limit reward options, we increase the chance that what we are offering may not be perceived as meaningful and therefore, behavior will not change.
In our opinion, unless you have complete knowledge of the demographics, diversity and cultural makeup of every employee in your program, trying to devise specific awards to meet each one’s needs would be virtually impossible. It has been proven that when you provide the “right” award options, you capture the attention of the employee based on his/her likes.
Should Programs with Different Objectives Offer Different Types of Awards?
If you agree with the scientific position as stated, is there any reason why you’d want to use different awards for different types of programs? Actually, many companies do exactly that. For sales programs, they might try to find the right set of techno gadgets or the electronics of the moment to motivate increased sales with the thought that these items would appeal to sales “types.” For a safety initiative, maybe an item that appeals to that particular group or demographic, such as hunting or fishing equipment, or even safety related items such as shoes or gloves. For standard employee recognition, maybe the same choice of gifts as they have received in their years of service program (silver, crystal, watches, household items) is appropriate.
For certain programs, some HR professionals desire items that have “memory value” meaning that the employee will remember the company fondly when he/she sees or hears or thinks about the item. But who’s to determine “memory value?” The item the company wants them to have? The traditional items the company has used for years? Or something else entirely? For example, an employee who receives a choice of a watch or other “memory” items from a small selection for 40 years of service may not find any meaning, despite the intended “memory value” in this choice. All that this employee wanted was a trip to Disneyland so he/she could take the grandkids. Now, wouldn’t that also provide “memory value?” In your opinion, which of these would provide the most “memory value?”
The broader the universe of choice, the greater the chance of any one employee finding what is meaningful. The more narrow the universe of choice, the greater the chance that we miss the target. Don’t make the mistake of giving them what you think they want or what the vendor says they want.
Joshua C. Klapow, Ph.D., is a clinical psychologist and associate professor in the Department of Health Care Organization at the University of Alabama at Birmingham School of Public Health. Klapow is also the chief strategy officer and chief behavioral scientist for ChipRewards Inc., a consumer health incentive company.
Kenneth - good point on the cash thing. The incentive industry for many, many years has waged a war of catalog envy - ever increasing the available choices in a merchandise awards catalog - culminating in the ability to now connect with amazon.com - providing for all intents and purposes unlimited choices.
When I first started in the industry many companies delayed their catalog launch in order to see how many items the competition had in their catalog so they could top them with their new release.
Then came gift cards and reloadable debit cards which are as close to cash as you can get without folding them and putting them in your wallet. ( I know - they have more trophy value than a sawbuck but c'mon - they're in the wallet - out of sight out of mind.)
The issue with the incentive industry in general is that they haven't found a way to mark up cash to the degree that they can with merchandise - or get the breakage on gift cards and debit cards.
Don't get me wrong - I don't advocate using cash in your award strategy. The big issues with using cash (or near cash) awards are two fold:
1. Once you start using compensation to drive tactical and in most cases, temporary behaviors (ie: dip in sales this month on product A) you set a precedent - and create an expectation in the work force. The audience may begin expecting the sponsoring company to offer cash incentives every time a new behavior a specific tactical goal needs to be achieved.
2. Cash does become income - and therefore, has less trophy value.
The "Choice" issue is a different thing.
The book and study referenced do not say choice is bad. A critical reading of both would show that "unmanaged" choice is the problem. What they are saying is that when I don't know what I want, having a huge array of choices creates anxiety about choosing the right thing so we end up "satisficing" - choosing something that just relieves my anxiety. And we are unhappy with that choice because we know we ended up with something less than what we wanted.
The appropriate discussion shouldn't be about having a ton of choices but should be around how we help participants in a program narrow their choices to those things they value and want - in other words help them connect the desired behavior to a tangible goal.
Having 2 million options is the easy way to avoid the problem of too little choice. Having too few is the easy way to avoid the choice anxiety issue. The real solution is to use a process of helping participants target a goal, a desired item and focus their attention on achieving that goal. Amazon does this all the time with their "others like you also bought..." nudges. The technology exists today to allow participants to highlight what they like and what they would want in an incentive - and then serve up those "limited" choices to them regularly during the program.
The tax issue is a not issue - there are only a few types of programs and approaches in incentive programs that have any tax issues (safety, length of service to name two) and the IRS has ruled that in many incentive programs using merchandise a "fair market value" approach can be used to reduce the tax bite on employees/recipients.
But I'd go as far as to say that any company that uses IRS issues as a constraint on how they motivate their staffs is simply running a program for defensive reasons.
A well designed program will have a return on the investment much greater than the money saved worried about whether the awards are taxable or not. It's just too small a piece of the puzzle to worry about.
Thanks for your thoughtful and well written comment. You bring up some good points that we have addressed in past columns and others that will be addressed in future ones. In an early December article titled Cash or Non Cash Awards we mentioned that “cash is a powerful secondary reinforcer, a stimulus that gains reinforcing properties because it is associated with a primary reinforcer. We don’t work for cash; we work for what cash will buy. It is innately tied to our perceptions of reward and is a universal motivator around the world. However, it is not a sufficiently defined entity. We have a tendency to lump all amounts of monetary rewards into a single category, which is our fatal flaw.” Simply cash is a means to an end.
When discussing cash as an award to motivate performance, we are not speaking exclusively of recognition programs. Many HR professionals see the reward industry as only one of providing the “long service or group safety award achievements” that you mentioned. While those are certainly a part of it, in our opinion those types of programs and related awards do very little to motivate improved performance. Recognizing achievement doesn’t necessarily motivate results. This is obviously a debatable issue, but one that we have seen proven time and again.
In the context of motivating performance, we need to design efforts that include the fundamental steps to change behavior; communicating to and training your participants what you want done, a feedback mechanism to tell them how they are doing on an ongoing basis, a method to analyze the overall performance of the program, and a reward system complete with enough choice to capture the attention of your audience.
Kenneth Mark Spencer, CBP, CCP, GRP Director Compensation & Benefits Member Since: 9/1/1998 Comments: 1
I found your article on the importance of choice in employee awards to be interesting. However it seems that the logical conclusion to this line of thinking is that cash is king when it comes to recognizing employees for performance. Cash, after all, provides the maximum possible choice to employees. Non-cash awards may still have a limited place for the recognition of things like long service or group safety record achievements, but these are generally merely symbolic mementos of appreciation (regardless of the value of the award) and do not generally have an important place in the Total Rewards practitioners' thinking on motivation and engagement strategies.
The limited drawbacks to this approach (i.e., a focus on cash) seem to be only two:
1) Cash may reduce in "symbolic value" what it adds in choice value and may tend to commercialize an interaction that is intended to be more subjectively meaningful. However, I think this is generally true as choice increases. The more choice an employee has in deciding the form of the award, the more the award become like a commodity. Your comments on the limitation of items with "memory value" are apropos.
2) There may be tax implications that reduce the received value of a cach award to an employee versus a non-cash alternative of the same value. However, in Canada, where I practice, there is a very narrow range of employee gifts and awards that are not taxable. Awards from corproate recognition programs that provide a very wide range of choice (such as points systems) are taxable regardless of the circumstances, and the entire category of rewards for good performance (which is truly important part of the topic) is taxable regardlessof the form of the award.
Thus, in spite of the impact on the employee awards industry, it seems simpler and more effective to dispense with complicated awards programs and simply pay bonuses for important achievements (accompanied by meaningful and heartfelt expressions of appreciation, of course). By all means, we can still give plaques or watches or the like for 25 years of service, but the more we commodify the recognition by increasing employee choice, the more the symbolic value is reduced.