Choice is the Optimal Word in Employee Incentive Programs

With the current recession, some recent studies actually show employee engagement scores to be higher, presumably because employees are afraid of losing their jobs and are working harder to maintain the status quo.

It would be easy for employers to get complacent and believe they can eliminate rewards and recognition, communications, development and other engagement tools with fear as the motivator that will dictate behavior. But surely that couldn’t last. As the economy improves and employment choices open up again, high performers who drive innovation and excellence will move on.

Some companies will lose their ability to compete with those that had the foresight to maintain strategic investments in people through bad times and good. If your company believes performance-based reward and recognition beyond traditional compensation and benefits is vital to engaging and aligning employees, you are one step of the competition. And, you can help to make sure that your investment is as effective as possible by using the principle of purposeful choice.

Why is purposeful choice important?
Choice is especially important today when dealing with five generations in a more diverse workplace and a global economy that is moving toward parity in reward and recognition practices all over the world.

Reward effectiveness is not only a matter of providing choice. If choice was all that mattered, cash would be the preferred reward for incentive, loyalty and recognition programs. But rather, it’s choice with a purpose – multiple purposes really:

1. To connect with every participant by offering a compelling selection of rewards that encourages each person to change his or her behavior.

2. To help every individual connect their actions with a reward they personally value.

3. To link the reward with a lasting memory of achievement in a way that is consistent with the company’s brand image and creates an ongoing positive bond with that company.

4. To provide rewards that will be most successful in measurably improving performance, engagement and loyalty among employees, sales partners and customers.

Purposeful choice is important to enable a critical element of motivation—goal-setting. A reward collection with enough choice to enable every individual to select something that is meaningful to them and to be able to add those items to their “Wish List” creates psychological advantages over the limitless choice seemingly offered by cash.

A study by Dr. Scott A. Jeffrey of the University of Waterloo shows why. Participants in a program with non-cash as the award thought about the awards 40% more frequently than those who were working toward a cash award. They also showed 25% higher goal commitment. Most significantly, they performed better.

This study clearly demonstrates three important points:

1. Employees visualize tangible rewards much more frequently than cash rewards.

2. Employees who visualize rewards have both greater goal commitment and greater performance.

3. Despite common assumptions that low-income earners are best motivated by cash, performance of call center representatives in this study indicate that tangible rewards still have a greater impact on desired business outcomes.

Many companies agree that cash is not appropriate for incentive, recognition and loyalty initiatives, but do believe that an “open” debit card—one that can be used anywhere—is the best option. Again, this option presents recipients with too much choice, causing recipients to feel obligated to use the reward card for practical items like gas and groceries … or just to put a little spending money in their pockets.

In fact, that’s exactly what reward earners do with an open reward card. The chart below is derived from an analysis of redemption by thousands of participants in several incentive programs using an open card and shows that two thirds of program earnings went to ATM withdrawals (an average of $70) or disposable items like gas and groceries. This wasn’t the meaningful, memorable reward the sponsoring companies had in mind.

So why offer any choice? Why not just pick the most appealing item you can find and have everyone work toward that? Remember diversity. “Most appealing” is in the eye of the beholder. Not only do demographic differences play a role, but so do life stage and lifestyle.

Consider a 20-something-year-old sales rep who loves to cook and decorate her home, and the sales incentive of the month is a set of golf clubs (right, she doesn’t golf). Or, think about the boomer who likes to splurge on the latest electronic gadget, and is offered a basic MP3 player that is two models below the model he currently owns. Or, imagine a single parent who has a 7-day luxury travel award to work toward, and he can only guess how much it will cost for a sitter for the week (on top of the fact that what he really values is more time with his child). These are examples of why rewards must connect with each individual, and why purposeful choice is necessary to make that connection.

So, if your company has the foresight to invest in employee engagement regardless of the economy, make sure that investment is effective by offering employees a professionally selected variety of rewards. It’s the best way to show them how much you value them, and engage their hearts and minds in helping your company survive, and then thrive when the economy improves.

Paula Godar is director, brand strategy for Maritz Motivation, a division of Maritz Inc., and member of the Incentive Federation at incentivecentral.org. She can be reached at: [email protected].