Training/Incentives

Let’s get personal

Don’t underestimate the impact of your reward choices

September 1, 2011
KEYWORDS incentives
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I have been helping companies implement safety incentive programs for many decades, and one decision that is constantly underappreciated is the selection of specific rewards to use as incentives for safe behavior. Companies can choose from a wide variety of rewards: cash, gift cards, awards/plaques/certificates, special parking spaces, t-shirts and on and on. In case I get stuck, I actually have a book called 1001 Ways to Reward Employees to help me brainstorm for ideas. But the decision is not one to be taken lightly. There are important ramifications of this choice that many companies do not realize.

The Personal-Impersonal scale

Rewards generally fall along a spectrum that I call the personal-impersonal scale. At one end is the most impersonal. This includes incentives like cash that can be used equally by anyone for anything. It seems to management to be the most flexible. Workers can use the cash on whatever is most valuable to them. In many surveys, cash is found to be the incentive preferred the most by employees. The downside is that there is no link back to the company or to the safe behavior. Once cash is spent, the employee soon forgets what he/she did to earn the cash that was used to buy the item.

At the other end of the spectrum is the most personal. A personal connection can be achieved in two ways, customization or personalization. Customization entails giving the employee a wide variety of choices, such as through a reward catalog. Catalog items are often coffee cups, t-shirts and other simple items that have the company logo on them somewhere and say something about the safety behavior that merited the reward. This allows employees to select an incentive they like, similar to cash, but with a key difference. The item is psychologically associated with the company because of this direct link to both the company and the safe behavior. The employee is reminded of both every time he or she looks at the item. So frequently used items like daily calendars and coffee mugs are more effective than rarely used items like folders or consumables like bags of candy.

Personalization entails publicizing the employee’s name, especially in a visible venue. An award plaque can be hung on a wall in the workplace or placed in a trophy case. Or you can announce the award in a company newsletter or local paper. I have even seen a company announce their safety award winner of the year on a highway billboard.

In the middle of the spectrum are incentives like gift cards that have a salient cash value, but can be customized by using different cash balances and/or personalized by selecting something special to the worker, such a gift card to his or her favorite restaurant. The gift card can also be decorated with the company logo and safety behavior. But as with cash, once it is used, it’s gone.

On the surface, it seems like this decision process should be easy to navigate. Some organizations try to find something “cool” or survey workers to ask what they prefer. Others take Maslow’s hierarchy  into account. Workers on the low end of Maslow’s hierarchy will be much more interested in cash and the less personal side of the spectrum will be fine. Any money that could have been spent on personalization or customization should be put into raising the amount of the incentive. On the other hand, workers at the top of Maslow’s hierarchy will be more influenced by self-actualization and will prefer the prominence of an award or newsletter article and only an impractically large sum of money would be effective in motivating them.

Advanced level incentive selection

Ready to take it up another notch? New insights emerge every day on the effectiveness of different types of incentives. For example, the field of behavioral science has identified a phenomenon called the endowment effect  that has interesting implications for a new kind of safety incentive. The basic idea of the endowment effect is that once someone has possession of an object, it acquires an inherent personal value and the possessor develops an aversion to losing it.

This can be leveraged in the design of a safety incentive program in some interesting yet effective ways. For example, a worker can be awarded with a product or service that requires ongoing safe behavior to keep. In one case, workers who achieved 1,000 points in a safe behavior competition were given a new cell phone along with a monthly subscription. Every month that they maintained a minimum level of safety performance, they kept the subscription. If they fell below, the subscription was cancelled. This leveraged the endowment effect because, once a worker had the subscription, they “endowed” the phone with this extra value and did not want to lose it. We found that employees who had earned the subscription tried harder to maintain it than a matched set of employees who had not yet earned it. Using this approach, designing an incentive program in which many workers can achieve the reward establishes an endowment and motivates employees to continue their safe behavior. The threshold for maintaining the subscription can be increased over time, and the employees will work hard to prevent the loss aversion of losing “their” phone.

Competition can be supplemented to this program by having a limited number of rewards (phones), and only employees who receive the greatest number of points get one. For example, each month, the employees with the greatest number of points get the cell phones. Employees will try hard to keep their phone because of the endowment effect and loss aversion. This effect is more powerful than when new items are awarded every month because if I get a reward in September, I may be less motivated to try to get one in October too. But if management is going to take away my September reward and give it to someone else, that is an entirely different story. The challenge in this case is to avoid creating so much competition that employees sabotage each other.

Key takeaway

Selecting safety incentive program rewards seems like a simple choice. But there are often insights that may not be apparent to a manager who is not constantly monitoring the stream of research that emerges every year. More powerful incentive programs can be developed when you really know what you are doing.

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