How Frequency, Variety, and Choice Affect Incentive Programs

Using incentives to inspire your workforce to new heights is one of the most proven ways to drive productivity. If your employees feel that their hard work is being recognized and rewarded above and beyond their usual compensation, you can really promote that kind of mental buy-in needed to see the quality of their work increase.

All incentive packages are not the same, however. It can be difficult to determine what incentives your workforce will deem 'worth it' to go that extra mile. Invariably, management will have to face questions like: How often should we offer incentives? What types of rewards yield the best results? How will different types of rewards affect productivity?

The Incentive Research Foundation (IRF) recently conducted a study to explore precisely those topics. You may find some of their conclusions enlightening if you're considering an incentive program of your own.

Quality vs. Quantity

One of the first things to determine is the frequency of your incentives. If you are offering a fun trip to your employees, do you plan one big trip a year, or smaller trips several times throughout the year? The IRF study concluded, perhaps counter-intuitively, that smaller incentives received more often tend to produce the best results in terms of employee satisfaction and productivity boosts.

Thus, if you decide to give a worker a $12,000 annual bonus, you're better off giving it in 12 installments of $1,000 each month rather than a lump sum of $12,000 at the end of the year. Even though the payout in this example is exactly the same, breaking it into smaller payments more often can give those recipients something more immediate to look forward to, something just over the horizon that they can work towards.

Real productivity stems from your employees keeping their attention focused on the task at hand, on being grounded in the present. Having a reward that's closer rather than further away can help them stay on task when it counts the most.

Cash vs. Non-Cash Incentives

Perhaps it's no surprise, but the study also found that money talks. Tangible rewards, like a trip or a special outing can be attractive, especially when varied enough to keep things fresh. While employees might love the chance to go to a fancy restaurant or some fun entertainment venue, the equivalent amount in cash is preferred.

So, if you're thinking of giving out a $20 Starbucks gift card, you might get more mileage by simply giving a crisp $20 bill instead. Of course, part of this is choice. The gift card could only be used at Starbucks, while twenty bucks in their wallet could be used for groceries or incidentals, or anything they want. The important thing is that the receiver gets to choose how the money can be spent instead of having that decided for them.

This would also seem to suggest that a cash reward carries a psychological draw that other tangible incentives may not be able to match. Now this definitely does not diminish the draw of non-cash rewards, because if properly managed they can work wonders. Still, it's definitely something to consider as you plan out your incentive program: sometimes nothing's better than cold hard cash.

Uniqueness vs. Repetition

The IRF study emphasized the importance of variety and choice in the incentives. Dinner at an expensive steak house might be amazing the first couple of times, but it will eventually start to lose its appeal. So, switching it up in terms of experience, venue, or activity makes it to where the newness of it, the novelty of it, never wears off.

This touches on a phenomenon of satiation, or the tendency to have incentives, even really impressive ones, lose their edge after the participants get used to that being the norm. So, if you're planning to give out tangible rewards that aren't necessarily cash, be sure to change it up and offer plenty of choices. As the saying goes, variety is the spice of life, and the same is true of incentives.

The last thing you want in your incentive program is diminishing returns. The study found (tying back into our previous point) that employees who were rewarded with non-cash incentives regularly actually had their efficiency drop by 5.4%, since the employees became desensitized to the incentives over time. Conversely, those who were given regular cash incentives saw the quality of their work improve by as much as 6%.

Conclusions

In short, the IRF study shows that frequent rewards, either cash, or varied tangible rewards are the ones that can really energize your workforce to give it their all. Of course, it may not always be feasible to simply give your employees more money, as no budget for incentives is unlimited.

Yet, we can takeaway from this information that the format of the incentive, as well as the overall frequency of how you roll those incentives out, can play a big part in how effective they wind up being. However you wind up presenting incentives, one thing is certain: some incentives will always be better than no incentives at all.

If you are in the process of building an incentive program for your organization, we can help you. We have decades of experience in the incentive space to create experiences that can supercharge productivity and leave your employees wanting more. Contact us today, and let's see what we can plan together.

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