IRF Releases Study On Applying Behavioral Economics To Incentive Programs
The Incentive Research Foundation (IRF) has released its analysis on how behavioral economics can be applied to the incentive, rewards and recognition (IRR) field in the report, “Using Behavioral Economics Insights in Incentives, Rewards, and Recognition: A Nudge Guide.” Behavioral economics combines traditional economics, social psychology, neuroscience and other disciplines to identify the motivations behind people’s actions.
“Behavioral economics gets to the heart of why people make specific choices, and it can be an effective resource in designing IRR programs that motivate employees’ best performance,” says Melissa Van Dyke, IRF President. “By understanding the role of emotion in motivation as explained in [the report] IRR professionals can use this knowledge of human drives to make work more satisfying, enjoyable and rewarding.”
The IRF’s interest in behavioral economics stems from the practice’s utility as a tool in helping employers understand what actually motivates employees, why some incentives are more effective than others and how they can strategically apply these principles to their own businesses. Takeaways from the report include:
- Nudges (subtle incentive tools/practices) make the reward system user-friendly and maximize its emotional impact. Emotionally compelling rewards hit the mind harder, are remembered longer, produce quantifiably better results from employees and most influence the internal brand.
- Move beyond programs that rely solely on monetary rewards. Large rewards, in particular, experience-type programs involving travel, tend to generate warm memories and appeal to more than two-thirds of survey respondents over the cash equivalents.
- Reward a top-performing team as opposed to using a system in which team members compete against each other for a single reward. Cooperative incentives are more effective and valuable than competitive incentives.
- Emotionally meaningful incentive benefits extend beyond just improving employee productivity. High-performing employees turn into brand ambassadors who extol the company’s virtues to current and potential customers, vendors and media.
To download the full study or the white paper, “How to Effectively Harness Behavioral Economics to Drive Employee Performance and Engagement,” click here.