Thinking about implementing a new incentive scheme at your company? You might have seen the success similar programmes have had at other businesses - but why is it that incentives are so effective at improving performance, engagement and a variety of other KPIs? Well, it turns out there's all sorts of psychological reasons behind the success of reward schemes.
During the 1940s and 50s, one of the major psychological theories of motivation emerged. Known as incentive theory, it states that people are pulled toward behaviours that lead to reward, and pushed away from behaviours that will lead to negative consequences. In essence, actions are carried out in order to gain rewards. This is opposed to other psychological theories that suggest we are motivated by internal drives.
Incentive theory only works if the person values the reward
Classic examples of incentive theory are when a child works hard at school to get good grades, or is promised chocolate in return for cleaning their room.
Incentive theory only works if the person values the reward - if someone doesn't like chocolate, or isn't hungry, it's not going to motivate them to complete an action. Rewards also have to be achievable. People won't bother trying if they don't think an action is genuinely possible to carry out.
Why non-cash works best
When reading about incentive theory, it might be easy to think that a generous pay package or bonus scheme is the best way to reward employees. However, there is also psychological findings that suggest non-monetary rewards work best.
People feel more comfortable discussing non-monetary rewards.
For example, it is a quirk of the human brain that people tend to place more value in rewards they've earned than in cash. If your employer were to add $20 to your salary to reward your hard work, you might not think this is particularly generous, but if they were to take you to lunch and spend $20 on you, it's more likely you'd appreciate this.
It's also common that most people will see cash as part of their overall salary package, and therefore not winning their bonus will feel like more of a punishment than if they were to miss out on winning a non-cash reward.
Non-monetary incentives are much more easily remembered, and people feel more comfortable talking about them. For example, it might be considered a little crude to go shouting about how big someone's bonus is, but people will be much happier saying that they won a trip or event ticket through work. Not only will this paint your company in a good light (especially if they discuss it on social media) but they will also help to encourage others to work hard to receive the same prize.
Power2Motivate and incentive theory
Here at Power2Motivate UK, we've worked hard to ensure our incentive and rewards schemes match with these psychological theories.
For example, knowing that employees must value their rewards in order for the scheme to work, we've developed our Global Rewards Gallery. This lets employees build up points to spend on thousands of rewards, including trips, electronics and household appliances. Employees will be much more encouraged to fulfil their KPIs knowing that they stand a chance of winning a reward they've chosen themselves and that really means something to them.
Our schemes are easily customisable so we can work out a programme that suits your company and that's achievable while still helping to get your employees hitting their KPIs and other targets.
For more information on any of our rewards and incentive schemes, contact the team at Power2Motivate UK today.