Who should choose the reward?

Photo by stephenhampshire

This post is the second post in a series of posts I am writing on lessons about managing people from the book Predictably Irrational, by Dan Ariely (for more post in the series, see here and here).

In the additions to the 2^nd edition Ariely added a chapter called Reflections and Anecdotes about Some of the Chapters. In it, he revisits chapter 4 where he discussed the differences between social norms and market norms. Just to fill in the gap, one of the main ideas of the chapter is that money changes relationships. There is a difference between the social norms (doing a favor, giving a gift and so on) and market norms (paying with cash). Cash changes the relationships and actually can de-motivate people where it is supposed to motivate them.

This is one of the examples Ariely gives:

Imagine that you work for me, and that I want to give you a year-end bonus. I offer you a choice: $1,000 in cash or an all-expenses-paid weekend in the Bahamas, which would cost me $1,000. Which option would you choose? If you are like most people who have answered this question, you would take the cash. After all, you may have already been to the Bahamas and may not have enjoyed being there very much, or maybe you’d prefer to spend a weekend at a resort closer to home and use the remainder of the bonus money to buy a new iPod. In either case, you think that you can best decide for yourself how to spend the money.

Ariely claims, due to the effect of market and social norms, that giving the employee no choice, thus giving him the vacation, will make the employee happier:

I suspect that both your and my best interests would be better served if I simply didn’t offer you a choice and just sent you on the Bahamas vacation. Consider how much more relaxed and refreshed you would feel, and how well you would perform, after a relaxing weekend of sun and sand, compared with how you would feel and behave after you got the $1,000 bonus. Which would help you feel more committed to your job, more enjoyment in your work, more dedication to your boss? Which gift would make you more likely to stay long hours one night to meet an important deadline? On all of these, the vacation beats the cash hands down.

While I agree with the comparison between the cash reward and the none-cash reward (and there is a lot of empirical evidence in the book about that), I have a problem accepting the assertion that giving no choice at all is always better. As Ariely mentions himself, the employee might not want the Bahamas trip. Do we really want to give the employee a vacation he does not want? I am not sure that Ariely meant to say that we should not offer a choice between a number of none cash rewards, but the way this paragraph is phrased, definitely suggests that.

Now, while I know there is not only a problem with monetary rewards (cash), but also a problem with too many choices, I still think that an employee will be happiest if he receives a reward that he actually wants (and I know that sometimes people don’t know what they want). I will admit that my assertion is not backed up by empirical evidence and only by my own limited experience and by what I learned and read, but the mere fact that people are different must make us realize that different rewards will work differently on different people. So, while we need to realize the dangers of cash, we should also remember that the best way to motivate our employees is to understand them and what makes them tick and give them the ability to choose what is best for them.

Elad