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 2nd 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.



4 Responses to “Who should choose the reward?”

  1. Hinda Incentives Says:

    Nice post. You are right about employers listening to what their employees want. Not all incentive programs work universally for everyone. It’s a matter of providing something that best suits your company needs.

  2. Derek Irvine Globoforce Says:

    Great post again, Elad. While I very much agree with Dan on his points about cash not being an effective motivator and it’s impact on relationships, I do think ultimate choice is a gift in and of itself. Who are you (the boss) to say that you know what I (the employee) would find to be motivating and rewarding? A colleague’s husband uses a wheelchair. I’ve discussed with her about their favorite vacation destinations. A beach spot is not even in their top 25 because beaches are very inaccessible to someone who uses a wheelchair.

    I forwarded this post to my colleague and asked here what she’d do if given a Bahamas vacation. Her response? “If I had the option, I’d re-gift the trip to family members. If that’s not an option, I wouldn’t go. I don’t like vacationing without my husband.”

    So now that $1,000 investment is a complete waste. I realize this is just an example, but it extrapolates well to any number of situations. Perhaps someone who puts in long hours to get the critical job done on deadline would most enjoy a recognition and reward that allows him to spend extra time with family — how? Dinner and a movie with the wife? What restaurant? What theater? How about a vacation resort? Where? Ski? Beach? Disney? Or perhaps the employee has long dreamed of a home theater system. Plasma? LCD? Sony? RCA?

    The point is no small committee of people intending to do the right thing can give all employees the latest, greatest, most personal and most culturally relevant reward they want — unless you put that choice directly in the hands of the employee.

    The solution? Instead of no choice, EVERY choice.

    Interesting take on the research, too. I recently wrote more about how recognition can’t be tested in the lab — it’s just too limited and too limiting. More here: http://bit.ly/4hENWQ

  3. sherfelad Says:

    @Hinda_Incentives I was happy to see the automatic generated link to your post about trophy value as I think it complements this post.
    @Derek – thanks for the great example. I always enjoy your comments. I guess you have more experience then me in understanding the difficulties of creating a personalized incentive programs but also about the possibility of actually doing it. I would love to hear more about that subject.

  4. Derek Irvine Globoforce Says:

    Elad, “personal” takes on many connotations. Just three I address in these posts on my blog:

    * Cultural (http://globoforce.blogspot.com/2009/10/cultural-wisdom-and-recognition.html) — Horror stories abound of clocks sent to Chinese employees (where such “gifts” signify death) and logo fleece jackets to employees in Nairobi. Know the cultural and geographical desires or, better yet, leave it to the local experts and your employees to choose.

    * Desired (http://globoforce.blogspot.com/2009/05/recognition-gone-wrong-thanks-but-no.html) — A great, true story of a milestone moment ruined for an employee with a catalog of trinkets and trash with nothing to offer him as a desired reward.

    * Public v. private (http://globoforce.blogspot.com/2009/02/dont-waste-your-time-or-money-on.html) — Many people would see public praise (such as in a team meeting) as punishment and not reward, so be sure to know your team.

    The “Reward Choice” category of my blog includes far more posts that address this point one way or another.

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