Behavioral Economics

 

Brain Power

Getting Inside Their Heads Is Key To Driving Performance And Engagement 

The incentive and recognition industry has never been more competitive. Clients are continuously raising the bar, seeking new ideas and methods to improve program performance, and expecting incentive and recognition professionals to deliver sustained and quantifiable results. An inability to credibly demonstrate competency will likely take you out of consideration. To remain competitive, we have to embrace new tools and new insights.

Compelling New Research
Offering incentive professionals another tool to help navigate the increasingly competitive landscape, the Incentive Research Foundation (IRF) has released an extensive report, Using Behavioral Economics Insights in Incentives, Rewards, and Recognition: The Neuroscience. Neuroscience is the study of the brain and nervous system, and behavioral economics explores why people sometimes make irrational decisions, and why their behavior doesn’t always follow traditional economic models. Over the past few years, interest in these topics has grown significantly as incentive professionals sought a scientific approach on how to effectively motivate people and influence their behavior to take certain actions.

The insights in the report help those of us selling incentive and recognition programs to better understand motivation, and to ultimately create more compelling and effective programs. Since neuroscience is relatively new for most of us, let’s begin with a quick overview of how the brain operates to establish context for the report findings.

An Overview Of Brain Science
The brain is a social organ wired to minimize loss and to keep us alive. It makes the assumption that because we were alive yesterday, what we did previously is safe. From the brain’s perspective, perpetuating the patterns of past behaviors is good for survival, and doing things differently—even if it seems like an improvement—is risky. The brain has no motivation to come up with new patterns as long as it knows it has a safe, predictable path; it will be content with utilizing the same paths as before. This is why change is so difficult for most people.

Our brain uses these familiar patterns to keep us functioning at optimal levels. Although our subconscious can process unlimited stimuli, our conscious mind has limited capacity, so it’s continuously working to ferret out the familiar and essential, and ignores that which isn’t relevant. And because our brain will automatically revert to the pattern/path that worked previously, if we want to embrace change and grow, as is the case in incentive and recognition programs, we have to help brains feel comfortable about unsettling their familiar patterns.

With the responsibility for keeping us alive, any change is taken as a threat by the brain, and our threat response is more intense and longer lasting than our reward responses. In neuroscience terms, change is a threat to our “status,” which is at the heart of incentive program design. Improved status favors human survival, and praise, respect and accomplishment increase feelings of status in our brains. They’re also the best way to create sustained behavior change, which is why incentive programs include frequent recognition and rewards for behaviors and achievements the client deems valuable.

Incentive professionals who are successful in building status and minimizing threats in their clients’ programs will be rewarded with improved employee engagement and program participation. To further optimize our effectiveness in creating and managing incentive programs, we also need to better understand another key element from the IRF study.

How Behavioral Economics Affects Incentives
Emerging in recent years as a discipline in its own right, behavioral economics has long been overshadowed by traditional economics, which suggests that:
• People tend to act rationally and in their own best interests when making decisions
• Money is the most effective motivator

Traditional incentive program design is influenced by traditional economics. The conventional approach (that rewarded behaviors are repeated) supposes that tangible rewards and punishments are solely sufficient to drive the desired employee performance or consumer choice. While an extrinsic approach is serviceable and relevant, behavioral economics posits that an overreliance or sole focus on extrinsic motivators is based upon an incomplete understanding of human motivation, and therefore is inefficient.

Because behavioral economics recognizes that 70 percent of human decision-making is emotional (as opposed to rational), it proves to be a more useful tool than traditional economics in helping program designers understand what actually motivates people, why some incentives are more effective than others and how they can strategically apply these principles in their programs.
Incorporating proven techniques from behavioral economics into motivation programs produces a competitive advantage and higher levels of employee productivity, engagement and retention compared to programs relying solely on monetary incentives. In most cases, an understanding of the person being motivated and an appropriate experiential or merchandise reward will result in a far more memorable and effective reward than cash.

Today, fewer incentive designers rely solely on tangible rewards and punishments in driving behavior and optimal performance. Instead, program designers recognize the importance of both intrinsic and extrinsic motivation to leverage the benefits of behavioral economics. You’ll see far greater program results by taking human nature and intrinsic motivations into account—by deliberately working with natural human thinking—rather than ignoring it or unwittingly working against it.

Harnessing Social Drivers For Better Results
In Driven: How Human Nature Shapes Our Choices, Harvard researchers Paul Lawrence and Nitin Nohria propose four social drives that complement our biologic drives and regulate virtually everything happening in the workplace. These four drives also explain the origins of both extrinsic and intrinsic incentives, and if we can turn on these productive pleasures in our programs, our clients will enjoy maximum productivity and engagement.

These social drives create pleasant and painful feelings that push and pull us during the course of a typical workday and serve as motivational ‘hot buttons.’ When these buttons are pressed individually, motivation rises marginally, but when pressed together motivation grows exponentially within an organization causing an even greater impact on engagement, retention and performance. Incentive and recognition programs provide organizations a powerful tool because, in a single intervention, they help activate all four drives.

1. Drive to Acquire: People want to  acquire things—money, property, cars, etc. They also want to acquire skills and status, become experts and feel proud. Companies also want their employees to be competent, confident experts. Reinforce the drive to acquire by rewarding employees who acquire needed skills and knowledge. Provide tangible rewards to supplement intangible recognition from managers and peers, and make sure recognition is spontaneous, personal and heartfelt. 

2. Drive To Bond: Employees want to h ave authentic, caring relationships not only with their family and friends, but with their colleagues and supervisors, and experience the warm, friendly feelings that come with them. Ensure each instance of reward and recognition has a face-to-face element. Because employers want employees to collaborate and cooperate as a team in order to solve difficult problems, programs that provide rewards for group achievements are working harmoniously with the drive to bond.  

3. Drive To Innovate: Humans are n aturally driven to learn about the world around them and create new thoughts, systems, relationships and goods based on those discoveries. It also feels good to satiate curiosity, think up a new idea, or solve a difficult problem, so give employees at least a small amount of time to innovate within their sphere of knowledge and insure each instance of reward or recognition helps employees learn the behaviors that are valued and important to the organization. 

4. Drive To Defend: People want to feel safe and secure and to defend the people and ideas they hold dear. Organizations also want this, because when employees are overstressed, productivity plummets and healthcare costs rise. Organizations that manage to harness the power to defend will be rewarded with loyal employees who are vocal about their affection for the organization. Reinforce the drive by gathering employee input on incentive and recognition initiatives to ensure they’re perceived as fair, maintain openness and transparency in all communications, and remind employees often of their importance to the organization.

When collectively activated, these drives have a compounding effect, so well-executed incentive or recognition programs offer a crucial opportunity for organizations. In a single instance of giving an employee an award, the company allows the employee to acquire status (and potentially goods or services), to bond with their team or the person giving the recognition, to more deeply comprehend what’s important to the company, and to defend the very deeply held belief that they’re good at what they do and have chosen the right organization for employment. And when you’ve achieved that, you will have delivered a compelling and successful program to your client.

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Applying Brain  Principles To Improve Program Results
Here are four more ideas to create more effective brain-friendly incentive and recognition programs.

1 The Halo Effect: Our brains take all of the information we know about something and file it for fast recall. For ease of processing, the brain will also combine and connect what it deems as relevantly related experiences. It’s called the halo effect. The more highly positive, emotional experiences our organizations create throughout our career, the more positive emotions we associate with the company.

2 Emotional Stamps: If we want people to remember things, we must tap their emotions in some manner. Given the amount of information our brains must process each day, all our memories are marked with an emotional stamp that controls their storage and retrieval. The stronger the emotional stamp, the easier the memory recall, which reinforces the necessity for incentive and recognition programs to tap into recipients’ emotions to have maximum impact.

3 Frequency Bias: Ideas, images and awards we see more frequently ‘feel’ more familiar and more positive. This bias suggests that the more recognition happens within an organization, the more often it will feel like a normal part of business, and program recipients will build stronger emotional connections to awards when they’re mentioned frequently.

4 Temporal Bias: Humans remember short, peak emotional experiences more than average ones. This finding means at most that short, highly effective reward experiences may be more memorable, and at least that all reward experiences should conclude with the most emotional part of the event as the final portion. To take advantage of this bias, make certain all recognition presentations, events and incentive travel programs always end on a high, emotional note. 

Source: Using Behavioral Economics Insights in Incentives, Rewards, and Recognition: The Neuroscience by the Incentive Research Foundation

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Successfully Selecting And Presenting Awards
How do incentive and recognition professionals decide which rewards to use and how exactly to use them? Factors like an employee’s age, profession and background all play into the impact a reward has on the employee, but for a truly effective campaign, incentive professionals should also give careful consideration to these subtle but significant variables:

Ease of Selection
Incentive programs should focus on using nudges to make the reward system user-friendly and to maximize the program’s emotional impact. Emotionally compelling rewards hit the mind harder, are remembered longer, produce quantifiably better results from employees, and influence the internal brand the most.

Reward Type
Employers need to move beyond programs that rely solely on monetary rewards, but instead use a variety of rewards in strategic combination to complement each other. Award programs should offer tangible awards and formal recognition more frequently, while using experiential rewards (trips or spa treatments) more sparingly. The latter tends to deliver more intense happiness, while the former serves as a permanent reminder of appreciation.

Motivation Type
Consider rewarding top-performing teams as opposed to using a system in which team members all compete for a single reward. In today’s workplace, cooperative incentives are more effective and valuable than competitive incentives. Also, don’t underestimate the value of rewards that reinforce internal (intrinsic) motivation, which creates a long-lasting desire to perform well by increasing the recipient’s self-esteem through the establishment of a sense of purpose, fueling a desire to live up to expectations or helping the recipient master new skills. And celebrating reward-earners publicly has measurable, favorable effects on productivity.

Personalization
Who does the recognizing, and how personalized or public that recognition is, can have an impact on the employee’s emotional response and ultimately the employee’s productivity. One employee may value and appreciate public recognition while another might respond more favorably to private acknowledgement from an esteemed colleague. Similarly, employers need to depart from a generic, one-size-fits-all model and incorporate creativity and personalization (based upon what matters to the individual) into rewards.

Timing
Surprise a recipient with a reward immediately after the goal has been achieved to make it more meaningful. A reward that is explicitly promised in advance to an employee if he or she achieves a particular goal loses its impact much more quickly than a reward received unexpectedly in recognition of reaching a goal.

Desired Impact
Rewards programs that prove employers truly care about their employees are the most effective. Implementing emotionally meaningful incentives in programs has benefits that extend beyond improving employee productivity. The more valued a company’s employees feel, the better the internal brand impression, and those employees act as brand ambassadors who extoll the company’s virtues to job candidates, current and potential customers, vendors and the media.

Purpose
Ideally, every incentive and reward program will align to the company’s purpose in some way. If employees believe in the company and its vision, trust their leaders and develop caring relationships with the people they work with, then the employer becomes an asset that employees will instinctively protect. In this case the employee feels like an owner as opposed to a renter and will act accordingly.


Source: How to Effectively Harness Behavioral Economics to Drive Employee Performance and Engagement. A White Paper on the Incentive Research Foundation’s Research Study, Using Behavioral Economics Insights in Incentives, Rewards, and Recognition: The Neuroscience

 

Named one of the Ten Best and Brightest Women in the Incentive Industry, Michelle M. Smith, CPIM, CRP, is a highly accomplished industry leader, international speaker, author and strategist. A respected authority on leadership, internal branding and employee engagement, she is past president of the FORUM for People Performance at Northwestern University, vice president of research for the Business Marketing Association and president emeritus of the Incentive Marketing Association.Smith is vice president of marketing for distributor O.C. Tanner. Reach her at michelle.smith@octanner.com.

filed under PPB Magazine | August 2017 | Feature
Comments (1)
Jae M. Rang, MAS
August 3, 2017
We saw a decrease in incentive buying during the recession - many companies used their capital to stay afloat - then didn't resume a formal program once things picked up. Now they're buying talent with lavish packages. When you understand what drives humans then you realize how crucial a quality incentive program is. You can't quantify the peripheral effect of team members being ambassadors but isn't that what every business leader is striving for?
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