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Cold Cash or A Free Class: Which Incentive Will Get Your Employees Going?

Incentives are a useful motivational tool when framed properly

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BY Lian Kyla Dyogi - 08 Jun 2017

PHOTO CREDIT: Getty Images

From paying a friend $100 to do something on a dare, to an extra $30 from a client for a rush job, financial incentives can be enticing. But what happens when the incentive goes away? Some may argue that the problem with financial incentives is that it doesn’t foster long-term behavior.

However, incentive programs can be very tricky to manage as they may foster unhealthy competitive cultures with one-upmanship at its core. As Jeff Haden, in this Inc. article puts it, “Incentive plans are designed to reward specific behaviors, but they’re often ineffective at best and harmful at worst.”

But are all incentive schemes bad? According to a study by Ho Teck Hua and Catherine Yeung from the National University of Singapore, you have to frame it well in order to get the results you want.

Incentivizing Long-term Behavior

Published in 2015, the study which ran from October 2012 to December 2013 involved “4,000 workers from the retail sector [who] were offered a one-time cash incentive of $60 for completing two, two-day training courses costing $30 each, within a period of four months,” informs Ho and Yeung in this newsletter.

The theory was that getting workers to take part in the program was a matter of design. They tested out two techniques: incentive framing and a commitment device, where the $60 was framed as either a cash reward or a reimbursement, and where employees had to make a specific plan of action or no plan at all. The latter based on research that says that the more specific the plan, the higher the chances of it becoming a reality.

After the four-month incentive period, the researchers studied the workers 9.5 months later in order to see if the incentive was effective in the long-term. The results were that the most effective design, for short and long-term, involved framing the $60 as a reimbursement (or a “free class”) and when workers had to specify in advance what classes they wanted to take.

“The results confirm that the use of carefully designed psychological techniques that influence people’s perceptions of a one-time incentive can promote the desired behavior in the long-term, even beyond the period in which the original incentive was offered,” writes Ho and Yeung.

Will this work for start-ups?

The study doesn’t account for whether this kind of one-off short-term incentive will entice start-up employees in particular. Also, the cash as reward or reimbursement strategy is enticing not only because it comes as no cost to employees, but because it gives them an opportunity to grow and improve their skills.

“It’s tempting to save money and cut back on training programs, but providing employees with access to continued learning, seminars, and conferences will keep your team motivated, sharp, and your business innovative,” writes Elle Kaplan in this Inc. article.

However, even if you frame short-term financial incentives in a positive employee-centric light, can it really be sustained in the long-term?

Len Choo Foo, senior regional account executive at GetLinks and former training and development specialist at Agoda, says, “Unfortunately the answer is not that simple. Employees get bored over time and although when you frame the ‘financial incentive’ in a way that speaks to them, the interest and passion needs to stay sparked.”

“There were many times at Agoda where we taught a subject and it was never to be used in the system so the next time we had to teach it when we actually needed it, employees were very demotivated to do it,” he adds.

He thinks it also depends on the employee and whether they have short-term or long-term mindsets and goals. For millennials, he says self-fulfillment trumps financial incentives, “which was the case at Agoda as people didn't always really care about the financial incentives of the training but more of the long-term effects the training can give for their career.”

Whether it’s through financial or non-cash incentives like free lunches, games, and company trips, incentives can help motivate your employees. You just have to make sure they see that the main activity, such as training and skills development, is worth their time.