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Thursday, March 26, 2009

Incentive Program Mythbusters

Exposing the truth about incentives in the workplace
Tyler Mitchell: VP of Market Development for Snowfly Incentives.

"In a workplace incentive program, tangible merchandise is more effective than monetary rewards when it comes to improving performance."

I have read and heard this and similar statements more times than I can recall. My experience with setting up and managing incentive programs for Snowfly as well as common sense has always led me to believe that the above statement is simply false.

But don’t take my word for it, check out the chart below from a study titled: "The Effects of Incentives on Workplace Performance: A Meta-analytic Review of Research." It shows that incentive programs offering monetary rewards realized an increase in performance more than twice that of those programs offering tangible rewards.

Effect of Type of Incentive on Work Performance

Incentive Type
% Performance Gain
 The results of this study which originally appeared in the Performance Improvement Quarterly are extremely reliable. They are derived from an aggregate review of 45 previous studies on the use of incentives to motivate performance. To ensure accurate results, these 45 studies were chosen from a field of approximately 600 based on their adherence to numerous standards.

So why does this myth continued to be held as concrete fact? Not surprisingly, perpetuators of this myth are usually affiliated with organizations that specialize in selling and fulfilling tangible merchandise for the purpose of incentives. They all make more or less the same argument that monetary incentives are not good motivators because they get confused with salary. This argument has been around for a long time but has become outdated due to the rapid emergence in the last 10-15 years of merchant gift cards and prepaid debit cards. Both of these reward options offer real monetary value to recipients, yet they will in no way get confused with salary or commissions.

Proponents of tangible merchandise will also point out that monetary rewards have little “trophy” value; giving someone a tangible piece of merchandise is a much more memorable and meaningful experience. This is true, but begs the question: at the end of the day what do really want to get out of your incentive program, quantifiable improvements in performance or a Hallmark moment?

Before closing the book on this one, I would like to address the fact that, yes, I do work for Snowfly and yes, our incentive programs do offer, endorse, and facilitate the awarding of monetary incentives. However, let it be known that Snowfly is in no way obligated to do so. Snowfly has chosen this direction based on our extensive experience and strong belief that offering monetary incentives will get our customers a greater return on their incentive and recognition efforts.

So, in conclusion, I feel extremely confident in declaring this myth to be BUSTED!

CONDLY,S.J., CLARK, R.E., STOLOVITCH,H.D."The Effects of Incentives on Workplace Performance: A Meta-analytic Review of Research." Performance Improvement Quarterly, Vol. 16, No.3 pp.46-63