What Behavior Science Tells Us About Motivation

How do incentives change behavior? And how they can be more effective?

how incentives work

There has never been a more innovative time for the rewards, recognition, and engagement industry than right now. As researchers in academia and the private sector continue to unlock the secrets of how and why people act the ways they do, using tools that range from measuring brain chemicals to increasingly more sophisticated experiments into how people make decisions, the business of motivation is rapidly becoming an aspect of the science of human behavior. 

"The days of providing the room and the ride and the beautiful sunset using plug-in platforms are coming to an end, and I think that's great news for everyone," says Tina Gunn Weede, CIS, CRP, president and CEO of Peerless Performance. "We're starting to focus more on why people are doing what they're doing instead of trying to drive performance or change behavior, which is really the how and the what. I think we've been putting the cart before the horse. Performance and behaviors are really just byproducts, either good or bad. It's how we feel and how we think about things."

How do incentives change behavior?

Tapping into those emotions and understanding those behaviors, "allows us to be much more predictive, both at the individual level and the organization level, on productivity and engagement and profitability and innovation," adds Weede, who is also chair of the research and education committee for the Society for Incentive Travel Excellence(SITE) Foundation. 

And it's not just that more and more reward, recognition, and engagement professionals are starting to get this. Clients are, too, says Charlotte Blank, chief behavioral officer at Maritz. "Behavioral science has really started to blow up," she says. "It has totally infiltrated pop culture and our clients are really becoming engaged and sophisticated about the scientific method."

The Four Pillars of Behavior

Before many companies actually attempt to change behaviors of recognition, reward, and engagement program participants in a positive way, they are putting an effort into understanding how the brain works. This can be basic chemistry -- neurotransmitters both reflect and impact whether people are happy and trusting (oxytocin) or stressed and fearful (cortisol) -- and it can be more subtle, such as an understanding of the difference between repetitive and creative thinking, says Weede. 

"So much of what happens in our day-to-day lives at work, unfortunately, is tied to that part of the brain that focuses on habits where we do something well or we do it okay, but we keep doing it," she adds. "We do it repetitively. When that happens, it shuts down the part that promotes and supports the exploration of new ideas and curiosity and creativity. So, when you're using one, you can't use the other." And stress is one of the best ways to shut down creativity. 

Once we understand this and other factors that drive behavior, "we have a better shot at really engineering a culture and establishing or aligning core values," Weede says. "I can't tell you how many times I walk in these companies and their mission is tied to some type of performance standard, which we all know is a byproduct of why you come to work every day."

In order to create the behaviors that businesses want in order to get better results, it is necessary to use mechanisms that help nudge them along the path that will help them achieve what they need to in order to earn a reward, says Cameron Conway, vice president and general manager of sales effectiveness at Maritz Motivation Solutions

"We try to ensure that we have four strategic pillars in all of the programs that we do," Conway says. These are an attention strategy, goal commitment, sharing feedback on progress, and having a reward that makes the desired behavior worthwhile.

  1. Attention strategy. This is pretty self-explanatory: you need to attract people's attention to the behavior you're trying to change, he says. Such as a reward or recognition program.
  2. Goal commitment. "This is critical," Conway says, pointing to a channel program for a property and casualty insurance company. "We asked agents to commit to a specific level of customer satisfaction" on the assumption that higher levels of customer satisfaction will lead to more business. Compared to agents who did not participate, the agents who set a goal sold more policies, at higher average premiums. And, of course, had higher customer satisfaction scores.
  3. Progress feedback. People take more action once they have started to accomplish something. For example, Conway says that enrollment in a multi-year, points-based incentive program for a pharmaceutical company jumped 147 percent after the participant pool was shown how far they'd come to reaching their goal in the previous year. "Just by showing people that they're already making progress towards the goal as opposed to people that have to start from zero," he says. 
  4. Meaningful rewards. Setting a reward that makes people want to reach their goals is hardly something new to the recognition and reward business, but there is plenty of innovative new research showing not just why it works, but also why non-cash awards work better.

Uncovering True Desires

When it comes to selecting rewards that will actually change behavior, top incentive practitioners are looking into what program participants really want rather than what they say they want. There is a growing body of behavioral science that says that non-cash awards work better, for a variety of reasons that the incentive industry has long known (based on experience rather than proof). This starts with the fact that people tend to view cash awards as compensation to be lost rather than an award to be won. 

Beyond that, an upcoming report by the Incentive Research Foundation (IRF) cites research that found "if cash rewards are removed, motivation, performance, and engagement among past recipients may drop even below levels that existed before the reward was introduced."

Also, cash tends to be used for practical needs rather than special indulgences that are more memorable and desirable. 

Recently, the IRF released a report looking at what the study of biometrics like eye movement, pupil dilation, sweat, and body positioning -- what professional card players call "tells" -- can show us about people's real desires when it comes to award types. The report, "Conscious and Unconscious Reward Preference & Choice: A Biometric Experiment," sought to determine whether people were being honest with themselves when they say they prefer cash awards in incentive and recognition programs. 

Not only did 62 percent of the subjects choose a non-cash award over the same amount of money, but their initial reactions "overwhelmingly" favored non-cash, says Allan Schweyer, the whitepaper's author and chief academic adviser of the IRF. 

Aside from biometrics, the study relied upon the science of preference -- how people make decisions. This breaks down into two methods: The first is unconscious thinking, which the report calls "fast, reflexive, automatic." The second is conscious thinking, which is described as "slow, careful, cognitive" thinking.

In interviews, 46 people were asked which non-cash award they would prefer: travel, merchandise, a gift card, or an experiential reward such as a spa day or ticket to a sporting event. With that information in hand, they were asked to choose between a non-cash award or its price in cash. In all cases, visuals of the awards or cash were prominently displayed to help with biometric measurements and build excitement in the subject. 

What the study shows is that "our involuntary, instinctual reaction to non-cash rewards is more emotional than our reaction to cash," Schweyer says.

He adds that planners of incentive, recognition, and reward programs know that "rewards which trigger emotions cause higher performance after and in anticipation of the reward. So, this research offers scientific evidence in support of a body of academic behavioral research that suggests non-cash rewards are usually a better choice than cash rewards."

When choosing between cash and non-cash awards, subjects' responses were measured with a number of biometric techniques, including pupil dilation and eye-tracking techniques that scientists call "time to first fixation." This showed that subjects were "overwhelmingly drawn to non-cash rewards over cash," Schweyer says.

Finally, when choosing between cash and non-cash awards, it took far longer for subjects to become fixed on the cash reward. Which is to say, they had to override their unconscious desires for more carefully considered ones. Only 16 of the 42 subjects ultimately chose cash.

Understanding the Culture

"Culture is a huge topic in businesses right now," says Melissa Van Dyke, president of the IRF. "For at least the last couple of decades, good businesses have known that. But when 80 percent of the market is now valued in intangible assets -- meaning what your business is worth is not in your bricks and mortar anymore, it's not even what you have on the shelves -- it's in your algorithms, it's in your people, it's literally in your brand. Your internal culture equals your brand, and that literally equals your value in the marketplace. When those are so tightly connected, organizations are going to have a much more important conversation about internal culture."

And many companies need to have that discussion, says Weede, citing a Deloitte study showing that 75 percent of companies' associates don't understand their company culture well. "Culture is not putting a ping pong table in the middle of a room or having casual dress every day," she says. "Cultures are associates. It's what they think, how they act, how they feel. My bet is if [employees] don't understand the culture, then they don't understand the mission, they don't understand the values, and they don't understand the goals." 

Which helps explain why Gallup says more than half of the associates in the United States are disengaged, Weede adds. 

That in turn means the rewards and recognition industry will be asked more and more to use the data it captures to "help organizations solve wider HR problems or human capital problems," Van Dyke says. "Because in many instances, reward and recognition systems have deeper performance data than most organizations even currently realize."

That lack of insight can be costly. In March, United Airlines suffered a public meltdown when it replaced a $300 quarterly bonus for all employees with a lottery of a $100,000 top prize, Mercedes automobiles and vacation packages, and smaller prizes in the $2,000-$5,000 range. The result was enraged employees, especially once the media picked up the story and started reporting on how much money the new bonus lottery would save the company.

There is a lot of academic research showing how motivating tangible and experiential awards like those trips are, Blank says. And the lottery idea has plenty of precedent in the incentive business in the form of "spin and win" games so popular as dealer channel programs. But it is never a substitute for fair compensation, and it is certainly not a good idea to take away cash compensation -- and there is plenty of research showing that regular cash bonuses are soon viewed as compensation -- says Blank. 

In behavioral science this is called loss aversion, says Van Dyke. It means simply that you will fight harder to hold on to what you have than you will to gain something new. And, she adds, people will "put in even less effort in once it has been removed."

If United had done a controlled experiment with a small group of employees, the company would have been able "to see how it would play out," Blank says. "How people would feel about it and how it would affect performance."