New Study Suggests Cash Might Not Just Be The Only Way To Achieve Employee Motivation

The findings of a new study suggest that tangible rewards motivate employees when they’re easy to use, pleasurable, unexpected, and distinct from salary. The study was recently published in the journal Accounting, Organizations, and
Society.

A recent survey of firms in the United States revealed that 84 per cent spent
more than USD 90 billion annually on tangible employee rewards, such as gift
cards, recreation trips and merchandise in hopes of increasing productivity.

“We found that there is, at best, mixed evidence regarding the motivational
efficacy of tangible rewards versus cash rewards,” said Adam Presslee, an
associate professor at the University of Waterloo’s School of Accounting and
Finance.

“It is somewhat puzzling why so many companies go to the trouble of
tangible rewards when cash rewards also lead to motivational differences.” Presslee and his co-author, University of Wisconsin-Madison’s Willie Choi, used
four experiments to investigate the factors driving the preference between
cash and tangible rewards.

The attributes examined include ease of use of the reward (fungibility), hedonic nature of the reward (want vs. need), the novelty of the reward, and how the reward is presented.

“Rewards are constellations of attributes, and firms should focus more on the
motivational effects of the attributes associated with a reward rather than the
reward type itself,” Presslee said. “Results confirmed that each of these
attributes – individually and in combination – increases employee effort and
performance.”

The researchers recommend managers interested in motivating employees
using tangible rewards would be best served to offer tangible rewards that
incorporate these four attributes.

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“If for whatever reason tangible rewards are the only tool available, our results
show compelling evidence that employees are motivated by rewards that are
perceived as distinct from salary,” Presslee said.

“Therefore, firms looking to get the most out of their reward programs should emphasize the distinctiveness of those rewards, and the attributes above are four ways firms can do that.”

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