• Cash bonus worth $30
• A text from your boss saying, ‘Well Done!’
• A free pizza
  
  

If you were given a choice between the above three options, in return of increased productivity and efficiency at your job, which one would you choose? The foodie in you might be most incentivised by the free pizza, and the realist in you might be torn to pick the extra cash. But you’d be surprised to find what works the best, in case you want to increase your productivity. 

What was the study?

For his book, Payoff: The Hidden Logic That Shapes Our Motivations, Dan Ariely, a psychology professor at Duke University, conducted an experiment of sorts, to fully understand which incentive works best. With an Intel chip making factory in Israel as his laboratory, he divided the employees into four groups, and sent three of the groups a message, promising them a pizza voucher, a text message from the boss that said “Well done!”, or a cash bonus (nearly $30), for assembling a certain amount of chips. The fourth group, which was the control group, was sent no message. Their productivity – easily measurable as the number of chips produced – was observed and recorded for a week, with rather surprising results.

What were the results? 

First Day:

Those promised pizza were 6.7% more productive than the control group, followed by those who were promised a praise (6.6%) and finally, those offered extra cash (4.9%).

So far, so good. But here’s when things got interesting.

Rest of the week:

During the week, the group promised cash was worse off than the control group – 6.5% worse off in terms of productivity, to be precise. The final order was such that the group which was promised an appreciative text from their boss finished first, as in, most productive than the control group, followed by the group that was offered pizza, followed by the control group, and then the ones offered a cash bonus.

In other words, the productivity went down than normal, when cash was offered as an incentive, and it actually ended up costing the company more than it would have, had it made no such promise. Furthermore, appreciation and recognition in person – verbally or otherwise – proved to be more effective.

Why is the study important?

You might write off the study with a smile, or assume that your line of work is vastly different, hence incentives would work differently, but you cannot deny the bigger questions that the observations ask. The entire concept of giving a cash bonus can be traced back to when factory industrialisation was intensifying and the focus on making the workers as efficient as possible. As history is witness, the production went up in the short-run, but plummeted down, for slogging without appreciation doesn’t come naturally to humans. The author, Dan Ariely, says that pizza would have easily outperformed the verbal praise as well, had he gone ahead with his original offer of home delivering a free pizza to the employee. "This way…we not only would give them a gift, but we would also make them heroes in the eyes of their families," he writes in the book.

The findings implore the fundamentals of incentivising and motivating an employee to work better, and their applicability in deciding bonuses and benefits. They also attest to the age-old, yet seldom followed, management wisdom that appreciation and recognition need to be humane and personal – not only copy-pasted email templates or extra cash at the end of the month. This is certainly not the first evidence of cash bonuses failing to motivate employees than expected, and will not be the last. But it leaves employers and organisations, especially HR personnel, with a challenge of devising a comprehensive and effective incentive programme, which is actually able to motivate employees to work better, with measurable output.

The Bottom-line

The study suggests that offering cash incentives might be worse than no incentive at all, if looked at the impact on productivity. Yet, many organisations have cash at the very core of their incentive models. Thus, alternatives in accordance with the company culture and organisation values need to be explored, for are likely to give better results. Furthermore, huge cash incentives, as offered by tech giants, or prevalent in the finance and banking sector, should not be yardsticks to incentivise employees solely with cash. Organisations need to start questioning the conventional approach to motivate their employees, and experiment with a system that produces the most desirable results. With so much talk about personalisation, innovation and change, it’s rather troubling that we haven’t really evolved on this front.

And if nothing works, a slice of pizza has much more potential to bring out the best in your employees, than you might imagine!