by Lisa A. Grimaldi | April 27, 2017
The Incentive Research Foundation has released "Using Behavioral Economics Insights in Incentives, Rewards and Recognition: A Nudge Guide," an analysis of how behavioral economics can be applied to the incentive, rewards and recognition fields. The report highlights behavioral-economics approaches and the powerful role emotions play in employee performance.
 
The idea behind behavioral economics is to help the user comprehend the motivations behind people's actions. It combines much from several disciplines including the fields of traditional economics, social psychology and neuroscience. Behavioral economics operates on a principle that holds 70 percent of human decision-making is emotional, and the IRF says it has been found to be a useful tool in helping employers understand what motivates employees, why some incentives are more effective than others and how to apply these principles strategically to their own businesses.
 
"Behavioral economics gets to the heart of why people make specific choices, and it can be an effective resource in designing programs that motivate employees' best performance," said Melissa Van Dyke, IRF president. She added that by understanding the role of emotion in motivation as explained in the guide, professionals can "use the knowledge of human drives to make work more satisfying, enjoyable, and rewarding."
 
Among the takeaways the guide provides are:  
• Incentive programs should focus on using nudges (subtle incentive tools/practices) to make the reward system user-friendly and to maximize the program's emotional impact. Emotionally compelling rewards hit the mind harder, are remembered longer, produce quantifiably better results from employees and influence the internal brand the most.
• Employers need to move beyond programs that rely solely on monetary rewards to experiential programs, such as travel.
• Rewarding a top-performing team works better than using a system in which members of a team all compete against each other for a single reward. In today's workplace, cooperative incentives are more effective and valuable than competitive incentives.
• Implementing emotionally meaningful incentives has benefits that extend beyond improving employee productivity. Eventually, high-performing employees turn into brand ambassadors who extol the company's virtues to nonemployees -- including current and potential customers, vendors and media. 
 
To download "Using Behavioral Economics Insights in Incentives, Rewards, and Recognition: A Nudge Guide," or to download the white paper, "How to Effectively Harness Behavioral Economics to Drive Employee Performance and Engagement," click here.