Web Exclusive - May/June 2018

Measuring Up

Study Examines Measurement of Awards Program Benefits

Incentive, reward and recognition programs result in an average 22 percent gain in employee performance, and U.S. businesses generally accept that rewards work to promote productivity. But that doesn't mean every business is getting all of the gains possible from incentives and rewards. To help businesses maximize the effectiveness of these programs, the Incentive Research Foundation (IRF) recently released a summary of the advantages of non-cash rewards and an examination of how businesses are measuring the program benefits, titled, "Award Program Value & Evidence."

"Most leaders expect their investments in incentive, reward and recognition programs to meet specific goals, such as driving more sales, increasing revenue or producing some other return on investment," said Melissa Van Dyke, IRF president. "'Award Program Value & Evidence' presents a strong case for using non-cash reward programs to motivate employees and practical advice on how to measure the success of these programs to ensure goals are met."

The study discusses the role of recognition in incentive, reward and recognition initiatives and the broad benefits of cash and non-cash rewards. It then provides an overview of academic research that explains the psychology behind why non-cash rewards are so effective. It concludes with a discussion of the measurement of the benefits of these types of programs.

Key findings and takeaways include:

Advantages of Non-Cash Rewards

  • People tend to make utilitarian purchases (e.g., groceries) when given a cash reward. Non-cash rewards (e.g., fun experiences, splurges) can create lasting memories and positive associations.
  • According to "The Ikea Effect," people put more value on tangible rewards that they have to work toward.
  • Non-cash rewards have a "trophy value." They are highly visible, and it is more socially acceptable to talk about merchandise or a trip than to "brag" about a cash incentive.

Measuring Incentive, Reward and Recognition Programs

  • Clearly defined, measurable objectives are among the most important success factors in IRR programs.
  • Metrics for tangible benefits include decreased staff turnover, increased productivity, sales, revenue, market share, gains in customer satisfaction and customer acquisition.
  • While more difficult to measure, metrics for intangible benefits include employee presenteeism and satisfaction.
  • An effective ROI analysis compares the full costs of an incentive program to its gains—both tangible and intangible.