The Right Employee Incentive Mix, as Showed by the Data
Employee Incentives And Tangible Rewards
Finding the right employee incentives to recognize and reward your employees has always been part numbers game, part psychology. In order for incentives to motivate employees and build a positive culture for an organization, they need to have value and meaning for each recipient. Many employee incentive programs fail to get a return on investment because program managers just guess as to what incentives will fit the bill.
But they no longer have to guess, thanks to a brand new study conducted by the Incentive Research Foundation (IRF) and the Incentive Marketing Association (IMA). This study looked at a cross section of 452 consumers from around the country, asking them questions about their incentive and reward preferences as well as gathering demographic and psychographic data.
There were a number of findings of note that are worth sharing, particularly when it came to rewards and reward experiences. For example:
1. When it comes to employee recognition, tangible rewards still carry the most weight.
In this study, participants were asked what sorts of rewards, both large and small, they would most prefer and least prefer as part of a program to recognize their day-to-day contributions at work. When smaller rewards were presented, the results were pretty clear: over 62% of respondents said they would most prefer some sort of tangible reward over personal recognition, internal company communications, and professional development opportunities.
“Rewards” is, of course, a rather broad category. Rewards can include merchandise, cash, gift cards, or points that can be redeemed for prizes. Digging further into the data, it becomes apparent that, though there are people who prefer each kind of reward, there are some general trends, such as that:
2. Cash is still King—but reward preferences are certainly not one-size-fits-all.
Of all the rewards types studied, cash was the most popular award option (when one controlled for who did the recognizing, how it was communicated, etc.). Gift cards were the second most popular option, and merchandise came in third.
That said, all reward categories had a significant number of “fans”—that is, there were a substantial number of people who most preferred each category, including merchandise. And the differences in these numbers were not as lopsided as one might think.
Furthermore, how participants felt about each reward depended heavily on other factors, such as who was presenting the reward and how. This seems to suggest that the experience of receiving the reward, and the recognition that comes with it, plays a substantial role in how the reward is evaluated.
Finally, there were significant differences in rewards preferences when one looked at age/generation, income level, and gender.
All of which means that rewards are certainly not one-size-fits-all. While participants showed some clear preferences, these seem to be overshadowed by the fact that over 62% of them wanted rewards. It might well be, then, that customization is the important factor here. For example, getting merchandise that the individual has selected himself or herself, or a gift card to a store of their choice, might well provide the “meaningfulness” more than the overall kind of reward.
This can be seen easily for the category of merchandise, where…
3. Preferred Merchandise for Employee Rewards included food, apparel, watches, and small electronic items.
Preferences for merchandise varied all over the map when a smaller reward was being presented. Participants had a wide range of preferences here, though there was a definite tendency towards food, and towards “status” items like clothes, watches, and electronics.
The overall breakdown of the top 4 most preferred items included:
- Food/beverage items (e.g. Edible Arrangements, Harry & David) 18%
- Apparel/clothing items (e.g., Gap, Old Navy) 13%
- Watch/clock (e.g., Casio, Timex) 10%
- Small electronic items (e.g., Hamilton Beach, Black & Decker) 10%
Again, there is no one-size-fits-all: no one type of merchandise was preferred by over 18% of respondents. What might matter more, then, is not the type of merchandise per se, but the ability to select and customize merchandise that fits one’s personal style and/or lifestyle.
4. There is a “profile” that fits people preferring merchandise employee rewards.
This is where the psychographics of the study get interesting. Although merchandise was not the most popular reward type overall, it definitely had value and meaning for employees that fit a certain profile. In terms of their attitudes (and compared to their counterparts) merchandise-preferrers were:
- Less concerned about feeling part of the company culture
- Less concerned about job security
- More enjoy parties and large gatherings
- More likely to buy things on impulse
- More likely to surprise friends and family with gifts, and
- More likely to entertain in their home
Of course, these were just tendencies. Some merchandise-preferrers did not fit this profile. Some that fit this profile still preferred cash and gift cards. And some merchandise-preferrers only fit parts of this profile.
So what does all of this data mean for planning the right incentives program? We think it implies two best practices.
Best Practice #1: Go for the whole rewards and recognition package.
While 62% of participants put an emphasis on the tangible reward, don’t lose sight of the fact that the other 38% thus felt that other elements of recognition were important. This shows in the data, as the way in which tangible rewards were presented effected their desirability.
The best rewards experience, then, isn’t a matter of presenting the best rewards, but the best mix of reward, recognition, and experience. Whenever these three factors can come together in a harmonious way, employees will feel most appreciated—and the incentive is most likely to have the desired effect.
Best Practice #2: Find ways to let them customize—and show off.
Given that tastes differ so much, there are few incentives that will be desirable across the board. Indeed, this might be the only reason why cash is the most preferred reward: it is, in a sense, infinitely customizable.
But taking a deeper look at the data uncovers another trend: people tend to prefer merchandise that is seen as a “status symbol” given their demographic. For example, millennials prefer electronics, while baby boomers prefer watches. And women tend to prefer clothing and apparel more than men.
Given the draw of luxury brands as status symbols, it makes sense to offer merchandise as rewards if there are options for picking and/or customizing the reward. For example, best practice would not be to offer an expensive watch, but rather to let the employee to select from a range of watch styles from a quality brand or brands.
This combination of recognition, experience, choice, and quality brands may well be the best way to create an incentives package—and get a positive return on one’s investment.
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