Mo' money, mo' problems? The impact of rewards on employee engagement

For decades behavioral scientists and organizational psychologists have searched for a solution to address the whopping 70% of employees who do not feel engaged at work. Culture and people executives have exhausted their searches for compensation and benefits packages to tackle the problem only to deplete their budgets and bank accounts in the process.

Based on a recent study that Disco conducted with companies facing employee engagement problems, we’ve uncovered several findings that should give culture and people pros hope!

To summarize, you don’t need to invest millions on cash or points-based programs to motivate your employees. Focus on building company rituals and integrating real-time recognition into daily and weekly processes to get the highest return on investment.

Key findings:

  • Non-monetary reward programs that are anchored in company rituals and core values have the highest ROI and impact on long term employee engagement.
  • Experiential rewards increase employee appreciation and engagement rates but at a lower ROI than non-monetary reward centric programs.
  • Cash isn’t king. Cash rewards and incentives offer short term gains on employee engagement. However, cash incentives negatively impact long term appreciation levels and productivity.

Disco Rewards Study
Inspired by the research of Dan Ariely, author of Payoff: The hidden logic that shapes our motivations, our team designed a study to understand the impact of employee appreciation and monetary rewards to answer the bigger question: What can founders, CEOs, and culture executives do to help their employees feel more engaged and motivated at work?

The goal of this study is to share what we’ve learned to help current and future generations of founders and culture pros design systems and programs that motivate their employees and empower them to do their greatest work.

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How did we structure our research?

  • We selected 9 companies at random who recently installed Disco for Slack.
  • In total, 3,000 employees were surveyed as part of the study. Employees were surveyed before interacting with Disco and then re-surveyed at 30 and 90 days.
  • Six of the nine companies used Disco as a means to issue monetary rewards to employees for a job well done.
  • The remaining three companies were asked not to issue any form of monetary rewards during their use of Disco during the first 90 days. Instead, they were asked to tie Disco engagement to other company artifacts and rituals to celebrate employee achievements (see examples).
  • Of the six companies that received monetary incentives, three of those companies were instructed to give an experiential reward to employees. In this case, it was a ride home from work worth $25. The other three companies were asked to give a $25 cash bonus.
  • All 9 companies were asked to recognize their employees publicly on Friday, where the rewards would be distributed to employees from the recognition data captured via Disco.

Cohort Summary

  • 3 companies = ‘Ride home from work’ experiential reward
  • 3 companies = $25 AMEX cash bonus
  • 3 companies = Disco with no monetary reward (cash or experience)

Here are the questions we set out to answer in the study to measure the impact of different incentives.

  • Do you believe you're appreciated for your contributions at work? (1-lowest 7-highest)
  • How likely is it that you would recommend your company as an employer to a family member? (1-lowest 10-highest)
  • If you were working on an important project, how likely would you be to work on the weekends? (1-lowest 10-highest)

Findings and insights

Experiential rewards had the highest impact on employee appreciation but at a material cost to the business.

When employers paid for their employee’s commute to and from home, those employees reported a 2.7% higher level of satisfaction with their company after the 90 day study.

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Companies that bought rides home for their employees also reported a 5.24% higher likelihood to recommend their company to a friend or family member as a great place to work and a 1.6% higher likelihood to work on the weekends.

Whoever said, ‘it’s not about the destination, it’s about the ride’ must have done their behavioral economics research. Experiences in the Disco study provided to be the most effective way to positively impact employee appreciation over the long term.

The downside: Experiential rewards still require a financial investment in a tangible reward, so budget will always be a factor to consider. Experiential rewards also require a higher level of overhead on behalf of the culture or HR professional to administer. Companies like Blueboard are great because they handle much of the program management and administration of facilitating experience based programs, while offering more meaningful individual and team based rewards.

Cash incentives had a short term boost, but ultimately left employees with a hangover.

Companies that issued the cash incentives saw a very sharp spike in appreciation levels after the first 30 days. These organizations reported 8% higher appreciation levels after 30 days. This lift was higher than both the ride and control chorts.

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The downside: Cash rewards had a negative impact on long term appreciation levels after the 90 day study. Similar to a sugar crash, when cash was used as an incentive, employees felt a short term boost on appreciation levels, but ultimately burnt out on cash as a motivator. Additionally, cash had negative impacts on an employee’s willingess to work harder on critical projects over the weekend and a -11.26% impact on the employees willingness to recommend their company to friends and family members as a positive place to work.

If a leadership team is looking for short term gains to boost morale to push on an important project, cash appears to help; However, the long term ramifications of this transactional incentive structure seem to negatively impact employee engagement.

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Disco without any incentives showed positive lifts across all three categories.

Companies that used Disco without any form of financial reward and connected their programs to company artifacts and recognition rituals (see examples) saw a healthy, positive impact on employee engagement levels.

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At 30 days, employees in the control reported an increase in appreciation levels, an increase in their likelihood to work harder, as well as an increase in their willingness to recommend their employer to friends and family. At 90 days, employees reported another 2.3% boost in appreciation levels, as well as an increase in their likelihood to work harder and willingness to recommend their employer.

While an investment in experiential incentives had the highest and longest term lift on engagement, simply implementing a process around employee recognition yielded almost an identical impact on employee engagement without any financial investment in monetary incentives.

Closing thoughts

As Dan Ariely quotes in his book from his own study on motivators, ‘most managers have a tendency to focus on things that are countable when assessing employee performance’ because these measures are the easiest to calculate and convert into a transactional relationship (i.e if you build these number of widgets, we’ll compensate you this much)

However, if there’s anything we’ve learned through the course of building Disco and this study, companies that create rituals focused on connecting employees and building more meaningful relationships and experiences will see higher levels of engagement from their employees at a much lower cost to the business.

As founders, managers, and leaders, it’s our responsibility to go one level deeper to understand our employees and their motivations to design a more fulfilling experience for them at our companies. As the statistics show, they’ll appreciate you for it!

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Mo' money, mo' problems? The impact of rewards on employee engagement
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