Behavioral economics challenges traditional views about motivating and rewarding employees.

Recent studies reveal surprising truths about what motivates workers.

  • New research shows that simply feeling acknowledged is what motivates workers best.
  • Surprisingly, monetary rewards are not motivating, but seen as compensation that is owed. Rewards that are treated like transactions, like earning points to obtain a prize, also don’t generate good will or motivate workers.
  • The monetary value of a reward is less important than the spirit with which it is given for creating lasting good will.

“Acknowledgement
is a kind of
human magic.”

Dan Ariely, Duke University,
James B. Duke Professor
of Psychology and
Behavioral Economics

“What makes us feel
good about our work?”

Traditional employee rewards quickly lose their impact due to “adaptation.”

  • Dopamine is the “feel-good” neurotransmitter triggered by the anticipation of something pleasurable. It’s why you experience joy when planning a vacation or cooking a special meal. Dopamine plays a major role in reward-motivated behavior.
  • When something becomes status quo, and is no longer novel or special, anticipation fizzles and dopamine levels drop.  The thrill is gone. This is called “adaptation,” and it’s the reason your employees seem not to care about another company sweatshirt, or free “Tuesday Taco” luncheon.

“Dopamine…
is about the pursuit of happiness rather than happiness itself.”

Dr. Robert Sapolsky

“ ‘Maybe’ is
addictive like
nothing else
out there.”

Dr. Robert M. Sapolsky
John A. and Cynthia Fry Gunn Professor at Stanford University Biological Sciences, Neurology & Neurological Sciences, and Neurosurgery

“Dopamine Jackpot: Sapolsky on the Science of Pleasure”

“Variable rewards” are the antidote to adaptation.

  • When rewards are variable – when the value or timing fluctuates – recipients don’t know what to expect. Adaptation doesn’t occur. 
  • The uncertainty of the reward produces especially high dopamine levels irrespective of the ultimate value of the reward, which is unknown. 
  • “Maybe” is a powerful emotion – it’s the reason that millions of people buy tickets for lotteries they have virtually no chance of winning. With variable rewards, the possibility of receiving something wonderful produces nearly the same dopamine levels as actually receiving it.

Surprise intensifies
emotional impact.

  • The impact of variable rewards is increased with the element of surprise.
  • Being exposed to unexpected stimulus intensifies emotion by as much as 400%. It feeds the “novelty bias” that causes sensory processing to favor something new and triggers a release of noradrenaline for intense focus.
  • In an instant, surprise captures attention while imprinting on memory for lasting impact.

“Surprise stops us in our tracks, it plugs us into the moment, it intensifies our emotions.

Tania Luna
Co-author, “Surprise: Embrace the Unpredictable and Engineer the Unexpected”

Tania Luna

“Taken by Surprise”

Additional Resources

Nine ways to reward your remote team members

Writer and entrepreneur Fiona Adler identifies creative, practical ways to recognize employees who miss out on perks that are only available to staff based at a company office.

Read to Article 

5 Reasons Your Retention Rate Is So Low

Laura Handrick, staff writer at Fit Small Business, examines the disconnect between what employees want and what employers think they want.

Read to Article 

Podcast: How to create winning employee engagement

Lou Carlozo, Managing Editor at BAI (Bank Administration Institute) talks with Teresa Tanner, EVP and Chief Administrative Officer at Fifth Third Bancorp about creating an environment where employees can do their best work.

Listen to Podcast 

Employee Engagement vs. Employee Experience

Ryan Scott, founder and CEO of Causecast and Forbes guest contributor, considers the emerging focus on employee experience, its origins, and how it differs from related disciplines like employee engagement.

Read Article 

6 effective strategies for improving employee retention

Sharon Florentine, CIO magazine Senior Writer tackles the subject of employee retention, outlining effective strategies for conserving your organization’s most important resource.

Read Article 

Video: Diana Dosik: Why we need to treat our employees as thoughtfully as our customers

Diana Dosik, Principal at The Boston Consulting Group, talks about how companies would benefit through greater focus on understanding their employees’ experience.

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