Some HR professionals swear by incentives; others, at them. In the United States alone, organizations spend almost $120 billion annually on work-related incentive programs. Are they getting their money’s worth?

Purveyors of incentive systems are wildly enthusiastic about using such tangibles as gifts and travel. But some researchers claim that tangible incentives destroy personal interest in work. Others conclude that organizations should not offer incentives for performance that might normally be achieved without them. Some have found that they work in specific cases with dramatic results.

Meanwhile, there is a lack of systematically documented incentive workplace practices. Many organizations implement incentive systems without understanding the factors that increase the positive effects and eliminate negative consequences of what they adopt. So what is an HR decision-maker to do when senior managers ask for an incentive program?

Two years ago, I organized a research team to cut through the confusion and derive clear conclusions about incentives. The purpose was to help senior HR managers make more informed decisions. The study was supported by a grant from the Society of Incentive and Travel Executives (SITE) Research Foundation and was sponsored by the International Society for Performance Improvement (ISPI). It included a review of

 

more than 600 English-language studies on incentives, a meta-analysis of well-conducted lab and field research and an extensive survey of U.S. organizations that apply various incentive systems. Nearly 150 surveys were completed, and 90 structured interviews were conducted with incentive system designers and selectors, incentive recipients and supervisors of recipients. The findings of the research disproved two myths:

 

• Myth: Incentives destroy personal, intrinsic interest in work. To the contrary, rewarding people for exceeding targets causes them to value work more and even heightens self-confidence and employee loyalty.

• Myth: Incentives only lead the business to pay for results it would have gotten anyway. To the contrary, only 8 percent of the workers surveyed said they would have achieved the same results without incentives.