C&B Notes

People Will Die For Ribbons

In a study conducted last year, economists found that employees responded more positively to gifts versus cash as a form of incremental compensation.  The human desire to feel valued and recognized is strong, and in this case a thoughtfully chosen gift yielded higher productivity gains than a little extra money.

A study published last year by German and Swiss researchers suggests that economists’ focus on cash might often be misplaced.  They found that gifts were far more motivating to short-term employees than unexpected cash bonuses, effectively paying for themselves by improving productivity.  The findings provide some guidance on the types of gifts that are likely to engender the greatest motivation and loyalty.

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Before the students started to catalog the books, the experimenters told some of them that they would receive an unexpected 7-euro bonus — a 20 percent pay hike relative to the promised wage of 36 euros for the three-hour job. Another group was given a gift-wrapped water bottle that was worth around 7 euros. (In some versions of the experiment, a price tag was left on and catalogers were informed of the present’s value, to ensure that the employees didn’t overestimate it.)  Crucially, a separate set of students didn’t receive any bonus at all, to serve as a baseline to measure the effects of gifts and extra cash.

The cash bonus didn’t have any effect on the speed or accuracy with which the students did their jobs.  However, those receiving the free bottle reciprocated by upping their data-entry rate by 25 percent, a productivity increase that more than offset the cost of the bottle itself.  It’s not that the workers particularly loved their bottles — in fact, in a separate experiment in which catalogers were offered the choice between a bottle versus 7 euros, 80 percent took the cash (and still worked a lot harder).  Rather, it was the thought that counted, and simply handing out a few more euros hardly takes much thought.  Even offering the option of a gift showed that the employer cared.

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The motivational effects of cash surely become more important when the stakes get higher, and gifts probably work best when tailored to the particular set of employees.  That’s how you really show you care.  And that, more than gifts versus cash, is really the study’s takeaway.  Many employees toiling away in stores, factories, and cubicles are desperate for a sense of meaning in their work lives.  Even the smallest gesture of kindness that shows they’re part of an organization that actually cares can give them purpose — and that leads to motivation.