Safety Incentives:
Why Cash Isn't King

A Reprint from OCCUPATIONAL HAZARDS.

When employers are deciding on the types of incentives to use to motivate safe behavior in workers, one question often arises: Which is best, money or merchandise?

by Sandy Smith

There seem to be as many incentive and motivational options out there as there are reasons to motivate employees. Trips, cars, watches, gift certificates, days off, lunches and dinners: you name it, and companies have used it to reward employees for exhibiting and promoting safe behaviors. But one subject that is hotly debated is whether to reward safe behavior with cash incentives.

Scott Jeffrey, Ph.D., an assistant professor in the Department of Management Sciences at the University of Waterloo in Ontario, supports the idea of tangible, or non-cash, incentives. He says non-cash incentives often have a "trophy value" that monetary rewards lack. When employees are deciding to participate in a motivational program, they take into consideration two things: the perceived value of the award and the effort required to earn it.

When employers are deciding that money-versus-merchandise question, he says the psychological processes used by employees to determine the value of incentives must be taken into consideration.

Four Psychological Processes

Four psychological processes directly affect the perceived value of an award and increase the value of earning the award, says Jeffrey. The perceived value of the award is impacted by:

• Evaluability – It is more difficult to assign a dollar figure to non-cash awards, often allowing them to have a perceived value that is higher than their actual value.
• Separability – Participants often view money as part of their compensation. They do not view it separately from their income, as they would a trip, a gift certificate, a watch or other types of recognition.

Jeffrey says employees also evaluate the value of earning the award, which is impacted by:

• Justifiability – Many non-cash incentive awards are viewed as luxuries that employees normally cannot justify purchasing, thereby making them attractive incentives.
• Social reinforcement – One of the most important rewards for a job well-done, says Jeffrey, is acknowledgement from one's peers, supervisors, family and friends. Tangible rewards offer more opportunities for social reinforcement, he adds.

Jeffrey says that all four psychological processes come into play when employees are deciding if they want to participate in a motivational program.

"Insights into this decision-making process come from expectancy theories," says Jeffrey, "which hold that effort exerted in pursuit of a reward is positively related to the value of the reward offered for performance."

He notes that rewards for safety in the workplace – unlike incentives tied to sales performance or production performance – should be rewards for good behavior in general rather than for specific behaviors or goals. In other words, he says, the program should be for an overall improvement in safe behavior, rather than for a specific goal of working for a period of time with no injuries.

"This makes it of critical importance to give awards (cash or non-cash) as an acknowledgement of past general good behavior rather than specific behaviors. It is a subtle difference," he admits, "but an important one."

He says non-cash incentives are better than cash because "they are less likely to be seen as an attempt to control behavior, which often leads to the association of the reward with the behavior and does less to internalize the value of the general behavior."

Tangible Results for Tangible Incentives

Jeffrey's findings are supported by a recent study sponsored by the SITE Foundation, which funds research related to the incentives industry.

According to Frank Katusak, executive director of the SITE Foundation, the study showed that "tangible incentives increase work performance by an average of 22 percent."

Key findings of the survey found:

• Incentive programs aimed at individuals increased performance by 27 percent. Programs aimed at teams increase performance by 45 percent.
• Some 92 percent of workers surveyed indicated that they achieved their goals because of incentives. In addition, 57 percent of corporations surveyed reported that objectives were met or surpassed, and 92 percent reported objectives were surpassed, met or at least partially met.
• Incentive programs structured with employee input work best.
• Long-term incentives are more powerful than short-term incentives (44 percent gain for programs beyond a year versus a 20 percent gain for programs less than one month).

"Incentives work to motivate employees," says Katusak. "It's just a matter of finding out which incentives to use."

When structuring a safety motivation or incentive program, Jeffrey suggests employers take these steps:

Make awards special – If the employee is less likely to purchase the item because he or she can't justify the cost, then making the award special will increase the value of earning it and motivate greater effort to earn it. Using infrequently purchased items or services as rewards increases the trophy value of the award.

Capitalize on social reinforcement qualities – Honor employees publicly when goals are achieved, and in communications with employees, encourage them to think about the admiration that will result in achieving the award and the performance that lead to it.

Vary award types to meet employees' diverse needs – When employees can choose from a variety of awards, the perceived value of the award increases because it is an award the employee wants.

Minimize the potential for "loss aversion" – Switching from a cash incentive program to a non-cash incentive program can result in loss aversion – the perception that losing something hurts more than receiving something of equal value. So, says Jeffrey, non-monetary incentives should have a higher perceived value than the cash.

Consider other potential benefits – For example, vacation travel used as an incentive might bring the company rewards because the employee will be better rested and more relaxed when he or she returns to the job.

Cash Versus Other Rewards

Jeffrey said he believes that employees often miss the point when they've been rewarded for safe behavior with cash.

He equates cash incentives for safety to rewarding children with cash for good grades. Children should want to receive good grades for the intrinsic value of the rewards a good education can bring to them. The same is true of working in a safe manner, says Jeffrey. There is intrinsic value in being safe, and any motivational programs should promote that concept, rather than reward employees for not suffering an injury.

"If you begin rewarding for specific behavior, the purpose of that behavior becomes the receipt of rewards rather than the personal benefits of behaving in that manner," he notes. "Incentives should be used to engender employees to be safe. You want to encourage an overall philosophy of safe behavior."

- Sandy Smith