How to Optimize Your Incentive Program

How to Optimize Your Incentive Program

When it comes to designing an incentive program, how does your company go about it? Chances are, if you’re relying on cash as your primary motivational tactic, there’s potential to do a lot better.

Carrousel Travel recently hosted a Motivation Forum featuring Lantern Group president and behavioral scientist Kurt Nelson, Ph.D. As an expert in human motivation and behavior changes, Nelson shared what drives employee motivation and how to translate it into improving your organization’s incentive program.

Why You Need an Incentive Program

Nelson started with a simple exercise: raise your hand as high as you can. As people lifted their hands up, he implored them to lift higher—and they did. Finally, he offered $20 to the person who lifted their hand the highest, leading to people standing and stepping on chairs.

As an example of how incentives work, it was successful. But even more than that, Nelson asked why—when the audience was first asked to raise their hands as high as possible—did it take another request and ultimately an incentive to get their best effort?

“We’re supposed to raise our hand as high as we can all the time,” Nelson said. “But when we’re asked to do it, we raise it even higher.”

In short? Organizations can use a variety of tactics to “raise hands higher.” Bonuses, cash, flexibility, time off, all of these are levers of a sort for companies to use in their incentive programs. But while most employees will claim that cash is their primary motivator, the research indicates otherwise.

What *Really* Motivates People

A study examined the performance lift brought on by incentive programs. In the organizations studied, cash brought on a 14% lift. But nonmonetary rewards saw a lift three times that, over 40%.

Nelson included a wide variety of interesting research that we won’t include in its entirety here. However, the essence of why cash rewards do not return as much of an incentivized investment comes down to two things: hedonic motivation and mental accounting.

Hedonic motivation is the idea that luxurious rewards, like incentive travel, are more rewarding than cash. There’s a guilt associated with indulgences, and with a luxury gift, we tend to perceive it as more valuable than its economic cost. It even resonates in our brain in different ways than a vacation we buy and purchase for ourselves; it shows up as more vivid and with stronger retention.

Mental accounting is the division we do in our brains about where we should put our money. When we get unexpected money, like a bonus or cash, we feel guilty spending it on things other than necessities. Merchandise and incentive travel don’t carry this weight.

How to Improve Your Incentive Program

You can improve your rewards by bringing in some of the mental models presented by Nelson at Carrousel’s Motivation Forum:

  • Ensure the end is positive. People tend to remember the high point and the end of an experience, especially a vacation. If you arrange incentive travel, think of ways to make sure that the end is spectacular (or use Carrousel Travel’s team to take care of that).
  • Highlight and use testimonials for social proof. Social proof, or the bandwagon effect, is the tendency of people to assume the actions of others reflect correct behavior. Find ways to show people the desired behavior leading toward the incentive.
  • Build rules and design a program that feels personalized. Idiosyncratic fit is the feeling of a unique advantage in a program. This can fuel a desire to perform.
  • Show progress to a goal. Motivation increases when we feel like we have almost reached the goal.
  • Ensure that it is perceived as fair. Fairness can have a huge impact on behavior and attitude.

The work doesn’t end with just designing a well-rounded incentive program. In order to get the participation and effects desired, organizations should also clearly communicate the expectations and guidelines. Nelson recommends framing the program accordingly, using descriptive techniques, as well as simplifying content and using graphics to help drive performance. Finally, make sure that you’ve set proper expectations around optimal performance to help them anchor in on what they need to do.

Integrating Incentive Travel

Incentive programs designed around money aren’t as effective as programs designed around merchandise and travel rewards. When it comes to motivating your employees, contact Carrousel Travel for guidance and help setting up your next incentive trip!


Interested in watching Kurt Nelson's presentation? Check out this video!