Employee motivation could be increased by implementing behavioural science techniques to understand the real impact of pay and reward on productivity, according to new research from the CIPD, the professional body for HR and people development.

The organisation’s report, Show me the money! The Behavioural Science of Reward’examines the role of monetary bonuses in staff motivation, highlighting alternative approaches that might produce better results when encouraging employees to commit greater effort for greater success.

Jonny Gifford, Research Adviser at the CIPD, said:

“These are interesting and challenging times for reward specialists. We need to recognise employees when they go the extra mile and add increased value, but there are a number of behavioural factors that should be considered when shaping a reward programme.

“Crucially, we must acknowledge that monetary rewards aren’t everything and that they can even distort people’s motivation. For example, enticing the workforce with financial incentives and a strong bonus culture can lead to unwanted, risky and even unethical behaviours. Equally, because we tend to overestimate our ability as individuals, many if not most people find performance-based pay attractive in the first instance, but ultimately disappointing and demotivating.”

By revising reward structure within their organisation, the report claims employers can take more control over the multitude of factors that determine an employee’s motivation and engagement.

The circumstances of a reward can be a significant indicator of its perceived value. For example, a bonus received during tough economic times will be perceived as having much greater value than the same reward given in times of prosperity.

Conversely, a bonus will hold less value if the person receiving it believes they have performed at a higher level than a colleague who has received the same amount.

Gifford added:

“The key is having a flexible reward package that takes into account behavioural nuances and doesn’t rely solely on a wad of cash as the only means to motivate staff. It’s a change in direction for many but should also be welcome news for organisations who, in a challenging economic context, need to be more creative with their rewards package.”

The report found that symbolic awards as a means of direct recognition were more likely to motivate a workforce because they are then driven by the desire to succeed in their role rather than chase monetary gains.

Schemes such as employee awards or discretionary ad-hoc gifts from line managers amount to a more intrinsic system, and are more financially sustainable year-round than annual bonuses.

Time and timeliness are key aspects explored in the CIPD’s report. It references a study by Zedelius et al, which found that when people were promised reward for a later task, they started to perform better at intermediate tasks, even when those weren’t subject to a reward.

It also explores the difference in perception between instant gratification and rewards that are of equal value but deferred, such as pension contributions. This difference is most clear among the youngest workers, who place the least value on pension contributions that they won’t receive for decades.

Charles Cotton, Performance and Reward Adviser at the CIPD, said:

“Workplace pension schemes boost employee pay packets by thousands of pounds over the course of their employment but without the instant gratification of seeing that money land in their bank accounts each month, many employees fail to value the schemes.

“When it comes to reward, it’s important that businesses regularly reinforce the total value of the package that they offer to individuals and pay equal attention to both short and long-term rewards. This can include communication and education, but should form part of a well-thought out financial wellbeing strategy.”