Dan Ariely: Employees Want Compliments More than Pizza, or CashA behavioral economist explains how bonuses can actually make your employees less productive, and what to offer instead.
It’s hard to turn down a gooey slice of fresh, hot pizza. But who would have imagined that offering employees said cheesy delight is more effective at boosting their productivity than a bonus of cold, hard cash?
Dan Ariely, for one.
Ariely is the James B. Duke Professor of Psychology and Behavioral Economics at Duke University and author of many books including “Irrationally Yours,” “Predictably Irrational” and “The Upside of Irrationality.” He recently demonstrated that you might be better off offering your employees pizza — or even a compliment — rather than paying them a bonus.
He tested the idea on a team at the Intel office in Israel. Intel had a reward system in place: Managers told workers how much to produce, minimum, per day. Staffers who exceeded the target received $30 bonuses.
It seemed like a logical plan — until Ariely and his team stepped in to figure out whether the bonuses were actually motivating employees.
“Usually, when we propose testing whether a company’s existing approach truly produces the outcome its leaders expect, we don’t encounter much enthusiasm,” Ariely wrote in his forthcoming book “Payoff: The Hidden Logic That Shapes Our Motivations.” “But, in this case, the Intel managers embraced the idea.”
Their reaction encouraged the researchers to try an experiment. “What if, rather than giving some employees a financial reward, we promised to deliver a delicious, family-sized pizza to their homes?” asked Ariely. “This way, we argued, we not only would give them a gift, but we would also make them heroes in the eyes of their families.”
The researchers tested giving the employees nothing, giving them cash bonuses and giving them pizza vouchers — which Ariely conceded were not as good as actual pizza. The researchers also tried having bosses send text messages to employees saying, “Well done!”
What do you think worked best? Ariely put this question to some HR managers, who put their money on cash, followed by pizza. Compliments, the managers assumed, would come in third, and the workers receiving nothing would be the least productive.
The managers had it backwards. The compliments and vouchers both led to more productivity than cash on the first day. As the week wore on, something even stranger happened: The employees who received cash started being less productive than all the other groups, including the one receiving no reward.
“It was as if they were saying to themselves, ‘Yesterday they paid me a bit extra, so I worked harder. But today they aren’t offering me anything special, so I don’t care’,” Ariely wrote.
Equally surprising: Employees who received compliments were the most productive of all.
“’Look,” Ariely’s team told Intel executives, “you thought that the monetary bonus would boost performance. But the data shows that performance actually declined. You ended up paying a bonus and getting worse performance.”
Ariely then suggested executives let him test whether bonuses for executives worked just as poorly. The executives were not amused.
So, there you have it. If you want to motivate your employees, you’re better off offering them pizza than cash. And if you want to save money, there’s nothing like a compliment to make an employee want to continue to impress you.
Of course, Ariely, ever committed to the pizzas, remains hopeful that cheesy dishes could be even more inspiring than compliments. “I suspect that if we offered a real pizza with a crispy crust and the smell of baked dough and melted cheese, we would have seen an effect similar to that of the compliment condition,” he wrote.