Study: Tangible Employee Rewards Should Be Integrated With Compensation

BI WORLDWIDE, which is a global business improvement company with offices in Australia, Canada, China, India, the United Kingdom and the United States, has published an article titled, “Keeping Up With the Jonses” – an examination of employee rewards  that emphasizes the importance of using tangible (non-monetary) rewards to generate employee happiness. The key concept behind the article is the “Hedonic Treadmill Theory” – the idea that humans adapt to any change very quickly, so that immediate inspiration and happiness is quickly diminished.

The article was authored by Tim Houlihan, vice president of the reward systems group at BI WORLDWIDE and 30-year veteran of the employee incentive industry. “Hedonic Treadmill is a behavioral theory that states we as humans adapt surprisingly fast to circumstances, such as an increase in income,” said Houlihan. “Managers believe that when employees get their annual salary increase of the typical three percent, the employee’s first reaction is to celebrate. That celebration, however, is short-lived because employees’ expectations and desires rise as their salary increases.”

Interestingly, however, non-monetary rewards can be an effective addition to employee compensation programs. The article shows that if an employee’s income remains the same, but they are rewarded with tangible gifts, they will perceive themselves as happier. And when those gifts come from their manager or organization, the employee associates their greater level of happiness with the gift-giver.

Houlihan explains, “At the end of day, employers should realize their employees will consider nominal salary increases as non-events, but by assigning tangible rewards to actions aligned with corporate objectives, employers can optimize employee engagement levels and realize a more effective compensation program.”

Houlihan’s paper also discussed a study on happiness that measured the factors that influence people’s levels of happiness. The results found that people’s happiness is also dependent upon how they view their peers to be doing. For more information, visit www.biworldwide.com.