Believe it or not, numerous studies attempt to answer the question of which is the more motivational carrot: straight cash or a tangible reward. Professors Scott A. Jeffrey and Gordon K. Adomdza studied 441 call center employees at a financial services company and found that “people think more frequently about noncash tangible incentives (merchandise and travel) than cash incentives and that as the frequency of thought increases, performance increases,” they write in Human Performance. “This leads to a larger performance boost for tangible incentives compared to a cash incentive of equal purchasing power.”
Other studies emphasize the importance of specifying the noncash reward. In the Journal of Economic Psychology, psychology professors Victoria A. Shaffer and Hal R. Arkes found that “when given a hypothetical choice between cash and noncash incentives, participants chose the cash incentive.” But as soon as the topic was no longer hypothetical—and a specific noncash reward was on the table — participants worked harder for the reward.
The Goodyear Tire & Rubber Company put this concept to the test as far back as 1994. “Their plan was simple and elegant,” explains Duke professor Dan Ariely, who specializes in behavioral economics. “First they ranked their 60 retail districts according to previous sales, then divided them into two groups of equal performance and assigned one group to receive monetary incentives [for selling a new line of tires] and the other to receive tangible incentives of equal value to the first group… It turned out that the tangible-reward group increased sales by 46 percent more than the monetary-reward group.
“One explanation,” Ariely continues, “. . . is that we can visualize tangible rewards (imagine yourself on a Hawaiian beach), which creates an emotional response. Money, on the other hand, is not accompanied by images as often (aside from maybe Scrooge McDuck swimming in piles of it), and lacks the emotional pull that tangible rewards have, so [it’s] less effective in motivating employees.”
Tom Gravalos, the Goodyear employee who spearheaded the incentives study, coauthored a white paper about it with John M. Jack titled “The Trouble With Money.”
Today, Gravalos is vice president of marketing, motorsports, and original equipment at Pirelli Tire North America.