Associate Professor Adam Presslee’s research has led to intriguing findings that suggest tangible rewards can effectively motivate employees, mainly when these rewards are easy to use, enjoyable, unexpected, and distinct from regular salary.

 

This research is particularly relevant in the current business landscape. A recent survey of American companies revealed that 84% spend over USD 90 billion annually on tangible employee rewards. These rewards range from merchandise and gift cards to recreational trips intending to boost productivity.

Presslee, an associate professor at the University of, stated, “Our research found mixed evidence regarding the motivational efficacy of tangible rewards versus cash rewards.” This statement raises questions about why businesses invest so much in tangible rewards when cash rewards can lead to motivational differences.

To delve deeper into this issue, Presslee and his co-author, Willie Choi from the University of Wisconsin-Madison, conducted four experiments. Their goal was to investigate the factors that drive the preference between cash and tangible rewards. They examined various reward attributes, including their ease of use (or fungibility), the hedonic nature of the reward (want vs need), the novelty of the reward, and how the reward is presented.

Presslee explained, “Rewards are constellations of attributes, and firms should focus more on the motivational effects of the attributes associated with a reward rather than the reward type itself.” Their results confirmed that each attribute, individually and in combination, increases employee effort and performance.

The researchers recommend that managers interested in motivating employees using tangible rewards should offer substantial rewards incorporating these four attributes. Presslee stated, “If tangible rewards are the only tool available, our results show compelling evidence that employees are motivated by rewards perceived as distinct from salary.”

In conclusion, companies aiming to maximize the benefits of their reward programs should emphasize the distinctiveness of those rewards. The four attributes identified in this research provide a roadmap for firms to enhance the effectiveness of their reward programs.

1. Presslee, A., Kelly, K., & Webb, R. A. (2017). The effects of tangible rewards versus cash rewards in consecutive sales tournaments: A field experiment. The Accounting Review, 92(6), 165-185. Link

2. Presslee, A., Vance, T. W., & Webb, R. A. (2013). The effects of reward type on employee goal setting, goal commitment, and performance. The Accounting Review, 88(5), 1805-1831. Link

3. Mitchell, T., Presslee, A., Schulz, A. K. D., & Others. (2022). Needs versus wants: The mental accounting and effort effects of tangible rewards. Journal of Management Accounting Research, 34(1), 187-207. Link