Which is More Motivating, Cash Rewards or Gift Card Rewards?

Thursday, December 13, 2018

moneyWhen employees compete against one another to earn rewards, the type of reward they compete over affects their motivation!

The study by Professor Alan Webb and Assistant Professor Adam Presslee (both School of Accounting and Finance faculty) and their colleague Associate Professor Khim Kelly (University of Central Florida) is based on a field-experiment where retail sales employees competed against one another in two consecutive three-month sales tournaments at locations across Canada. Half of the employees received a cash reward if they won their tournament whereas the other half of employees received a gift card of their choice from one of 12 retail locations (e.g., Best Buy, The Keg, etc.) if they won their tournament.

Although results show no significant difference in performance between the two reward conditions for the first tournament, employees eligible for gift card rewards outperformed those eligible for cash rewards in the second sales tournament. Interestingly, this result was largely attributable to employees that lost the first tournament. “It appears that tournament one losers were more willing to give up on trying to win the next tournament when pursuing cash versus an attractive gift card” says Presslee. “Attractive gift cards can be used to buy wants like electronics, whereas extra cash might go towards paying for needs such as rent or bills. Because sales employees found the gift cards more attractive than cash, they were less willing to quit competing in a tournament that they were unlikely to win.”

This study published in the Accounting Review in 2017, is among the first to examine the effects of reward type on employee motivation and it is highly relevant to compensation scheme designers given the relative ease with which gift card rewards can be used by organizations as part of an incentive system. 

Importantly, Professors Presslee and Webb's results suggest that gift card rewards may be an effective means of sustaining the motivation of weaker performers to work hard – a problem of particular importance when employees compete against one another for rewards.

Khim Kelly, Adam Presslee and Alan Webb, 2017, The Effects of Tangible versus Cash Rewards in Consecutive Sales Tournaments: A Field Experiment, The Accounting Review, 2017, 92(6): 165-186.

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