How Well Do Incentive Programs in the Workplace Work?

Josh Wright —  1 May 2012

WSJ has an interesting story about the growing number of employer efforts to import “game” like competitions in the workplace to provide incentives for employees to engage in various healthy activities.  Some of these ideas sound in the behavioral economics literature, e.g. choice architecture or otherwise harnessing the power of non-standard preferences with a variety of nudges; others are just straightforward applications of providing incentives to engage in a desired activity.

A growing number of workplace programs are borrowing techniques from digital games in an effort to encourage regular exercise and foster healthy eating habits. The idea is that competitive drive—sparked by online leader boards, peer pressure, digital rewards and real-world prizes—can get people to improve their overall health.

A survey of employers released in March by the consulting firm Towers Watson and the National Business Group on Health found that about 9% expected to use online games in their wellness programs by the end of this year, with another 7% planning to add them in 2013. By the end of next year, 60% said their health initiatives would include online games as well as other types of competitions between business locations or employee groups.

How well do these programs work in practice?  The story reports mixed evidence of the efficacy of the various game-style competitions; this is not too surprising given the complexity of individual incentives within organizations and teams.

Researchers say using videogame-style techniques to motivate people has grounding in psychological studies and behavioral economics. But, they say, the current data backing the effectiveness of workplace “gamification” wellness programs is thin, though companies including WellPoint Inc. and ShapeUp Inc. have early evidence of weight loss and other improvements in some tests.

So far, “there’s not a lot of peer-reviewed evidence that it achieves sustained improvements in health behavior and health outcomes,” says Kevin Volpp, director of the University of Pennsylvania’s Center for Health Incentives and Behavioral Economics.

Moreover, some employees may feel unwanted pressure from colleague-teammates or bosses when workplace competitions become heated, though participation is typically voluntary.

Incentives are powerful; but when and how they matter depends upon institutions.  Gneezy et al have an excellent survey of the literature in the Journal of Economic Perspectives, where they conclude:

When explicit incentives seek to change behavior in areas like education, contributions to public goods, and forming habits, a potential conflict arises between
the direct extrinsic effect of the incentives and how these incentives can crowd out intrinsic motivations in the short run and the long run. In education, such incentives seem to have moderate success when the incentives are well-specifified and well-targeted (“read these books” rather than “read books”), although the jury is still out regarding the long-term success of these incentive programs. In encouraging contributions to public goods, one must be very careful when designing the incentives to prevent adverse changes in social norms, image concerns, or trust. In the emerging literature on the use of incentives for lifestyle changes, large enough incentives clearly work in the short run and even in the middle run, but in the longer run the desired change in habits can again disappear.

HT: Salop.


2 responses to How Well Do Incentive Programs in the Workplace Work?


    The question is not whether incentives actually achieve their desired results, but whether incentives should be employed at all. It never ceases to amaze me to see libertarian-oriented economists champion the idea of incentives. If anything, the idea of effective incentives is actually MORE conducive to interventionist government than an economic theory that recognizes radical uncertainty and human fallibility. Incentives, if they are to be effective, do nothing more than produce the impression that the social sciences can be made predictable. Very rarely do economists pause to ask themselves if this sort of mentality is even desirable. For libertarians, it most assuredly is not. I have e-mailed several Chicago-school economists about this, but they still haven’t gotten back to me yet.

    — a current law student and failed economist


    Incentive based programs have been analyzed for many years and have had mixed reports. Issues such as the employees ability to reach the incentive, stress related to the income tie and so forth are issues the can create a de-incentifying incentive. One good place to see more information is The Royal Society for the encouragement of Arts, Manufactures and Commerce. See their animate video of drive and motivation I think you will find it very interesting on this subject.