The Dirty Laundry of Employee Award Programs: Evidence from the Field
Executive Summary — Many scholars and practitioners in human resource management have recently argued that awards and other forms of on-the-job recognition provide a "free" way to motivate employees. But are there unintended, negative effects of such awards? In this paper, the authors simultaneously examine the costs and benefits of an attendance award program that was implemented in an industrial laundry plant. The award used in the study was effective in that it reduced the average rate of tardiness among employees. However, it also led to a host of potential spillover effects that the plant manager readily admits were not considered when designing the program, and that reduced overall plant productivity. Overall, findings demonstrate that an award program that appears to be effective may also induce unintended consequences severely reducing the net value of the program. These results highlight the impact such a program can have on the overall performance of the firm and suggest caution when designing and implementing such programs. Key concepts include:
- Even simple awards programs can have much broader and complex implications for employee behavior.
- In the study, two highly valued employee groups - the most productive workers and the most consistently punctual workers - suffered a 6-8% decrease in productivity after the award was instituted. This finding is remarkable because it suggests that awards for one type of behavior have the potential to "crowd out" positive behavior in a completely different realm.
- This research suggests that non-monetary but extrinsic rewards such as corporate awards act more like monetary rewards than they do intrinsic motivators such as love for the job or empowerment through autonomy.
- Award programs with a low likelihood of winning may be ineffective because employees do not habituate good behavior, and instead lead to a highly strategic response from employees.
Many scholars and practitioners have recently argued that corporate awards are a "free" way to motivate employees. We use field data from an attendance award program implemented at one of five industrial laundry plants to show that awards can carry significant spillover costs and may be less effective at motivating employees than the literature suggests. Our quasi-experimental setting shows that two types of unintended consequences limit gains from the reward program. First, employees game the program, improving timeliness only when eligible for the award, and strategically calling in sick to retain eligibility. Second, employees with perfect pre-program attendance or high productivity suffered a 6% to 8% productivity decrease after program introduction, suggesting they were demotivated by awards for good behavior they already exhibited. Overall, our results suggest the award program decreased plant productivity by 1.4%, and that positive effects from awards are accompanied by more complex employee responses that limit program effectiveness.