Johnwoon (Willie) Choi , Associate Professor of Accounting & Information Systems, just finished a study in the lab about tangible rewards.

Tangible rewards are non-monetary rewards with non-trivial monetary value, such as gift cards, travel vouchers, and merchandise. Consultants claim tangible rewards can be more motivating than cash rewards, and prior literature offers some evidence supporting this claim. Proponents of tangible rewards argue the performance benefits of tangible rewards accrue because these rewards (1) are paid separately from workers’ salaries, while cash rewards are often paid in a lump-sum with workers; salaries, (2) are often hedonic in nature, while cash rewards are perceived to be more utilitarian in nature, and (3) are often perceived as windfall gains, while cash rewards are viewed as “expected” pay.

In this study, Willie and his study team conduct a series of experiments to examine whether these differences actually lead to differences in performance between cash and tangible rewards. Interestingly, they find tangible rewards lead to greater performance than cash rewards when all three differences are present. However, they also find that each of these differences, in isolation, is not sufficient for motivating greater performance. Thus, it appears that tangible rewards will lead to greater performance only when more than one of these differences are present (i.e., each individual difference is not sufficient for motivating greater performance).