Present reward and recognition programs are aimed at providing higher incentives to top performers. Without doubt, this strategy makes for good economic sense. However, unfortunately, it has failed to garner anticipated results over the years. The team of World of Talent Management has put its best foot forward to find out the possible reason (s) behind this failure with the help of Behavioral Economics.
Behavioral Economics: An Outlook
A branch of Economics, Behavioral Economics involves studying human decision-making. Assuming that people are not always rational in their decision-making, BE explains this “irrationality” as the influence of human feelings. Interestingly, most of us are completely unaware of this factor, as we perceive ourselves to be rational decision-makers who take the best decision by considering all the possible options.
However, the ground story is completely different. People (read here employees) do not always behave in a logical way towards their managers. Studies in the area of Behavioral Economics show that this perceived irrationality can be predicted by managers, which will ultimately assist them in driving their team towards realizing organizational goals without opting for any turbulent round of job cut or high-priced restructuring program.
By considering emotions as an important aspect of the decision-making process, managers can understand that employees, knowingly or unknowingly, give value to their “psychic income,” which is how their organization, management or boss makes them feel in the workplace. And this psychic income influences a person’s decision-making process as how much efforts or inputs to be provided while accomplishing a task, how to deal with co-workers, and so on. If an employee gets positive feelings in the workplace, he/she feels better motivated to realize organizational goals.
For an organization, it signifies that their managers should value emotional requirements of their team members, apart from financial benefits while devising compensation, rewards, and recognition plans.
Problems like lower-than-anticipated outcomes and higher-than-anticipated absenteeism are common in the workplace nowadays, as managers mostly believe that money is the prime factor for their employees. They often overlook or underestimate the importance of ‘non-monetary motivators’ as an influencing factor.
How would one identify these motivating factors? How would organizations leverage these factors to drive their employees towards achieving their desired outcomes? The following are the principal observations as well as recommendations made by the team of World of Talent Management:
Interestingly, an employee’s exposure to all these factors is always within the control of his/her manager. And therefore, the use of behavioral economics theories in the people management context, along with traditional management techniques, will definitely lead to better results and perspectives.
Everyone makes multiple decisions every day and if the decisions/choices are first organized and then presented in a particular manner, these decisions/choices will be positively influenced to form a win-win situation in an organized context.