Welcome to the home of Noah Brier. I'm the co-founder of Variance and general internet tinkerer. Most of my writing these days is happening over at Why is this interesting?, a daily email full of interesting stuff. This site has been around since 2004. Feel free to get in touch. Good places to get started are my Framework of the Day posts or my favorite books and podcasts. Get in touch.

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Which Motivates Better: Financial or Tangible Incentives?

Which is more motivating, a financial incentive or a tangible one? Over at Predictably Irrational, Dan Ariely points to an experiment by Goodyear tires to find the answer. The company divided its sales team into two groups, giving one financial incentives and the other tangible incentives of equal value. I’ll let Ariely (at least I assume it’s Ariely writing) take it from here:

The results were very interesting; it turned out that the tangible-reward group increased sales by 46% more than the monetary-reward group. They also improved in terms of the mix of products sold by 37%. One explanation, and it seems to me a fairly good one, is that we can visualize tangible rewards (imagine yourself on a Hawaiian beach), which creates an emotional response. Money, on the other hand, is not accompanied by images as often (aside from maybe Scrooge McDuck swimming in piles of it), and lacks the emotional pull that tangible rewards have, so they’re less effective in motivating employees. I guess it’s called “cold, hard cash” rather than “future beach vacation cash” for a reason.

August 5, 2009