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Research / The Role of Incentives in Today's Decentralized Workforce
by Allan Schweyer (Incentive Research Foundation) and Angela Fan, Emily Ford, Ji Hyoung Kang (Carnegie Mellon University)
The world of work has changed permanently. Going forward, most workers whose work can be done remotely will work off-site more often. This necessitates a review of incentives, rewards, and recognition systems, especially those aimed at motivating remote and hybrid workers. Organizations that fail to adjust their tangible and intangible incentives will almost certainly suffer consequences, including increased difficulty in attracting and retaining talent.
Key results from the survey of 1,000 employees and managers we conducted for this study in March 2022 reveal the following:
Incentives, rewards and recognition will play a vital role in organizations’ transition toward a much larger hybrid and remote workforce. Redesigned incentive programs will stretch many designers’ notion of what constitutes “incentive, reward & recognition,” and, therefore, what falls within their scope of practice.
Good incentive design is needed to emphasize the intangible benefits of work crucial to remote/hybrid work environments. These cultural elements include increased camaraderie, collaboration, trust, and appreciation. Incentive program designers should lead efforts in using tangible and intangible rewards to promote behaviors and actions that bring and keep the workforce together, even when much of it is working off-site.
For a more complete list of findings, please see Appendix A.
The COVID-19 pandemic created an unprecedented and seemingly permanent change to the nature of work. In 2019, only about 6% of US employees worked mainly from home, up from 4% a decade earlier (Coate, 2021). Today, even with the pandemic receding, remote/hybrid work remains a staple. A report by Gallup released in 2021 shows that even as the economy was reopening, 45% of all workers and 67% of white-collar workers continued to work from home at least part of the time and 91% hoped to continue doing so. As of February 2022, research led by Stanford economist Nick Bloom found that work from home constitutes 25 to 35 percent of all work hours in the US. Our own March 2022 survey of more than 1,000 employees and managers found that about 84% work remotely at least one day per week.
A growing consensus among those studying workforce trends and the future of work states that remote and hybrid work arrangements will continue in force post-pandemic (Telford, 2022; Choudury, 2020, Dahik, 2020). According to a range of reports from the Society for Human Resources Management, Gallup, Robert Half, and others, about three-quarters of employers intend to continue the practice indefinitely. For example, an April 2021 report, based on a 30,000-person survey from the National Bureau of Economic Research, concludes that “working from home will stick,” with a permanent 400% increase in the numbers of Americans working remotely post-pandemic. More than 75% of Gallup’s global 2021 survey respondents believe that their employers will continue remote/hybrid work options indefinitely.
In our March 2022 survey for this study, we found that both employees and managers would, on average, prefer more time working remotely. 82% of employees and 84% of managers prefer either more or the same amount of time working remotely then they are currently given. The demand for flexibility, including remote or hybrid work options is deeply felt. About 30% of our respondents would either take a significant pay cut (7%) or look for another job (23%) if denied the opportunity to work their desired number of days remotely. Consistent with other recent studies (Melin & Egkolfopoulou, 2021), our survey demonstrates an especially strong preference for remote work opportunities among those 25-44 years-old (35%), and women (40%). Many of our respondents cited the desire to participate more in childcare as their primary reason for desiring remote and flexible work.
Given that effectively managing remote workers and teams is – and will likely remain a high priority in most firms – the remainder of this paper expands on the relative paucity of evidence-based advice in how leaders and managers should motivate and incentivize their remote/hybrid workers.
In our survey, 62% of managers and 64% of employees said they are most productive when working hybrid or fully remotely versus about 20% who feel most productive on-site (the remainder believe they are equally productive either way). Interestingly, about one-third of managers believe their reports are most productive onsite, suggesting a significant disconnect between manager and employee perceptions of worker performance. Nevertheless, many more managers (49%) in our survey assess their remote and hybrid workers’ productivity higher than that of on-site workers.
Nevertheless, many leaders and managers have concerns. Remote work presents a unique set of challenges. Only five of the 420 managers who responded to our survey said they have no concerns regarding remote work. Others cited worries about workforce culture, distractions that impact remote workers, lack of remote worker motivation, inconsistent access to IT, cyber-security threats, and difficulties associated with onboarding remote talent. Many of our employee respondents voiced similar concerns, adding lack of work/life balance, out-of-pocket costs for equipment, isolation, poor communications, reduced information-sharing, and micro-management.
A significant number of managers – particularly those with less experience – lack confidence in their ability to manage remote workers (Parker, Knight & Keller, 2020). For employees, the lack of physical separation between the workplace and home can increase the risk of burnout and demotivation (Hayes et al., 2020). This effect is especially strong for those who are not used to working from home. A five-year global survey of more than 20,000 workers (concluded in 2015) performed by Vega Factor, found that motivation tends to drop among remote workers in general, and steeply for those who work remotely against their preferences.
Remote work creates barriers to communication. Yang et al. (2020)’s extensive survey of over 61,000 Microsoft employees who worked remotely during the pandemic noted a rise in information silos and a sharp decrease in communication. For companies that rely heavily on collaboration, significant declines in communication can be devastating. Indeed, in our survey, factors around isolation stood out as employees’ and managers’ main concerns about working remotely (Figure 1).
Extensive research, including major theories of human motivation, argues that loneliness and isolation can have profound consequences on worker well-being, engagement, and productivity (Deci & Ryan, 2012; Nohria & Lawrence, 2001). Though our study and many others have found evidence of increased worker performance when remote, other research has discovered the opposite (Yang et al, 2021; Toscano & Zappala, 2020). Accordingly, managers’ most immediate challenge lies in determining how to motivate employees to stay productive given the typically decreased communications and interaction associated with remote work.
Whether an employee works one day remotely or five, managers should take measures to address isolation and loneliness. With varying success, employers have attempted to bridge the gaps through proactive communication – weekly calls, group Zoom gatherings, and so on (Chanana, Sangeeta, 2021; Kumar, 2021) – but other measures, including the use of more, and a greater variety of incentives, are necessary (Schwartz, 2021).
The Incentive Research Foundation and many others have documented the benefits of non-cash rewards and incentives extensively over the past three decades. While non-cash incentives and rewards have demonstrated their efficacy compared to cash-only rewards in many studies over the past few decades, many complexities bear on incentive/reward program design. Adding to this complexity, the ‘game’ has recently changed. Non-cash incentives and rewards are, if anything, more vital where a significant percentage of the workforce is remote at any given time, but the new contextual factors must be considered before revising, designing, and implementing non-cash incentive programs.
The existing research has not adequately addressed the efficacy of non-cash incentives in the context of remote work. The question is urgent. According to a 2021 survey by Deloitte, one-third of senior leaders worry that remote work harms their company’s culture. In a May 2021 paper published in the Business Research Quarterly, professors Alvaro Lopez-Cabrales and Angelo DeNisi state that in the new normal, “it is more difficult to monitor the activities of employees who are working at a distance; it is harder for supervisors to provide feedback and direction to employees who are teleworking, and it is more awkward for employees to engage with other employees remotely.”
In a May 2020 paper published in the Journal of Industrial Marketing Management, researchers argue that incentive programs designed prior to Covid are no longer as relevant or applicable, and leaders must rethink and revise them to match the new reality. However, as Lopez-Cabrales and DeNisi point out, “further research is needed in this field to determine innovative reward mechanisms consistent with the crisis context.” Lopez-Cabrales and DeNisi conclude that leaders should review incentives aimed at encouraging desired behaviors, then make those incentives strong and clear. These incentives, they advise, should include cash and non-cash rewards that link employee decisions, behaviors, and actions to the firm’s pandemic-recovery strategy and priorities.
Decades of studies and experience in workforce motivation prior to the pandemic (combined with existing research into motivating the remote workforce) provide a high-degree of confidence that well-designed incentive plans will help mitigate disengagement due to distance (Lopez-Cabrales & DeNisi, 2021; Schwartz, 2022; Choudhury, 2020; Peterson & Wartzel, 2021).
First, incentives can be used to signal or reinforce desired changes in managerial attitude and behaviors. Leaders and reward program designers should consider what changes are most likely to bring about managers’ greater commitment to one-to-one meetings with their reports, for example. Incentive program designers should also tailor incentives to remote individuals and teams. Firms should select and implement meeting and collaboration technologies, then ensure that all remote workers know how to use them; this best practice can also be accelerated using non-cash incentives, such as points for employees who learn, use, and promote new technologies early on.
Managers should receive training in how to conduct remote meetings and how to manage based on outcomes and performance rather than “face-time” (Coffee & Wolfe, 2018). Incentives, including recognition, can encourage managers to access learning around managing remote workers effectively. Our survey results reveal the vital importance of managers in motivating their teams (Figure 2a&b).
Consistent with human motivation theory, our respondents expressed preference for intangible rewards related to the quality of the work, growth opportunities, and autonomy (Figure 3a). Consistent with much of the research on tangible rewards, our respondents prefer cash rewards, but not substantially more than gift cards, gifts, points, and travel (Figure 3b).
By granting remote workers trust and autonomy, meaningful work, a sense of purpose, and learning opportunities, motivation levels can remain high, especially where employees work some of the time from the office. Events of late, however, suggest that tangible rewards restricted to increased compensation and cash bonuses may put employers at a recruiting and retention disadvantage versus firms that exercise more creativity in their rewards, recognition and incentives (DeSmet & Mysore (2020). Indeed, in the experience of the more than 400 managers who responded to our survey, tangible incentives and rewards (cash and non-cash) prove highly effective in increasing employee engagement and retention (Figure 4a&b).
Respondents identified peer-to-peer recognition programs as effective tools for remote and hybrid workers.
Although recognition is generally associated with non-tangible rewards, respondents identified approaches that provide tangible forms of recognition including points, personalized gifts, and celebratory meals with colleagues as effective for remote workers. Other comments noted the effectiveness of recognition and provided unique examples of effective recognition incentives including verbal praise and “peer-to-peer rewards on a recognition platform.” These measures help address isolation in a remote environment.
The pandemic – with its endless Zoom calls and constant emails, texts, and Slack messaging – has exacerbated meaningless and productivity-destroying collaboration, contributing to employee stress, anxiety, and burnout (Cross, 2022). Peer recognition exchanges, however, deliver meaningful appreciation and demand no further collaboration.
Our respondents clearly identified isolation and loss of trust as negative outcomes from remote work. In his 2018 book, How Behavior Spreads, Professor Damon Centola suggests that peer-to-peer networks could be ideal vehicles to promote the spread of complex ideas and positive behavior change. By their very nature, well-managed peer recognition networks – which connect people through appreciation – lay the foundation for connection, relationship-building, and trust. Based on Centola’s and Cross’ work, firms interested in spreading positive behaviors or encouraging outcomes like faster communications technology adoption, are likely to get results by ‘seeding’ (i.e., incentivizing) those ideas in peer recognition networks.
As every experienced reward program designer knows, incentives intended to change people’s thinking, behavior, or decision-making, require careful thought. They know that peer interaction and appreciation can promote desired behaviors by focusing positive attention on the people exhibiting those behaviors. In other words, they proactively manage and monitor peer networks to ensure that employees are appreciating and rewarding the things the firm wants them to. Where a large percentage of the workforce is remote, the ability to monitor behavior via a peer-to-peer recognition platform can confer enormous advantage, including as one means of performance management.
Though our respondents only articulated it indirectly in their responses, rewards and incentives that impact behaviors that overcome the demotivators associated with remote work will be extremely important. Examples of these behaviors include those that encourage collaboration, peer recognition & appreciation, autonomy, and accountability. Also important are behaviors that build a strong culture, including knowledge-sharing, teamwork, resilience, customer service, inclusivity, purpose and meaning, etc. As above, solutions to these concerns lie at least partially within the domain of non-cash rewards and recognition and the incentive program designers who craft them.
More than ever, incentive program designers should partner with human resources and/or senior leaders to combine incentives with workplace environment changes that eliminate the disadvantages of working remotely. Culture shifts could include managers and execs working remotely some of the time and conducting all meetings on web communications platforms. It’s important to take measures to ensure that and employees who do work on-site do not gain preferred access to leaders nor reap advantages in access to information, promotions, choice assignments, etc. Where organizations eliminate all advantages of coming to the office versus working remotely, they send a powerful signal that they have fully embraced the new world of work.
Incentives and rewards have an important but non-exclusive role to play in managing and motivating the remote workforce. Incentive designers must, more than ever, expand their notion of what constitutes “incentive, rewards & recognition,” and, therefore, what falls within their scope of practice.
Without the contribution of incentive program designers, firms will fail to maximize efforts at boosting the intangible benefits of work that matter even more in remote/hybrid work environments, including increased camaraderie, collaboration, trust, and appreciation. Incentive program designers should lead efforts in using tangible and intangible rewards to promote behaviors and actions that bring and keep the workforce together, even when much of it is working off-site.
In this edition of Academic Research in Action, we summarize an interview conducted with the Chief People Officer of a mid-size and fast-growing AI-powered recruitment solutions.
Our panel will examine the changing priorities of today’s workforce and which types of incentives and rewards motivate early, mid, and late career employees