Can employees be engaged and motivated by reward systems they don’t actually perceive as rewarding? You don’t have to be a genius to work out the answer to that question. A new study from the CIPD contains some important insights into why rewards systems fail and how behavioural psychology can make them work.

Perception is key to motivation. Our perceptions of reality are more real to us than the reality on which they’re based, and anyone charged with employee engagement would be committing a grave error by failing to appreciate this. Take performance-related pay. Financially rewarding people for their performance should be a hit, shouldn’t it? But in reality (and I’m talking about perceived reality again) it often ends up failing.

Why? Because of “endowment bias.” No prizes for guessing that we’re back to perceptions again. Here’s how CIPD research adviser Jonny Gifford explains it:

“Because we tend to overestimate our ability, most people find performance-based pay attractive in the first instance, but ultimately disappointing and demotivating.”

Performance-related pay, in other words, can leave people feeling narcissistically bruised – if I don’t receive ongoing pay boosts, it shows I’m not valued as highly as I think I should be.

But clear, educative communication with employees about the real value of some benefits like workplace pensions can go a long way. Worryingly, the CIPD report found that employees prefer immediate rewards, even though workplace pensions can boost their income by thousands of pounds over the course of their employment. But they don’t perceive it in their bank accounts month by month and often fail to appreciate the scale of its value.

The CIPD’s performance and reward adviser, Charles Cotton, summed the issue up very neatly:

“When it comes to reward, it’s important that businesses regularly reinforce the total value of the package that they are offering to individuals and pay equal attention to both short and long-term rewards.”

If something’s intangible but real, it needs to be talked about to turn it into a perception.

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