Motivate without spending millions

(Fortune Magazine) -- Last year Jennifer Lepird spent several weeks working long hours on a big deal.

The 39-year-old Tucson-based human resources staffer at Intuit was part of a fast-moving acquisition team: Intuit was buying competitor Paycycle, and her job was to integrate its employees into Intuit's salary structure. She stayed up all night perfecting her spreadsheets as the deal was about to close.

Her immediate reward for that grueling overtime assignment? An e-mail from the acquisition team manager with a gift certificate worth a few hundred bucks.

And she was thrilled. "The fact that somebody took the time to recognize the effort," she says, "made the long hours just melt away."

On the face of it, that seems absurd. All that time and energy for just a few bucks and a note? But what Intuit has discovered, thanks to experts at a $90 million Boston-based firm called Globoforce, is that the standard way of recognizing good performance -- bonuses, new titles, high-priced quarterly giveaways to only the very top people -- doesn't motivate employees very effectively.

What really works, says Eric Mosley, Globoforce's founder and CEO, especially for a budget-constrained company, are the things you might dismiss as the stuff of kindergarten: small awards, all the time, to almost everyone.

"Even high earners can appreciate a small award if it is unexpected," he says. By studying employee satisfaction and retention rates, he discovered that the best systems had similar and very surprising characteristics.

Counterintuitive though they may be, Globoforce's theories hold up, says professor Hayagreeva Rao, an expert in organizational behavior at Stanford, who is studying whether motivational "juice" is a type of dopamine that is activated by unexpected positive results.

In one study Rao's team gave three groups puzzles to solve. The first group got $1 each immediately after solving a puzzle. The second knew they would get $1 for solving each puzzle, but didn't know when. The third group knew only that its members would be randomly rewarded -- yet completed the most puzzles.

"It's the element of surprise, not the size of the award, that really moves people," says Rao.

Intuit VP of human resources Jim Grenier says that employee satisfaction with the recognition of their accomplishments is up four percentage points since the company changed its approach. "I've never seen bigger awards get such a bang for the buck," he says.

For all Globoforce's results, convincing execs that meager rewards work is no easy task (although the recent financial debacle centered on paycheck-obsessed Wall Street may help).

Most companies, says Mosley, are still wrongly in thrall to the famous maxim of "Neutron Jack" Welch -- reward the top 10% of employees and fire the bottom 10%.

"People misunderstood that quote," Mosley says. "They forget what Jack Welch also said: The middle 80% of employees do all the real work."

Incentives that work

Share the Wealth. About 80% to 90% of employees should get some reward every year. "A lot of companies worry that this sounds like 'everyone is a winner' thinking," says Globoforce's Mosley. "But when you're trying to reinforce certain behaviors, you need to constantly recognize them."

Small bucks beat big ones. The average prize should be just $110. Smaller prizes can seem insignificant, but larger ones, Globoforce found, don't motivate any better. "Even billionaires appreciate a Christmas sweater from their mom," says Mosley.

Weekly, not quarterly. Every week, 5% of employees should get an award. Any less frequent and people will forget about the program. "Salary increases, which many employees say they prefer, are one-time events," Mosley says. "There's just pressure for another one. Small awards all the time are a way to constantly touch people."