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How to keep your employees engaged using Behavioural Economics

16 November 2020


Businesses around the world are undergoing a lot of uncertainty and are worried about numerous factors out of their control - or at least think are out of their control. Whether employees are back in the office or still working from home, their engagement with their work during these trying times could be better. A study done by Gallup in 2012 indicates only 15% of adults worldwide who are employed full time are engaged in work.

What do we mean by employee engagement, you ask? Employee engagement refers to the level at which employees are involved in, enthusiastic about and committed to their work. Being engaged is about understanding what task is required of you, how to complete the task to a high standard and proactively contributing to the overall success of your organisation. In Southern Africa, only 17% of employees are engaged at work. Low employee self-esteem, infrequent performance feedback and traditional management practices are at the root of much of this disengagement.

Historically, both organisations and their employees have assumed that the cause of low engagement was poor wages. If true, this implies higher wages would result in higher levels of engagement amongst employees. Indeed, a study in 2018 conducted by Genesis Associates in the UK found that 85% of employees stated that they were motivated by monetary incentives. However, behavioural economics has shown that social incentives can be more effective to increase employee engagement. This is because employee engagement is driven by factors that give employees a sense of fulfilment in their work.

The low-cost of designing and implementing behavioural interventions should make this revelation music to the ears of all organisations, but many organisations are unaware of what these interventions are. Here are three easy-to-implement, inexpensive interventions that can drastically change employee engagement.

Social recognition

When looking to address low employee self-esteem, although there are benefits to monetary incentives, social recognition is a better motivator for high performance. Social recognition improves employee self-esteem as human beings appreciate intrinsic value over monetary value. By recognising positive aspects of an employee’s performance and making it known to them (and in some cases their peers), employers are likely to drive better employee engagement.

Behavioural economist Dan Ariely conducted an experiment in which individuals were asked to assess a sheet of paper with letters spread all over a page at random. The participants had to complete a task similar to a word search puzzle. The individuals would either receive positive recognition of their work by a supervisor others had their papers shredded immediately after completing their work. They were all then asked how much money they were willing to accept to do more of this. The results showed that people who received recognition were willing to receive 50% less money for the same amount of effort than those who didn’t receive any recognition. The participants that received recognition felt that their work was more meaningful than those who didn’t and were, therefore, more intrinsically motivated to continue with this work than those without recognition.

Timeliness of feedback

When providing feedback to employees, timing is essential. The more we delay feedback, the more we rely on our memories of our behaviour. Although we tend to think of our memory as perfect video recordings, our memory usually stores highlights of an event. It then fills in any missing details by making logical assumptions about what must have happened in between. When feedback and performance reviews are conducted sooner, employee behaviour is more closely linked to their actual behaviour and allows us to provide more personalised and useful feedback.

For example, in 2012, when Adobe began speeding up its delivery process from a physical shipment process to a digital subscription model it transitioned from traditional performance review practices to a system of two-way, ongoing feedback. This consisted of regular feedback on performance by both lower-level employees to their managers and by managers to their subordinates. This real-time feedback aimed to reinforce desired employee behaviours to enable them to be increasingly motivated and engaged in the new, fast-paced environment they were moving into. Encouragingly, it resulted in 10% more employees reporting improved performance and facilitated a smooth transition to this new system.


It is also useful to use processes that feel personalised and specific to the employee rather than using a one-size-fits-all incentive structure.

Something as simple as a handwritten note saying thank you to an employee after they completed a task, whether small or large, is known to boost employee morale and improve engagement. According to the Harvard Business Review, 76% of employees are likely to keep personal, handwritten notes from their employers to thank them for their hard work as it keeps them motivated and engaged and reminds them of the excellent work they have done in the past.

Behavioural Economics provides businesses with an excellent opportunity to change the landscape of employee engagement by using low cost (or, in some cases, free) methods that can have an enormous impact on employee engagement. Perhaps it’s time for businesses to break out of the traditional cocoon and start looking for new ways to keep their employees engaged. Behavioural Economics provides a great opportunity to do just that.

This article was first published on LinkedIn on 13 November 2020

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