Sunday, April 09, 2006

Ice cream or $10 cash? Motivating employees through non-monetary incentives

Dr. Robert J. Shillman, Chairman and CEO of Cognex Corp. is interviewed in an article today (part of the compensation survey) regarding the ways in which he rewards employees:
"..from free films and refreshments at the local theater that Cognex rents Friday nights to company-paid trips abroad for long-serving employees and their friends. The company's biggest individual shareholder, he stopped taking a salary in April 2001 and bonus in 2004. "

Apart from these incentives, he sends free cakes to every employee's home on their birthday and thanksgiving, personally serves ice cream to employees one day a year, and once, treated every employee to dinner for two at a swanky restaurant and a limo service for five hours.

All of these activities reflect the strong views that Dr. Shillman has regarding hiring and motivating employees - "I am meticulous about hiring, and then I'm hands-off.", "Uniqueness is what people like about rewards."

Are these forms of compensation are a better motivator than just cash directly deposited into your bank account?

In wondering this, I looked for some academic research that might support this CEO's philosophy, and was very surprised to find it reflected almost word-for-word in a 2005 paper by two economists at the University of Zurich (Economic Journal, November 2005). Their two main findings are summarized thus:
(1) Goal-oriented intrinsic motivation of agents should be supported by fixed incomes and an extensive selection process of employees; (2) Extrinsic, but non-monetary incentives (e.g. conferring orders and titles) can be used;

Looks like Cognex offers a great empirical testing ground for Drs. Frey and Benz at the University of Zurich!

1 comment:

texan_0109 said...

"Are these forms of compensation are a better motivator than just cash directly deposited into your bank account?"

It depends on what one means by motivation ... In my view , 'motivating' an employee in these ways will not necessarily contribute towards his work efficieny , neither his loyalty to the company he works for ..

At best , it'll develop a strong bond between employee and employer , and they 'might' remain good friends after he quits his job to work for another ... :)