The New Standard in Employee Incentives Surveys.
By James Houran
Wednesday, 16th May 2007
Forward-thinking organizations want to know what incentives are valued most strongly by their employees.

The service industry now has the ability to answer this question more specifically and accurately than ever before thanks to a new application to the traditional Employee Incentive Survey. Furthermore, this advancement is more cost effective than typically statistical approaches like raw-score sums, percentages and averages that may be highly misleading but are still used by high profile firms.

The innovation is in the data analysis – not the content or presentation of the survey questions per se. With the statistical gold standard of Item Response Theory (IRT), companies can actually obtain mathematical hierarchies of incentives for their employees based on scaling analyses of employees' ratings of those incentives.

In other words, companies gain linear measures of employee incentives from what was otherwise imprecise ordinal data. Also, IRT will clearly identify demographic differences (e.g., men vs. women) as well as variations that might exist between divisions or departments of an organization. Finally, IRT methods provided a powerful method to highlight the similarities and differences between short-term and long-term employee incentives.

Case in point is the worldwide consulting firm, HVS. HVS has commissioned Organizational Climate Surveys for several years as part of its quality and excellence programs. The company's 2007 survey measured 72 different monetary and non-monetary incentives on the degree to which they would stimulate short-term versus long-term personal satisfaction in employees.  

Over 200 employees – spanning 17 offices worldwide – participated in the study. Employee Incentive Surveys seem to yield consistently impressive response rates due to the relevant subject matter. For instance, the HVS study had a 56% response rate compared to the ~20% rate that is standard for most questionnaire research. It is also noteworthy that the HVS respondents were not offered any reward to encourage their participation.

Unprecedented Insights

Analyses revealed that the HVS employees' appraisal of all 72 potential incentives could be thought of as forming a single, mathematical hierarchy. In other words, the 72 employee incentives could be ordered such that incentives towards the top part of the list represented highly rated incentives, incentives towards the middle of the list were rated as mediocre, and those near the bottom of the list were given relatively low ratings.

Moreover, this hierarchy has the desirable property that endorsing the higher incentives implies that employees already also endorse the lower ones. Therefore, in practice, Managing Directors should first consider the employee incentive at the #1 position in the hierarchy, next at the #2 and so forth (NOTE: the full hierarchy is not presented in this article). This same hierarchy also implies that the incentive at the #60 position on the hierarchy (e.g., "Overnight trip with officemates") is generally not as effective as the incentive at the #20 spot (e.g., "Holiday party where significant others/ family are invited"). So even though incentive #60 might cost more money, it is not perceived by employees as meaningful as a less costly alternative.

This raises the issue of monetary versus non-monetary incentives. The HVS study revealed that non-monetary incentives were often rated as high as or higher than monetary incentives. This is entirely consistent with the idea that – besides fair compensation – employees remain with organizations that consistently provide feelings of belonging, appreciation and worth for employees.

Interested readers can read more about these ideas in the white paper "Money and Employee Motivation," available for free at: www.2020skills.com/asts/Money%20and%20Employee%20Motivation.pdf .

The finding of a single, mathematical hierarchy for employee incentives allows HVS Managing Directors to make informed, evidence-based choices when it comes to implementing employee incentive programs. Furthermore, analyses revealed that the ratings of some incentives were biased towards being short-term motivators, whereas other incentives were biased towards being long-term motivators.

Thus, Managing Directors can make even more targeted choices for incentives based on a particular agenda – "Does this office want to motivate employees more for the short-term or more for the long-term?"  Short-term motivators might apply to associates who are not expected to remain with the office more than 1-3 years, whereas long-term motivators might apply to support staff and other employees with whom you want to establish and nurture a lasting employment relationship.

Below are shown representative items from the mathematical hierarchies for short-term motivators versus long-term motivators at HVS. Generally speaking, monetary-based incentives seemed more highly valued as short-term motivators, whereas employees perceived incentives concerning recognition and appreciation as more long-term motivators. Again, incentives towards the top part of these lists are incentives for which employees gave relatively high ratings, incentives towards the middle of the list were rated as mediocre and incentives towards the bottom part of the list were given relatively low ratings.

Therefore, the rule-of-thumb for HVS is to consider using these incentives in order from top to bottom – taking into account the office's resources and income. That is, Managing Directors should first consider the employee incentive at the #1 position, next at the #2 and so forth.

Mathematical Hierarchy of Short-Term Motivation Incentives

Mathematical Hierarchy of Long-Term Motivation Incentives

A Unique Competitive Advantage

The importance of some employee incentives relative to other incentives in these Tables might seem counterintuitive or "wrong." However, keep in mind these hierarchies are data-driven – they reflect the ratings (and hence value systems and mindsets) of HVS employees rather than HVS management.

Thus, what management deems motivating may not always be what staff members find motivating. And, since the incentive hierarchies differ somewhat across departments, it should not be surprising to find variations between companies as well. This is why Employee Incentive Surveys offer valuable insights and why objective analysis of quantitative data is preferred over opinions and suppositions from management and consultants.

HVS' employee incentive survey cost relatively little to conduct in terms of time and money, but it produced findings that served as a reliable and sobering indicator of the value system of its worldwide employees. This gives HVS a significant competitive advantage in attracting and keeping its top talent in an industry laden with high employee turnover.

Of course, the specific findings about the effectiveness of certain incentives at HVS study are not meant to generalize to other companies.

The examples presented here are illustrations of the type of outcomes that organizations can expect from such surveys. The IRT methodologies used in the HVS Employee Incentive Survey set a new standard in the industry and can be efficiently duplicated for other businesses and for other industries. To that end, some helpful guidelines are suggested:

  • Carefully identify incentives to be rated by employees via a panel review, i.e., invite Human Resources professionals, senior management and department heads to assist in creating the list of incentives to be evaluated.
  • Conduct the survey online to maximize efficiency and accuracy of the data collection. 
  • Use a third party for the study to emphasize the impartiality and anonymity of the survey to employees.
  • If needed, create different sections of the survey to differentiate (a) incentives your company now uses versus (b) incentives the company is contemplating for the future. 
  • Make it clear to employees at the start that the incentive survey merely aims to collect information for consideration; it is not necessarily a promise to implement new incentives in the short- or long-terms.
  • Wherever possible, segment divisions or departments in analyses as opposed to aggregating results across the entire organization. There might be an overarching company culture, but divisions or departments can have small but significant deviations from the umbrella culture that can impact incentive ratings.  
For more information on the HVS Employee Incentive Survey or to discuss a similar study for your company, contact:

James Houran, Ph.D.
2020 Skills™ Assessment
516.248.8828 x 264


About the Author
James Houran holds a Ph.D. in Psychology and is President of 2020 Skills™ assessment. He is a 15-year veteran in research and assessment on peak performance and experiences, with a special focus on online testing. His award-winning work has been profiled by a myriad of media outlets and programs including the Discovery Channel, A&E, BBC, CNN, NBC's Today Show, Wilson Quarterly, Chicago Tribune, USA Today, New Scientist, Psychology Today, ABCNews.com, Time, Forbes.com and Rolling Stone
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