You could fill the Grand Canyon with all the studies researchers have produced on ways to motivate employees. But one published this summer stands out. It’s an elegantly simple illustration of how the most effective strategies may also be the cheapest.
Three economists from the University of Chicago and London School of Economics worked with Virgin Atlantic Airways to try several ways of persuading pilots to save fuel. (It turns out that airliners in some ways are like cars — if you drive with a heavy foot, you use more gas.) Along the way they saved the airline more than $5 million, cut carbon emissions by 21,500 metric tons — and learned a thing or two about human behavior.
A working paper on the study was published in June by the National Bureau of Economic Research. The authors — Robert Metcalfe, Greer Gosnell and John List — highlight their findings this week in a piece published online by the Harvard Business Review.
In a nutshell, the study confirms that you can work wonders simply by telling employees you’re watching them and providing targets to hit. This simple strategy may even work better than offering incentives.
Here’s how the study worked: In January 2014, Virgin Atlantic told pilots that their fuel-saving performance would be monitored for the next eight months.
To test different motivational strategies, the researchers divided the pilots randomly into four groups. Group No. 1, a control group, received no further attention. Pilots in group No. 2 got a monthly summary of how well they carried out specific company suggestions for saving fuel. That report — and I think this is important — was delivered by mail to their home.
The third group got those reports, plus individualized targets set at 25 percent above their pre-experiment performance. And group No. 4 got all of that plus a small incentive: £10 donated to the cause of their choice for each target they hit.
When results were tallied, it turned out that pilots in all four groups improved their practices and saved fuel. The study authors note this confirms a well-known principle called the “Hawthorne effect” — namely, that people act better when they know someone is watching. Those that received reports by mail at home got an especially strong reminder that the company was paying attention to their performance.
The more interesting effect was that both groups 3 and 4 did much better than the others, improving their fuel-saving practices by up to 20 percent. The fact that the improvement was similar for both groups, regardless of whether an incentive was offered, is telling, the study authors say. It suggests that in such a situation, setting targets alone is the most cost-effective strategy for getting employees to do the right thing.
It’s worth noting that Group No. 4 did distinguish itself in another way: In anonymous surveys after the experiment, pilots who had been offered incentives reported significantly higher job satisfaction. This suggests that while incentives may not mean better results, they can improve morale.
Why is setting targets so effective? The study authors think that set a higher expectation for job performance, and “captains successfully adjusted their habits to meet it.”
Writing about the study in his Financial Times column, economist Tim Harford put it succinctly: “If you want people to do a good job, tell them what success looks like to you — and that you’ve noticed when they’ve achieved it.”
Intuitively, we also can imagine that setting targets also helped by activating competitive instincts, the way “gamification” strategies do — who can resist a challenge to hit a target? I also have a hunch about why the incentive didn’t make much difference in fuel-saving behavior: I think it implicitly told the pilots that improving performance was optional. Why would the company offer an incentive if it could make improvement mandatory?
This points to how easily employers can go astray if incentives aren’t part of a broader strategy to recognize success. Among those who have studied this is Stanford University management professor Jeffrey Pfeffer, who wrote in 2007 about how financial rewards can backfire, incentivizing the short-sighted or otherwise harmful behavior. Focusing on executive compensation, he notes that “financial incentives offer the mirage of a quick fix.”