An increasingly common feature of wellness programs is the existence of incentives, and sometimes even penalties, to encourage people to engage, participate and succeed in their efforts at getting healthy. It stands to reason that incentives will work, since incentives seem to improve work performance in general. Employees, when asked what it would take to get them to exercise or eat better, almost inevitably tell us "incentives and rewards." It's no surprise, therefore, that the wellness industry has become convinced of the power of incentives. If you are too, think again.
There are four keys reasons why incentives fail:
1. Forgetting the golden rule of incentives. If you care about getting value for money from your wellness program, consider that for most people the size of the incentive required to get a new behavior is greater than the savings that comes from the new behavior. Some smokers will quit for $50, but most of us, most of the time, only respond when the size of the incentive is much larger.
The savings usually only arise several months or years after the new habits have been in place, so employers need to consider not only the time value of money but also the likelihood that employees who are bribed with incentives now may be working for someone else when the savings finally show up. If the savings only come from a sustained change in habits, then incentives need to be offered on an ongoing basis, so the total of all incentives over time must be compared with the savings over the same period.
When we do the math, we find that most incentives fail the golden rule of incentives:
"Only offer incentives when the total value over time of all the incentives required to drive the new behavior is less that the total savings over time that the new behavior generates."
2. Rewarding the wrong people or the wrong behaviors. The biggest financial problem with incentives is that they are often simply paid to those who are already practicing good health habits, and they do not stimulate a change in the habits of these who really need to change. Even for those few for whom incentives do drive change, we've found that incentive fatigue sets in, meaning that people expect greater and greater incentives each year for the same behavior.
There are no shortage of case studies that purport to show massive returns of investment on incentive programs when, in reality, all they are showing is that people who are already healthy (with lower claims) show up to claim all the incentives. What makes these case studies compelling is the salience of the individual testimonies that distract us from a proper review of the data. Hearing about one Jane Doughy who was offered an incentive and proceeded to lose 50 pounds, run a marathon and cure her diabetes, is very inspiring. It sounds so logical and even fits with how we think we might behave in a similar circumstance. We incorrectly believe that was has tripped up our own prior attempts to be healthy was a lack of motivation, and thus incentives might be just the elixir that we have been missing. Studies of habit change have shown us that in fact what is usually missing is learning the new skills, even basic ones, that make the new habit stick.
For example, when quitting smoking, you're better served by changing your route home from work to avoid the convenience store where you normally buy cigarettes, than by promising yourself a new set of golf clubs if you stay tobacco-free for a year.
3. Classifying mental buckets. When our employer offers us an incentive for a certain behavior, we reclassify the activity in our minds. What might once have been something that we did for fun or pleasure now becomes something we will only do for money. The real problem with this mental reclassification is that when the incentive is removed or reduced, people often revert to even lower levels of the behavior than before an incentive was ever offered. Thus, incentives can sometimes backfire so badly that we would have been better off never trying incentives in the first place. It turns out the incentives can change behaviors in the short term, but they often fail to make these new behaviors stick.
It's useful to think of the difference between behavior change and habit change as follows: If a force is applied (like a gun to your head or the promise of a large incentive), it is possible to change your behavior. But once the force is removed, if the new behavior does not stick then you have not created a new habit. A habit, by definition, is something that people do repetitively without the stimulation of an ongoing incentive or external force. Wellness is the game of changing habits, and we should not be satisfied only with short-term behavior change.
4. Offering "if, then" vs. "now that" incentives. Incentives that are offered on an "if,then" basis are less powerful than those given on a "now that" basis. For example, compare these two approaches:
1. Saying to employees: "If you get your cholesterol under 100, then we'll give you $100."
2. Saying to those employees who do succeed in lowering their cholesterol, "Now that you've reduced your risk, we wanted to recognize your hard work with a token of our appreciation in the form of $100."
The second is much more powerful. Notice that you are almost compelled to compliment the person and express appreciation in the second version, whereas the first sounds like a common bribe. Try telling your spouse that you think they would look good if they lost a few pounds. A few months later, try telling them instead that you've noticed how good they look, and asking if they have lost a few pounds. Let me know if the first approach works better than the second!
The reason why we're committed to "if, then" incentives is because they are easy to communicate and administer, and because we think we ourselves will respond to such offers. "Now that" incentive programs take effort and imagination, but for that effort the return to employers can be much greater, since the effect is longer-lasting than with the bribe approach. The reason for this is that as soon as an "if,then" deal is concluded by the delivery of the incentive, employers need to "re-up" the ante or the new behavior will cease. The surprise element of "now that" incentives often leaves people glowing with pride and doubly committed to continuing with their new health habits.
The lesson for employers is that a penny of appreciation, from people we like, trust or admire, is worth a pound of incentives from an otherwise uncaring employer. The latter often leaves us feeling bribed or conned, especially by an impersonal incentive program that is long on "stuff" but short on appreciation.
Contributing Editor Andrew Sykes is chairman of Health at Work. He is a qualified actuary, a licensed health insurance broker, an HIAA managed health professional and an accomplished speaker on the topic of consumer-directed health care and wellness. He can be reached at
