Why Experiences

The problem with points-based rewards systems

One of the most common questions I hear from People leaders is, “Does Blueboard allow people to recognize each other with points?”.

Especially now, with employees burning out faster than ever and companies scrambling to retain top people, points-based employee rewards systems are a default solution. But many of these  for employee recognition programs exist to check a box—they aren't actually making employees feel appreciated or motivated. They aren't making any significant impact.

The answer to the question above is "No". Blueboard isn't a points-based system. In this post, I'll explain why and share my insights based on years of working with organizations improve their employee recognition programs, and thousands of conversations on the subject.

What is a points-based employee reward system?

Let’s start with the basics: employee recognition is the act of acknowledging and appreciating an employee for a behavior, milestone, or contribution through informal or formal processes. Employee recognition is often tied to some type of reward—which can come in many forms like cash, gift cards, experiences, or points.

A points-based employee rewards system allows a sender to give points to a recipient. These points are tied to a specific dollar value, though this dollar value tends to be obscured for employees. Generally, employees can accumulate and redeem these points for merchandise, gift cards, or travel incentives from an employee rewards catalog.

While it may seem like an effective system, this points-based approach has flaws that can mute the impact of your employee recognition. In fact, while companies spend over $90B on non-cash employee rewards in the U.S. every year (which includes everything from travel to gift cards to points-based systems), a 2012 study by Deloitte found that 87% of employee incentives investments have zero impact on organizational goals—including employee motivation, employee engagement, performance, and retention rates.

Let’s take a closer look at points-based employee reward systems and explore why this may be the case.

What do points-based employee reward systems accomplish?

First, it’s important to acknowledge the strengths of a points-based employee reward system. There are a few reasons why this approach to employee recognition may be a good fit for your company, especially if your organization is strapped for resources and budget.

1. They're low maintenance.

Points-based employee rewards may be a convenient choice if you’re looking for a low-maintenance employee recognition program. Since these systems are centralized in one digital platform, it’s easy for an HR team to:

  • Enable managers or peers to give points at their convenience, 
  • Put controls in place for quantities of points distributed, and 
  • Track who is giving and receiving points.

2. They're flexible.

Points-based employee rewards programs also give you the flexibility to reward employees in a large range of dollar increments. If your company has a limited monthly budget to dedicate to employee recognition, for example, a points-based employee reward system lets you dole out smaller dollar amounts more frequently. This creates more employee recognition touch points and spot recognition with employees without having to break the bank.

But where do points-based employee rewards miss the mark?

If your company has the time and budget to dedicate to a more comprehensive employee recognition program, you should look beyond a points-based system.

Because this type of program doesn't actually offer an impactful, sustainable solution. And research shows that a poorly-designed employee recognition program can actually have harmful effects—from procrastination to poorer business outcomes. Author Dan Pink says it best in his book, Drive: 

“… while a few advocates would have you believe in the basic evil of extrinsic incentives, that’s just not empirically true. What is true is that… deploying them without understanding the peculiar science of motivation—is a very dangerous game.”

Here’s why points-based employee rewards programs tend to fall short:

1. Points don’t establish a clear tie between the achievement and the reward.

With a point-based system, there’s often a lag between the recognition and the reward.

Let’s say an employee receives 20 points every time they do something positive at work, but the desired reward isn’t available until 300 points—forcing the employee to wait before they can redeem their reward.

This makes it difficult to tie the specific behavior the employee received points for to the employee recognition moment, because the process for receiving the reward is drawn out over such a long period of time.

A study by Kaitlin Woolley, assistant professor of marketing at Cornell, found that immediate rewards—compared to delayed ones—strengthen the association between the activity and the goal of the activity, making people feel like the task is rewarding in and of itself. 

“The idea that immediate rewards could increase intrinsic motivation sounds counterintuitive, as people often think about rewards as undermining interest in a task. But for activities like work, where people are already getting paid, immediate rewards can actually increase intrinsic motivation, compared with delayed or no rewards.”

The ideal, then, is an employee recognition program that easily and quickly connects the recognition moment with the reward, and offers a clear link to the behavior(s) demonstrated. This will lead to increased performance output and workforce engagement.

2. Your investment gets backlogged.

With a points-based platform, employees tend to hoard points to save for larger rewards, which can take place over a long period of time. During this span of time, one of two things tends to happen:

  1. The outcome is underwhelming. When the employee finally redeems their points, it’s often for a reward like a $50 gift card to Starbucks—which can be a huge letdown. On top of the snooze factor, studies show that anywhere from 46% to 56% of folks have at least one unused gift card in their desk drawer. In other words, your employees may never even use the reward they worked so hard and waited so long for.
  2. Employees end up forgetting about the points they were saving. When employees forget about the points they do have, they don't redeem them. This often means there's a huge waste of benefits funds, not to mention reward utilization reporting becomes a nightmare. This also impacts employee excitement around your recognition program. You want employees buzzing about the rewards they're receiving, which won’t happen if points sit around collecting dust.

3. They promote a transactional relationship.

Another downside of points representing a dollar value is that they’re just another form of currency, which can make them feel transactional rather than meaningful.

While transactional rewards can be effective for certain industries, experts find that people with complex, creatively focused jobs (which is the bulk of knowledge workers) crave more personalized rewards. According to Harvard Business School Assistant Professor Ashley V. Whillans:

“With most of today’s employees, you’re trying to help instill intrinsic motivation, so they feel motivated to put in more effort out of enjoyment for what they do and appreciation for their jobs, rather than feeling extrinsically motivated by cash alone.”

Not to mention that Capgemini Consulting found that while 97% of loyalty programs rely on transactional rewards, and 77% of transaction-based programs fail in the first two years.

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4. They fail to make employees feel appreciated.

To me, this is the most important point.

The goal of all types of employee recognition, ultimately, is to make your people feel valued. To make them think, ‘wow, my manager (and my company) actually notice my hard work and they appreciate me as a human.’ But this is just the start.

With the right approach to employee recognition, your program has the potential to prevent employee burnout. To close the connection gap in the workplace. To help employees feel more fulfilled in their day-to-day work. 

But because points-based programs tend to feel transactional and forgettable, they often fail to make employees feel truly appreciated. In that case—what's the point?

Why an experiential rewards program may be the path forward.

Ok, ok, so if points-based programs aren’t worth the investment, then what is? 

What I discovered after countless hours of research and conversations is that experiences are a powerful, yet underrated motivation tool. A growing body of research finds that tangible non-cash rewards—such as experiences—deliver equal or greater returns to organizations in most circumstances than equivalent cash rewards.

But there’s not just a business case for experiences. There’s a human case too. Research supports the fact that experiences: 

  • Foster meaningful relationships,
  • Positively contribute to identity shaping, and
  • Evoke fewer social comparisons

And while there haven’t been any formal studies done on the impact of experiential rewards vs. points-based rewards in the workplace, our team has talked to experts—like Dr. Amit Kumar, a leading researcher in the study of experiences—who firmly believe that experiences could lead to greater employee well-being.

“If our experiments suggest that it's a good idea for individuals to shift some of their personal investments away from material consumption and towards experiential consumption, and we know they're likely to be happier as a result, then it could be similarly wise for organizations to help people do this.”

Anecdotally, we’ve found this to be true with our own clients at Blueboard. Thousands of employees and employers alike have told us how meaningful our rewards have been—whether that’s because they helped people spend quality time with loved ones, discover a new passion, or cross off a bucket-list item.

Russel S. enjoying Blueboard's "Chase the Northern Lights in Alaska" experience.

Eve C. enjoying Blueboard's "Brushes and Brunch" experience.

Haillie P. and their family enjoying Blueboard's "Family Day at the Aquarium" experience.

By making experiences accessible to employees in the context of a well-structured recognition program, you’re giving your workforce the opportunity to reap all these benefits.

Still on the fence about the best types of employee rewards?

To be an informed buyer, I encourage you to investigate different forms of employee recognition and employee reward systems for your employees. Regardless of the direction you go (points-based programs, spot awards, experiential employee rewards, or an in-house solution), your employee recognition efforts should be authentic and meaningful to produce the best results. Here’s why:  

  1. Happier employees equal more productive employees. It’s no secret that happier employees produce better work. Which means happy employees lead to more satisfied customers, which leads to revenue growth, and opens up additional resources to invest back in your employees. Bersin by Deloitte found that organizations with sophisticated employee recognition practices in place are 12 times more likely to have strong business outcomes. Create a meaningful employee recognition program, and it will end up paying for itself.
  1. Employer brand matters. In competitive industries where talent is scarce, each employee is extremely valuable to the company as your brand voice and external champion. To stand out from other hiring organizations, it’s crucial to have a strong employer brand because the candidate's perception of your business just might be the final factor for a candidate with multiple offers. Great employee reward and recognition programs build excitement and buzz, and they can build evangelists within the company to further spread the word in an authentic way. That’s why so many people turn to resources like Glassdoor to learn more about a company’s culture. Imagine having an employee leave a review where she raves about the time she was rewarded with aerobatic flight lessons — a memorable, personal, and shareable experiential employee reward that is more likely to attract the attention of other qualified candidates.
  1. Decisions are necessary to excel as a company. I understand changing up your employee recognition efforts is a big decision to make. But if you want to break away from the status quo and attract great talent, you need to actively make the decision to invest in your people. Having the same ineffective program in place year after year hurts your ability to attract, motivate, and retain top talent. The longer you sit on the decision, the longer your team suffers from the negative effects of doing nothing.

Taking the next step to a new kind of employee recognition.

At the end of the day, your company has to choose the employee recognition and employee reward system that best suits your needs, that is an authentic reflection of your company culture and values. I challenge you to look past convenience and ask you to consider what type of program will truly be impactful and give your employees the employee rewards they deserve.

If you’re interested in making the jump to a different kind of employee recognition program, our team would love to tell you more about Blueboard. We’re all about helping you recognize and reward your people with their choice of hundreds of experiential employee rewards, making recognition exciting, personalized, and built for scale. Connect with our team to learn more.

Editor's note: This post was originally published in April 2018 but has been updated with up-to-date information and to reflect modern circumstances.

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