Employees were randomly assigned to one of three groups. The first was “usual care,” in which they received educational materials and free smoking cessation aids. The second was a reward program: Employees could receive up to $800 over six months if they quit. The third was a deposit program, in which smokers initially forked over $150 of their money, but if they quit, they got their deposit back along with a $650 bonus.
Compared with the usual care group, employees in both incentive groups were substantially more likely to be smoke-free at six months. But the nature of the incentives mattered. Those offered the reward program were far more likely to accept the challenge than those offered the deposit program. But the deposit program was twice as effective at getting people to quit — and five times as effective as just pamphlets and Nicorette gum.
People hate losing money ("loss aversion")
I have worked for many different organizations who wanted their employees to quit smoking. Before my current organization, administration would prohibit any smoking on the grounds at risk of penalty. This didn’t work to get people to quit, most typically, they just ended up taking longer breaks. My current organization used the same strategy, but additionally offered incentives to those who quit smoking.ReplyDelete
From all the possible strategies, loss aversion is the most effective strategy. Being awarded money for not doing something is great, but it isn’t great enough to entice people to quit smoking. Instead, if you collect money from them and promise to give it as well as an additional sum back after the employee quits smoking, they’re going to at the very least want their money back. “We feel the pain of loss more acutely than we feel the pleasure of gain. In other words, we may like to win, but we hate to lose (Richards).”
Richards, C. (2013, December 9). Overcoming an aversion to loss. Retrieved April 19, 2017, from http://www.nytimes.com/2013/12/09/your-money/overcoming-an-aversion-to-loss.html
Most employers have incentive programs designed to nudge workers toward healthier choices. But most of those programs aren’t designed properly to deal with the human element. And perhaps it shouldn’t surprise us that, given how irrational people really are, systems based on the apparent logic of classical economics sometimes miss the mark in getting us to do the right thing.ReplyDelete
For many companies and employers, even if they’re not in the health care business, health is central to what they do, because it keeps their workforce healthy and because frankly, health care costs have an incredible impact on their bottom line. Everybody knows that health is determined so much by individual human behavior; we now have much better ways of motivating that behavior from principles of behavioral economics.
As depicted in the article entitled How to Get Employees to Stop Smoking, the most effective methodologies were the deposit program as people do not want to deal with potential losses as losses loom larger than gains.
The control group who just received educational information had no perceived losses if they continued to smoke and didn’t quit. Employees that are enticed with a financial reward should they stop smoking had a distinct opportunity for a gain, but had no real opportunity for a loss. The deposit program was the most affective as employees had to deposit $150 which they would lose if they didn’t stop smoking, but they had an opportunity of receiving a bonus.
People see losses as more persuasive than gains. So there are far more successful ways an organization can frame a stop smoking program so that employees perceive the losses. For instance, each employee could have a fixed amount of money deposited in an account and each day that the employee continued to smoke, money would be removed from the account.
Setting up a loss incentive is consistent with theories of behavioral economics, but inconsistent with how a lot of employers or doctors think about the best way to take care of their patients. Financial incentives that are designed with psychology in mind can demonstrate tremendous success in identifying ways to manipulate financial incentives to motivate employees.
First I must say no two persons are alike, and while its easier for one to quit smoking the other individual has to struggle to quit or may not be able to quit at all. Incentives, motivation and finding out what triggers one to smoke is a good starting point. Each individual has to come up with a plan as to the date when he or she would like to quit smoking and work to achieve these goals. If the companies set up some attractive incentives for their employees who smoke, then this might motivate them to quit. The head team leader needs to lead by examples, because some employees might want to emulate their managers or become their manager; so, if smoking is not on their to do list then employees might work towards this venture. If and when they quit, I think the managers should reward them openly so that the others may see the good works and jump on the bandwagon to quit smoking. This does show that this company exudes moral and cultural values in investing in the interest of their employees. This does and can increase the work ethics, value, and production in the company.ReplyDelete
In addition to the cost to society and the costs to government programs and private insurers there is also a quality of life cost to the smoker. A 1 pack per day smoker in New York state can expect to spend around $ 360 monthly for cigarettes. This is a significant amount when taking into consideration that an average NYS hourly pre-tax wage for someone who is a production or a hospitality worker is less than $ 20 per hour ( NY Gov Stats) And that is a data that is heavily skewed by the higher wages of jobs in densely populated downstate parts of New York. One can expect that if the Central, Western and Upstate regions of New York were to be evaluated without New York City and its immediate suburbs, the average wage will be considerably lower. The bottom line is that $ 360 per month is a lot of money, especially when one leaves the urban areas. It can get you a lease on a $ 20,000-$25,000 car ( $ 179-$229), plus insurance ( $ 80-150) and you may still have some money left for gas. I was just recently approached by an employee that had calculated that he spends more on cigarettes than he does on his car and insurance seeking help in quitting smoking. Your post provides a timely suggestion on how to try and help him.ReplyDelete
NY.Gov Statistics https://labor.ny.gov/stats/ceshourearn2.asp
Nowadays employers are offering more incentive programs to help their employees become healthier, which can lead to an increase in productivity. These can be programs to help employees lose weight, decrease stress levels or to quit smoking like this article talks about.ReplyDelete
When you look at this from the perspective of an employee you must look at the opportunity cost. By giving up smoking you will become healthier and receive a one-time cash bonus. On the other hand, you can keep smoking, which will affect your health and not be eligible for a cash bonus. It makes perfect sense that the deposit program would be the most successful way. If the employee were to be in the reward program and decided to quit they wouldn’t be out of any money, but if the employee were to be in the deposit program they would have to forfeit $150 of their on money so there is more to lose, and this will encourage them to complete the program.
The one negative thing that can be seen about this incentive pay is that non-smokers have nothing to gain from this. This could be looked at unfair from a non-smokers perspective since they are not being rewarded. For instance, let’s say a company offers two programs one for weight loss and stop smoking program. You as an employee are very healthy and do not smoke. Well you are not eligible for this incentive pay as some of your coworkers might be, so they will be able to get a cash bonus and you will not.
Froeb, L. M., McCann, B. T., Shor, M., & Ward, M. R. (2016). Managerial economics a problem solving approach. Boston, MA: Cengage Learning