“The tricky part of incentive design is that there are noisy signals about what could work and what may not work. For example, when given a hypothetical choice between cash and non-cash incentives, people overwhelming choose the cash incentives but studies consistently show that giving additional compensation in the form of non-cash rewards can be more motivating than cash.”Kristen Berman, The Science of Change podcast
The basis of Alchemy is to create a lot of of value for a small cost. Alchemy happens for donations, for interest payments, and even for paying for a Peloton. Non-cash incentives are another form of Alchemy: the value of the item is greater than the cost to produce it.
On March 9, 2022 gas in Florida cost $4.19 per gallon. A friend noticed this and stumbled into a bit of Alchemy. His company is creating a mileage reimbursement program for the employees.
A “mileage reimbursement program” moves past a basic cash benefit and into the realm of alchemy because it uses our availability tendency: what’s top of mind is most important. Gas prices are often top of mind thanks to their frequency (and SIZE), but with Russia’s invasion of Ukraine the availability is even greater. And that’s not all! Thanks to our mental accounting we perceive pain at the pump.
A “mileage reimbursement program” is a great idea. It delivers more value than it costs. Here’s a few more:
- Mother’s Day. There’s no holiday that deserves status elevation more. What if an organization had flowers for moms (or husbands to take home to moms) or bulk ordered a delivery. Hey everyone, at lunch today there’s a signup form if you want to order flowers for your mom. This is kinda tricky because if gifts are too easy they lose some impact.
- Annual bonus. There’s alchemy calling it a “Christmas” rather than “end of year” bonus.
- Four day workweeks. Businesses have some quantity of work that’s divided into some number of days. Divide those two for a rate. Reducing the number of days means the rate must rise, but many employees find this a fair trade as evidenced by the work-from-home success.
The original advertising alchemist, Rory Sutherland, noted that organizations often optimize the wrong metrics. Don’t make the trains run faster, which is very costly, Sutherland said, if you can make them more enjoyable for much less. A place to sit, a plug to use, and a coffee to drink go a long way for a small cost. That’s alchemy. Find something to provide that has an outsized impact.