The Things in Life That Excite

Editor's Note: Today's post comes to us courtesy of guest contributor Chris Dobyns.

A few months ago I won the lottery.  No, not The Lottery, as in the nine-digit super-jackpot lottery, but more like the $42 lottery – where I had the Powerball and one other number on a couple of tickets.

Despite the disappointment of having just missed the $758.7 million jackpot, I can still vividly recall the excitement I felt cashing out my “winning tickets”, as the cashier at the local convenience store counted out my pile of forty-two $1 bills.  That got me wondering once again about the influence of the physicality of cash, and some of its behavioral effects. 

The Psychological Influences of Money

A study commissioned by the Consumer Financial Protection Bureau examined the subtle (and not so subtle) effects that cash has on people’s behavior. The short version of the research study examined what happens when experimental subjects were sold identical mugs for $2, and then asked to sell them back – but where one group was told they paid for the mugs on a credit card, and other with cash.  The results showed the cash purchasers reflected a much higher perception of the value of the mugs than credit card purchasers.  Some of this influence can be attributed to endowment effect, but not in its entirety. Subjects in a different experiment felt notably more connected (psychologically, emotionally) when making charitable contributions in cash rather than with some other form of payment. 

Some of best research about the subtle influences of money, has been conducted by Kathleen Vohs, from the University of Minnesota.  In a number of these experiments the power of cash to negatively influence behavior, disrupt team-based relationships and to encourage more selfish decision-making was consistently demonstrated. More telling was that money’s ability to influence people to be less socially-sensitive was not limited only to instances of the physical presence of money, but even to the very mention of money.

Give Las Vegas Some Credit

The phrase, “what happens in Vegas, stays in Vegas”, would probably be better stated “money that comes to Vegas, stays in Vegas”.  Many, many years ago casinos began using chips because they recognized that gamblers were predisposed to take greater risks when betting chips, because we all know it’s much easier to ante up a pile of same-size, brightly-colored chips, rather than contemplate that you just bet fifty $20 bills that may represent a significant portion of next month’s mortgage payment. 

We all know that credit cards are not the same as casino chips.  Or are they?  Hmmm, providing consumers with colorful plastic cards – all of a similar size, that are essentially an opaque instrument that allows for the easy purchase of products or services, as a substitute for actual currency, does sound a lot like the use of casino chips. Ultimately, whether a personal expenditure is in the form of chips in the casino or a plastic card in the retail store, an intermediary instrument nearly guarantees our insulation from the subtle, psychic influence associated with the direct expenditure of cash. 

Separating Us From Our Money

Purveyors of products and services (including casinos and credit card companies) clearly have an understanding of people’s psychological relationship with money – with the goal of more easily separating us from our cash.  But what about social responsibility and predisposing people toward charitable giving and feeling good about that behavior? And for total rewards professionals, what about affirmatively de-conflicting the explicit linkage between money, motivation, behavior and performance?

How is all of this influenced by the move towards a cashless society, with debit cards, cashless transactions and virtual wallets using smartphone apps, with their ubiquitous near field communication capability? 

It sometimes makes me wonder whether a return to a day when employees were paid in cash, and the linkage of work to its associated outcomes and subsequent levels of motivation would be strengthened by the receipt of actual cash. Perhaps that linkage is fading, and is already being replaced by new, psychic and behavioral linkages as the workforce continues to change.

A Ticket To Ride

As is the case with most things that excite us . . . it’s complicated – mostly because it involves people.  Whether it’s a winning lottery ticket or your next paycheck, what you’re really receiving is the means to an end or opportunity – maybe best illustrated by the line from The Maltese Falcon, “. . . the stuff that dreams are made of”.

Everyone probably has a different perspective.  What’s yours?

Chris Dobyns, CCP, CBP is currently employed as a Human Capital Strategic Consultant for the Office of Human Resource Strategy and Program Design for one of the largest U.S. intelligence agencies. The Office of Human Resource Strategy and Program Design is responsible for organizational effectiveness, personnel assessment, compensation and incentives, occupational structure, recognition and rewards, HR policy, human capital program design, implementation, evaluation and assessment and internal consulting. Chris has worked in the area of compensation for more than 35 years, and has been employed in various compensation-related positions by a number of large, private sector companies including, Sears, Roebuck, Arizona Public Service and Westinghouse Savannah River Company.

Original image "Lottery Cashier Window" courtesy of Chris Dobyns.

Comments

[Joe Thompson]

As always, Chris, a wonderful post.

So, to pull the thread, should we dispense incentives and awards in cash? (I can't help but conjure up an image of some poor HR disbursing officer with a large coffer of cash ... which may be enough to derail the idea in its nascent stage.)

But, if cash is king, what does it mean when an employee receives a modest award in their monthly/biweekly paycheck as opposed to if we handed them the same amount in "Benjamins"?

Okay, so I keep stumbling over the image of the HR specialist with the cash box. But, surely there is a way to incorporate this psychology into incentive design.

I'm curious what that might look like.

[Chris Dobyns]

Talk about a strange confluence of telepathy and shameless shilling in support of this topic. And I mean all that in the nicest possible way . . .

Seriously, I considered adding something to the base article that was almost exactly what Joe is alluding to. While a cute idea (HR people paying off people with piles of cash), clearly that's not practical. What I did briefly contemplate was a variation on what Joe suggests - but in the form of an encrypted pre-paid card, that might actually require you to go to a bank, and have them count out money in front of you.

I think something valuable may have actually been lost, in the transition to and efficiencies associated with direct deposit. Maybe the pre-paid "debit card" isn't the exact answer - but I think this challenge of restoring the motivational effect of the physicality of financial outcomes is solvable.

[EJames Brennan]

Early pyramid-scheme promoters regularly spiced up their big every-seat-taken conferences with "... look under your chair" announcements. Finding a $100 bill many years ago would marvelously charge up their enthusiasm. Cash has a distinctly powerful effect on perceptions and attitudes, far beyond the power of proxy substitutes that create psychological distance from "money."

[Kurt Nelson, PhD]

Chris,

Ahhh cash...that wonderful and perplexing phenomenon. You laid out nicely how it impacts us differently than cash substitutes (chips/credit cards). There is also a substantial body of work on how cash works as an incentive vs non-cash. Scott Jeffrey did some great research on people stating that they would prefer cash as an award over a non-cash experiential award (i.e., a massage) but actually working harder and performing better on the task for the non-cash award. This type of study has been repeated numerous times with other non-cash awards (merchandise, travel, etc.). As Thaler points out with mental accounting, we tend to place our money into different mental accounts. So spending my incentive money on a massage or luxury vacation is unlikely (just like the gambler being more reluctant to bet a big wad of $20's vs chips) - at some level, it is supposed that we know this and our performance suffers as a result. Of course, there are other drivers of this as well...but I've already gone on too long. Thanks for the thought-provoking piece.

[Chris Dobyns]

Yep, tons of elements that could have been woven into this, if not for the article length limits.

I'm frequently surprised by how little we (We = Any People) seem aware of the influences we're regularly subjected to, primarily from a selling/marketing perspective. Talk about a target-rich environment to draw lessons from. Regarding your point about how we mentally segment our financial income streams, and how some "streams" are more likely to be directed to discretionary spending.

My favorite in this area that gets targeted by marketers is the new car advertising (and lots of other big ticket items) that seems to reach a near-frenzy pitch right around the time that federal income tax refunds begin to arrive. Because those "big" refund checks represent free money, right? That situation could only be made worse from a behavioral perspective, if those refund checks were able to be paid out in casino chips.

Oh wait . . . I'm sure that's already happening, somewhere. Thanks!

[Sarah]

Awesome thoughts. Could be the reason people tend to spend more with credit cards is because they derive less satisfaction.