Recently, National Public Radio featured a discussion of a University of Chicago study about the impact of short-term incentives on student performance. The introduction to the radio piece was along the lines of “does bribing kids to get better grades work?”

As a father of four, I certainly know that parents usually say it's a bad idea to bribe children. But I also know that in reality parents bribe their kids all the time. If you don't believe me, simply imagine the discussion about driving privileges between a teenager and their parent: “You can't drive the car unless you keep your grades up.” (Parents everywhere give thanks to the auto insurance industry for good student discounts.)

What caught my ear was the finding that different bribes work very differently. For one, when a $20 bill is promised to the students as a reward for any student who improves their score on a standardized test, there's a small improvement. But if the $20 bill is put on the desk and the students are told it's theirs unless they don't do as well on the test—when they know the $20 is theirs to keep or lose—they are much more motivated.

Another important element of a successful bribe is immediacy.

In the words of the study: “All motivating power vanishes when rewards are handed out with a delay.”

You may be thinking, 'What does this behavioral economics finding have to do with voluntary benefits?' There are two key times in voluntary selling that we need to motivate potential customers into action: the employer sale and the employee sale.

In the employer sale we're not selling anything to them directly, except the concept that offering voluntary benefits is good for their employees (and satisfied employees are good for them). Are bribes used? Sure. That's what we do when we promise to manage core benefit enrollment for the employer, or provide benefit summaries, or communicate messages or survey employees during enrollment and so on.

We call this bribery “negotiating enrollment access conditions.” But the problem is, the payoff for all of these bribes is during and after enrollment. So we need to turn to employee enrollment to help convince employers their bribes will pay off.

When it comes to employee bribes, we are at sea. During enrollment meetings (and in most enrollment systems that educate employees), we talk about long-term goals like family security. We frame products that directly benefit the employee, such as disability income insurance, in terms of their long-term self-interest. We act as though people are rational, long-term planners. That is not the case, according to behavioral economics. We act much more like Popeye's pal Wimpy, who famously said: “For a hamburger today I will gladly repay you on Tuesday.”

We need to ask ourselves how we can create a sense of behavioral urgency in the enrollment information and discussions. Like the students mentioned above, we need to put the $20 bill in front of the employee and tell him or her: “This is yours and you are about to lose it.”

Usually I try to populate this column with ideas and answers. This month I have ideas and questions. I need your help. Please submit your input on how to improve employee enrollment techniques to my email address (listed below).

In an upcoming issue we'll discuss some of your contributions.

Instant Insights /

Behavioral economics and selling voluntary benefits

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