25 August, 2020

Create an Effective Employee Rewards Program Using the Halo Effect

The term ‘Halo Effect’ was first coined by a psychologist named Edward Thorndike in 1920. However, it was later popularized by neuroscientists and psychologists, striving to understand the hidden cognitive phenomenon influencing the behavior of the modern man. The Halo Effect occurs when one or more past experiences with an individual, place or entity are used to create the current overall perception, resulting in a sort of halo around everything associated with the subject. Nobel Laureate Kahneman draws this concept back to the ‘associative machine’: a system of the intuitive (or subconscious) brain used to form impressions about someone or something based on all the collective past experiences related to that person or entity. In this blog, we explore how you can use this knowledge to create an effective Employee Rewards Program.

Using the ‘associative machine’, our brain keeps track of all the positive and negative experiences we’ve had with a given company or brand and generates an overall impression that guides our choices when those memories are activated. In our previous blog, we have already highlighted that emotions are the basis on which memories are stored in the brain- the stronger the emotion, the more deeply the memory is seared into our brains and the easier it is to retrieve it when a similar situation arises. Therefore, employers must seek to create multiple emotional experiences that trigger happy, positive memories related to the organization, in the minds of its employees. This will ensure a continual positive influence on employees’ decisions and actions in day-to-day operations, which will ultimately benefit the organization’s profitability.

To understand the phenomenon better, let’s digress into a popular example- celebrity endorsements in advertising. The Halo effect is the reason why customers start thinking positively of a product once a celebrity spokesperson endorses it. It does not have so much to do with the product itself; rather it has more to do with the positive qualities the celebrity is known for. Marketers create an unconscious positive association in the minds of potential customers, which impacts customer loyalty. In an ideal world, consumers would only look at product features and reviews to come to a rational buying decision. In the same way, employees would ideally only consider their monetary compensation and job profile as motivators for peak performance. But, as research has already shown, humans tend to take shortcuts while thinking, as the analytical way of thinking is laborious and doesn’t kick in as fast as our intuitions.

Example of Halo Effect in Workplace

In the context of employee rewards and recognition, the Halo Effect can be leveraged to improve your organization’s total rewards program, in the following ways:

  1. Introduce gamification in your award system to create fun, exciting experiences for employees, especially those having clerical or repetitive job functions. Giving away badges, titles or points frequently can help employees feel valued and create a mini emotional rush every time they receive something. The better they perform, the more awards and titles they receive and the higher they think of their employer. This becomes a virtuous cycle.
  1. Using the ‘best for the last’ principle in employee rewards and recognition. For instance, by disbursing a mega reward right at the end of a high-yielding quarter/year. This will lead to the employees remembering the whole year or quarter positively for a long time to come
  1. Highlighting company achievements and even department-level accomplishments frequently through virtual meetings can help employees associate their work or even identity with success, thereby boosting employee morale.

It is imperative for organizations to improve or polish their halo with every successive interaction with their employees. This requires planning with employee-centricity in mind, which will ultimately help win the best talent for the organization and positively impact sales and customer loyalty.