On average, people estimate that they’ll go to the gym they belong to more than twice as often in a month than they actually do. To counteract these tendencies to underutilize the gym, economists have a solution that alters the incentive equation. Knowing that people are really bad at prioritizing long-term benefits, economists recommend signing another contract – one with yourself – so that the long-term drivers of behavior become short-term drivers. The basic idea is that you set a goal and give money to a friend with some instructions. If you meet your goal, your friend will give the money back. If you don’t adhere to your agreement, your friend will donate it to charity or spend it. Going back on your commitment, then, comes with an immediate financial penalty.
This is similar to a study by led by Heather Royer, a professor of economics at the University of California, Santa Barbara. The study demonstrates the persuasive power of these contracts, which includes the long-term effect they may have. The study tracked the fitness habits of about a thousand employees at a large, Midwestern company who had access to a company gym. Randomly-selected employees were offered $10 for every time they visited the company gym, covering up to three visits per week. As one would expect, attendance doubled, but after the deal ended, people returned to their old workout-dodging habits. Cash is clearly a strong incentive, but the motivation is temporary and dependent on ongoing funds.
Here comes the contract! At the end of the month-long incentive program, Royer and her team approached some of the employees with a proposal. They would hold onto their money if they committed to going to the gym once every two weeks for the next two months. If the employee met that goal, they would get their money back; if they didn’t, the money would be given away to a charity. Not everyone signed on, but of the ones who did (women and overweight people were the groups most likely to opt in) went 25% more often than those who didn’t. The graph below shows the gym attendance rates for all three cohorts.
The contract option combines rewards and penalties into a single program, which should be a model for corporate wellness programs. We saw this in other studies that show the carrot and the stick work well together. Although this was not part of the study, we see the challenge, from a corporate wellness perspective, is maximizing the number of individuals who sign up for the contract. This is where the reward combination gets interesting. What if employers offered to give back the money plus something extra? Since we know people overestimate their attendance rates, this should result in more employees signing up for the contract (thinking they can earn even more money). Once the contract is in place with more employees, it’s impact will be even greater.