Happiness Economics and Incentive Travel

Allocation of an Incentive Instrument and Its Utilisation in the Context of a New Economical Point of View

Term Paper (Advanced seminar), 2013

28 Pages, Grade: 2,0


Table of Contents

Executive Summary

List of Figures

List of Abbreviations

1 Introduction
1.1 Problem Definition
1.2 Objectives
1.3 Methodology

2 Happiness, Economics and Work - Happiness Economics

3 Incentive Systems and Allocation of Incentive travel

4 Incentive Travel
4.1 Concept of Incentive Travel
4.2 Incentive Travel in Practice
4.3 From Special to Global - Why Incentive Travel is Important for Happiness Economics

5 Conclusion

A) Excursus: What is Happiness?
B) Excursus: Ground Domestic Product and Happiness
C) Excursus: Income and Happiness
D) Excursus: Theoretic Fundamentals of Incentive Systems
E) Excursus: Success-factors for Incentive Travel Programs


ITM-Checklist 1: 360-degree analysis

List of Figures

Fig. 1: Effect of incentive travel on individual happiness 11

Fig. 2: Relevance of Happiness Economics for a corporates` strategy making 12

List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

Executive Summary

Happiness Economics is a new point of view on economic utility. Profit is no longer in the sole focus of business activity. It is accomplished by a behavioural approach consid- ering individual happiness. Using corporate incentive systems corporations are able to participate in this concept for their own benefit and the benefit of their employees. As a special incentive measure, incentive travel has the potential to affect employees` productivity and individual happiness with tangible as well as intangible values.

1 Introduction

A happy worker is a good worker. This seems to be a common and timeless insight of Human Resource Management and Soft Skills and Leadership sciences. Is it really that simple? The answer is easy. Yes.

The point of view of economic science is expanding. Maximizing profits is no longer accepted as sole business purpose, and concepts like sustainability and Corporate Social Responsibility (CSR) have been source as well as product of a trend of redefining the social purpose of economics in general and companies in special (Layard 2005, Elkington 1997, Jonker & de Witte 2006). That Happiness Economics (HE) is both part of a new perspective and part of a trend will be shown in the following paper. Afterwards it will be discussed an explained, why someone might dare to formulate the fourth sentence of an assignment chapter with a single word.

1.1 Problem Definition

HE is a relatively new issue in business and science. Its impact on corporations and employees is shown by the example of incentive travel.

1.2 Objectives

The objective is to examine the relation of HE and Incentive Travel and the interdependencies of employee incentives and individual happiness.

1.3 Methodology

In the second chapter the concept of HE will be examined on a theoretical level. In the third chapter the theory underlying corporate incentive systems (IS) will be discussed. In the fourth chapter the incentive measure of incentive travel is explained in theory and its practical relevance shown on research studies.

2 Happiness, Economics and Work - Happiness Economics

Jeremy Bentham stated the vision of Happiness Economics as short and incisive as pos- sible: „The Greatest Happiness of the Greatest Number“ (Laszlo 2008). In contrast to this Spartan formulation, a simple analytical or descriptive definition of HE is hard to find. Most of the authors seem to define the concept by explaining the relations and interdependencies of the behavior science based view of happiness and the economy science based view of economy. For this approach is considered adequate, the following chapter is based on it too.

Nevertheless, to summarize the explanations of many of the authors (exemplary see Van Praag & Ferrer-i-Carbonell 2010) HE can be defined as the orientation of economics on individual happiness aspects. With this in mind, in the following chapter the term happiness as far as it is an object for this paper is explained, and based on this, will be combined with economic aspects.1

As Frey and Stutzer (2002a) stated, the extent of happiness (or unhappiness) is related essential to the quality of the economy. Most economic domains have a significant in- fluence for an individual’s well-being. Several national economic indicators correlate with the population’s average happiness level. For example these are the inflation rate or the unemployment rate, which both correlate negative with a nation’s well-being. Equal results have been evaluated for nutrition, housing, health-care and education, which all correlate positive (Ferrer-i-Carbonell 2013; Frey & Stutzer 2002a; Layard 2005).2

Also the business economical level is interdependent with happiness. In general, it can be stated that happiness correlates with productivity, or, a happy worker is an effective worker. Studies show that happy workers are more successful in their jobs, they are more effective decision makers, they get better evaluation reports by supervisors and they are more creative. Additionally they tend less than unhappy workers to switch their job or company, which is an important economical factor considering transaction cost theory (Diener & Biswas-Diener 2008; Frey & Stutzer 2002a).

On the other hand work also affects individual happiness. If work is recognized as meaningful and stimulating, it is an important happiness and health determinant. The

2 Happiness, Economics and Work - Happiness Economics

difference between a satisfied and unsatisfied worker may depend on the point of view on the job, which are three classifications:

a) individual goes to work to get paid with tangible benefits, the work itself is no motivation
b) individual is career orientated and motivated by non-tangible status or promo- tional benefits, but the work itself is no motivation
c) individual is being motivated for the job by the job itself, considering it to be an important work

Type c) is suspected to be the kind of character, which benefits most of its work as a happiness determinant, recognizing its job not only as profession but as calling. This calling orientation can be found in any profession and any job from CEO to janitor, and these employees are getting engaged in trying to improve their jobs and their working environment above their original tasks, and can be considered to be the most valuable employees for an organization (Diener & Biswas-Diener 2008). So getting people to being calling-oriented may be a task for IS.

Working places supporting happiness of their employees are determined by several gen- eral factors which can be part of corporate politics, culture or organization to improve the working environment. The importance of these factors for an individual depends on its character and perforations. So the social environment on the working place seems to be very important. For Frey & Stutzer (2002a) the interpersonal relation to the col- leagues is one of the most important factors for individual well-being. A feeling of per- sonal control is provided by having control over the own job and not being controlled by unnecessary restrictions and rules. A variety of tasks is needed to prevent boredom in the job (Diener & Biswas-Diener 2008). It has to claim and use employees` skills in a framework which is in accordance to their strength. Therefore an excessive demand as well as an underuse has to be prevented. Everything above this framework is supposed to create negative stress, which causes unhappiness. Supervisors have to be supportive, so they need to practice an adequate balance between giving employees freedom and control them if necessary. Employees have to experience respect and status, in order to feel competent in and being proud of their job, and they want clear requirements. Only an unequivocal job descriptions, and solid information on how to meet them, can pre- vent frustration. Also a good pay and fringe benefits are important. The salary has to be significantly above job-related expenses. This includes benefits like health-insurance and retirement-savings. That the use of money as motivational factor is limited and that it cannot compensate other happiness factors is discussed in the next chapter (Diener & Biswas-Diener 2008; Laszlo 2008).

As a conclusion for the relation of happiness and economy in all the facets discussed above, it might be stated, that a more different understatement of the human nature has to be included in economic sciences, than the homo economicus theorem was. This can be achieved using finding of humanities and social sciences, esp. psychology. The focus on income and profit has to be overcome for a more holistic picture of economics and economic acting. A part of this process is making happiness to an object for economic sciences. Therefore the evaluation of a national happiness index might get the same im- portance as the classical GDP (Layard 2005; Frey & Stutzer 2002b). The HE concept uses subjective measures of satisfaction as a proxy for utility (Ada Ferrer-i-Carbonell 2013), switching the classical focus of economics from effective use of resources to an individual, subjective vision of man as participant in economy (Juurikkala 2008; Frey 2008). This individual vision itself is depending on individual happiness (Frey & Stut- zer 2002b).

And why HE? To conclude all of the already mentioned authors, HE seem to be the next logical step in economic evolution, considering the overall trend of growing individualism, social orientation and even sustainability. A sole monetary profit orientation is not seminal any longer, an approach other concepts like CSR have also taken as substantiation. This thinking is reflected in business studies and macroeconomic sciences. Its impact on corporate strategy is discussed following.

3 Incentive Systems and Allocation of Incentive travel

For the interdependency of individual happiness and job performance, the well-being of the employees is an aspect a companies` strategy should consider. To create a win-win situation out of this consideration, an IS has to be implemented, to increase both jobperformance and individual happiness in relation to each other.

An IS is defined as a subsystem of management. It is an intangible resource, having no material existence on its own, but is using material resources. Its purpose is to motivate the companies` personal behavior in a positive way to attach it to the companies` ideals and culture. Abstract company goals and implicit cultural contents need to be clearly defined to be reachable by incentives, for only unambiguous objectives can be evaluat- ed. Its use should therefore result in greater worker productivity or cost-saving innova- tions out of workers suggestions. Nevertheless, for itself it is a cost driver to the compa- ny, and is not providing direct profit (Thompson et. al. 2012; Schulz 2000).

The general goal for using incentives is behavior modification. A positive influence may only achieved if an incentive is able to activate individual motives, and for these motives the incentive has to offer a suitable motivational counterpart. Finding this is part of creating the companies IS as part of its strategy and culture (Schanz 1991, Wöhe 2010, Wolf 2013). If properly configured, an IS is an important factor to bond employ- ees, for they might recognize the offered incentives as important benefit for their work- place related well-being. Their rate of absence will decrease with raising motivation, as well as the fluctuation among the employees, which will decrease transaction costs. Al- so the employees’ preparedness to perform, beyond bonding and preventing times of absence, should be raised, due to higher identification with the companies’ objectives. And additionally an outstanding positive IS is an important marketing tool to gain ade- quate new employees, for a possible employee is assumed to normally choose this or- ganization, which offers the best incentives and salary to him (Schanz 1991, Wöhe 2010, Wolf 2013)3.

Incentives are divided in tangible and intangible motivators. Other classification is done by considering the number of addressed recipients, which may be an individual, a group or the whole organization, and the source of the incentive, which may be intrinsic or extrinsic (Schanz 1991). To discuss the purpose of IS a behavioral science based view will be used, depending on Wienert (1991) and Schulz (2000). This concept divides the raise of work performance in three sub-goals: raise of productivity, raise of job satisfac- tion and raise of motivation. As shown in chapter 4, incentive travels can be allocated in the third sub-goal. Furthermore, employees’ behavior is to be influenced on three levels: at first, the prospect for the incentive, or the reward, causes motivation to reach it. Sec- ond the achievement of the reward is strengthening the intended behavior. And third, independently of special rewards, these incentives are constantly motivating, which are permanently present, such as corporate culture. None of these levels is providing abso- lute impact on motivation, for an incentive, regardless of its classification, does only work, if it is congruent with the structure of needs of the individual employee, which may differ as explained in chapter 2.

It seems to be a trend that intangible, post material values (Schanz 1991) are gaining in importance in the work life and therefore in their value in the psychological contract. In logical contrast tangible (mainly monetary) values are losing importance, though their incentive value must not be underestimated as already stated. But for the lack of trans- parency and standardization of most of the salary systems, money itself is not handled as motivational factor as long as its scale does not correlate with individual performance but with factors as hierarchy level, period of employment or family status. And, as far as a direct comparison of the salary is not possible, there is no impact on individual job related well-being as discussed in chapter 2 (Schulz 2000; Borg & Bergmeier 1992).

Not otherwise than monetary rewards and salary incentive travel rewards have to be characterized as tangible incentives, for a monetary value can be clearly assigned. But special about them is their additional strong intangible component: if used in framework of a whole group of employees, e.g. a division or even the whole company, there is as- sumed a strong positive impact on the social cohesion, caused by the shared experience of the reward and the shared quality time. As shown in the following chapter, this is one of the strongpoints making incentive travel a particularly interesting object in relation to HE.


1 For a more detailed discussion and explanation of the term „Happiness“, as it is used in this paper, see Annex A) Excursus: What is Happiness?

2 For more detailed examples see Annex B) and C)

3 For more details on purpose and configuration of IS see Annex D) Theoretic Fundamentals of Incentive Systems

Excerpt out of 28 pages


Happiness Economics and Incentive Travel
Allocation of an Incentive Instrument and Its Utilisation in the Context of a New Economical Point of View
University of applied sciences, Cologne
Corporate Strategic Management
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ISBN (Book)
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happiness, economics, incentive, travel, allocation, instrument, utilisation, context, economical, point, view
Quote paper
Dipl. Päd. Thilo Ketschau (Author), 2013, Happiness Economics and Incentive Travel, Munich, GRIN Verlag, https://www.grin.com/document/233160


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