Which Is Best? Cash or Non-Cash Incentive Rewards?
Many people managers debate the merits of cash or non-cash incentive rewards. Which motivates people more? What moves the needle? And which is the most cost effective?
Well, according to at least one recent study, the answer isn’t cash. Surprised? Read on to find out why.
Cash vs. Non-Cash Rewards: What’s the Difference?
First, it’s helpful to define what constitutes a cash or a non-cash reward. Here’s how to think about it:
- Cash Reward. Anything involving a direct payout. This could include spot bonuses, stock options, debit cards, and direct payouts via payroll check. Note: this does not address hourly raises or a salary increase.
- Non-Cash Reward. Just about everything else. Trips, gift cards, event tickets, exclusive merchandise, employee recognition, additional vacation days, and so on.
Interestingly, if given a choice, most people would voluntarily select to receive cash. This makes financial sense: I mean, we’ve all got bills to pay, right? However, anecdotal evidence suggests non-cash rewards deliver a greater organizational benefit.
Cash Is NOT King
Remember how we mentioned that everyone has bills to pay? Credit card debt, new tires, a trip to the emergency room…everyone has something unexpected in the unpaid pile on their desk. And that’s the problem.
With a cash incentive, people are significantly more likely to think about it like compensation. So they take that nice bonus payout, turn around, and promptly apply it to something necessary (but not exciting). Using it for those kinds of everyday purchases lessens both the memory and positive association of the gift.
In other words? It’s boring!
On the other hand, if an individual gets flown to Hawaii for an all expenses paid vacation, it creates a highly memorable experience. They will look back at that time for years afterward, and continue to have a strong positive association.
Even better? They’re significantly more likely to brag about the trip than they are about the cash. Talking about compensation is a social taboo and, in some cases, frowned upon by different companies. So, if you’re trying to create a residual effect and illustrate how hard work gets rewarded, you’ll get a bigger “halo” from implementing non-cash options.
Do’s and Don’ts of Non-Cash Rewards
Ok, we’ve sold you on the alternative rewards. You’re ready to move forward with implementing a non-cash reward strategy.
Here are some things to think about as you go forward:
- DO make it memorable. You want people talking about it for a while after, right? So give them something to talk about! An exotic trip, new flat screen TV, or dinner at the chef’s table of the city’s best restaurant…make sure it’s got some wow factor.
- DO make it unique. Think about rewards that create a feeling of exclusivity. These are items or experiences an employee wouldn’t have access to in their day-to-day life. Consider options like:
- Courtside seats to a basketball game
- Concert tickets inside the company’s suite
- Meet and greet lunch with CEO, or other famous individuals affiliated with the company
- DO make it work for the bottom line. Ideally, you want an incentive to cost the company less than its perceived value. Take a look at any existing relationships you can leverage, bulk purchase options, or other cost-saving strategies. Even something as simple as a few “off the book” vacation days or a reserved parking spot can work to your advantage. Inventory your resources and see what’s already available to you.
- DON’T assume the same rewards work for everyone. Not everyone wants to go to the Super Bowl or win a pink car. Universal rewards can be tricky things, so it’s best to have a few options available. You should also have tiers of options, based on the size and scale of the employee impact. Because you wouldn’t give a two-week cruise to the guy who saved the company $500 on office supplies, right?
- DON’T use a reward when praise and acknowledgment is a better choice. One of the most undervalued tools in the employer arsenal is public praise. Maybe it’s a monthly email, acknowledging top sales performers. Perhaps it’s a call out at the next corporate all-hands meeting. Sometimes, just saying the accomplishment out loud can be the most meaningful reward of all.
- DON’T give away junk. Most people have been on the receiving end of a meaningless reward. Cheap gym bag with the company logo blazoned on the side? A packet of coupons for discounted car washes? While some employees may not mind, others may find it insulting. It’s important to understand what items your employees will perceive as having the most value, regardless of the cost to you. Otherwise, you run the risk of alienating your best performers.
If you follow these simple Do’s and Don’ts, your company will be well on the way to improving morale and driving employee engagement.
Ready to Get Started?
The team at Loyaltyworks has decades of experience with non-cash incentives. Let us help craft the strategy that’s right for your business.
Call 1-800-844-5000 to find out more about whether cash or non-cash incentive rewards will work best for you.