Are Non-Cash Rewards Better Than Cash?

It’s the holiday season and I’m faced with my annual dilemma: How do I thank a small number of employees who have disproportionately supported the company’s and my own success over the last year?  For most of my career, I’ve believed that non-cash rewards were better than cash.  After all, cash gets used for next months’ car payment, to pay down a credit card balance, or for a night on the town. Cash disappears.

I’ve noticed this behavior regardless of whether the cash is included in their pay checks, provided as a separate incentive, or given as a spot bonus. Maritz, a sales and marketing services company, analyzed the use of cash cards in employee incentive programs and found that “more than 65% of cash card redemption was for non-memorable and essentially non-motivating items including bail bonds, court costs, tax payments and disposable retail purchases, like groceries.”  This poor performance doesn’t count the estimated 10% of all cash and gift cards that aren’t redeemed.

In an article entited “Right Answer, Wrong Questions” in the Sept 2004 issue of SalesForceXP, Scott Jeffrey, assistant professor of management sciences at the University of Waterloo, reports that non-cash rewards can be two to three times more effective than cash rewards.  The study goes on to recommend that managers should offer incentives that employees consider luxuries.  Gifts that employees wouldn’t purchase for themselves are more motivating than everyday items.

I’m not surprised by these conclusions. A physical item – even if it’s a desk clock or a pen – is a more constant reinforcement of behavior than money spent on a dented fender. According to research, people are more likely to be motivated by something that is perceived as a luxury, even though it might be worth less than a cash alternative.

The evidence is that non-cash rewards are more motivating than cash ones. And yet, this year I gave cash to a few select people. Actual physical currency. Somehow, after the economic roller coaster of the last year, it felt more substantial.

I’m interested in your opinion. Do you think that non-cash rewards are better than cash ones?

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6 Responses to Are Non-Cash Rewards Better Than Cash?

  1. Kelly December 21, 2009 at 6:23 am #

    Cash? I am definitely in the camp of non-cash rewards because it is a motivator (to me) and reminds me of the hard work put in to receive the reward in the first place. My company has a great program that the Mgr gives you a value reward and the employee can pick from hundreds of items offered. I’ve received a few over the years and it means a lot to me. Love turning on the old fashioned radio…

    I didn’t read your links to the research but where does charity fall? I assume ‘non-cash’. Donations to charity are another great motivator but this requires you know something personal about your employees… which is needed when ‘thanking’ someone rather than just rewarding them for a job well done.

  2. Oski December 21, 2009 at 9:54 am #

    Why is this an either or situation? It feels like you’re overthinking this issue

    There’s a recession out there and people have lost huge amounts on their 401Ks, etc so a little more cash (especially during the holidays) is always a good thing.

    Also, public recognition of the great performers not only validates their effort but also provides visceral clues for the rest of the organization on the right behavior to emulate.

  3. Robert E December 21, 2009 at 1:20 pm #

    I think that a non-cash gift can be just as tricky as a cash gift. Value is in the eye of the beholder and I would agree that it would have to be perceived by the receiver as a luxury.

    That gift also has to be appear personal, too often it is not. I have worked places where it appeared that a particular item was bought in bulk on the hopes that “one size fit most”. Then I had to listen to my coworkers complain that they wished they had just been given the money instead. My take was that they would have been even more insulted if just given that cash.

    It helps if this non-cash gift is unexpected. Expectations are rarely exceeded, Customer Surveys notwithstanding.

    While I appreciate a cash gift, I more often remember those non-cash rewards that were thoughtful and that showed my manager really cared.

  4. joe December 23, 2009 at 6:35 pm #

    As the lawyer for my ex-wife once said – ‘nothing says appreciation like cash’.

    As to the person who used his cash gift for a bail bond, what better gift than a ‘Get our of jail free card’. I would wager that he thought so.

  5. Kate December 28, 2009 at 9:21 am #

    There are only 2 things I want as reward – cash or time. The only “luxury” I really want is more time to spend with my family. Give me an extra day or week off if you want to show appreciation. If I can’t have that, then give me cash that I can spend on a vacation, or put into a retirement account so I can retire sooner and spend more time with my family at that point in my life.

    Actual gifts are tricky – as we all probably experienced over the latest gift giving season. Not a good idea to go there…

  6. rickpulito December 31, 2009 at 8:53 am #

    The question you pose is one that has been around for a long time. Having spent the last 25+ years in the behavior-change arena, here is my (short) answer:
    — As a means of recognizing behavior or achievement, cash is fine. It has a universal appeal, and although it is very likely NOT going to be used for a hedonic luxury (much more likely to be spent on rent, groceries, day care, etc), cash awarded after-the-fact is like a one-time bump in compensation. Unexpected perhaps, and always welcome.
    — As a tool for motivating future performance, cash is not going to get the job done. The long answer as to why involves a long-form answer that digs into brain science.. Suffice it to say that studies have proven that as a motivator, non-cash (tangible, such as luxury merchandise or experiential such as travel) will engage the emotions of your audience, and will propel greater effort and results.
    — The key is to distinguish between “recognition” (an award for past performance) and “motivation” (a reward based on future performance).
    One last note: When you are looking to drive future positive change, the very best way of doing that is by encouraging the individual to set their own goals, with a progressive reward structure based on elements of risk and positive reinforcement.
    If you would like to explore this in greater detail, pls feel free to contact me or visit my blog: http://www.ideationz.wordpress.com.
    All the best to you in 2010 ! !
    Rick Pulito
    rick.pulito@biworldwide.com

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