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 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 analyzed the use of cash cards in employee incentive programs and found “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?