When It Comes to Rewarding Employees, Is Cash Really King?
It all started with a gold watch. In 1929, jeweler Edward Maritz began distributing watches to corporations to give to their employees as rewards for sales and service. This symbolic gesture of gratitude started a broad practice of rewarding employees with a seemingly endless variety of merchandise, experiences, and gift cards.
With today’s limitless choices and frictionless transactions, it’s natural to wonder what type of reward is really most meaningful. For simplicity’s sake, it’s tempting to fall back on rewarding employees with cash. After all, the logic goes, employees can buy anything they want with this.
The problem is, they won’t. We imagine employees treating cash rewards as “found money” — to be used on a special treat like a massage or dinner out on the town. Research consistently shows, however, that the most common uses for cash and card rewards are gas, groceries, and utility bills. When left to our own devices, it turns out, we’re terrible at treating ourselves.
When it comes to rewarding employees for going above and beyond, it’s time to recognize that cash isn’t always king. You may need to rethink your reward program to treat your employees for their incremental efforts, with memorable experiences and gifts linked to thoughtful recognition.
The Push for Non-cash Incentive Programs
Contribution recognition is a crucial component of employee engagement. Tangible rewards have been shown to enhance perceived organizational support — or how much employees think their employers care about their contributions and well-being. But when it comes to rewards, should you offer goods as an incentive, or stick to cash?
In a study commissioned by The Maritz Institute and the Incentive Research Foundation, 42 subjects underwent biometric testing that included facial expression analysis, eye movements, heart-rate monitoring, pupil dilation, and galvanic skin response. Participants were immersed in a virtual awards presentation, where they were presented with cash and noncash rewards. In most cases, biometric indicators revealed an emotional preference for non-cash items.
When it comes to human nature, tangible, experiential, and alternative rewards trigger positive feelings that cash just can’t. For example:
They Spur Social Recognition
It’s socially unacceptable to brag about your cash bonus. It’s totally cool, however, to show off a new grill you earned from your company. The recognition you get from your peers is actually an incremental reward on top of the item itself. An fMRI study showed that social recognition activates brain pathways associated with positive emotions.
Moreover, in today’s social media-centric world, the social benefit of sharing a noncash reward is amplified exponentially across our networks — a phenomenon we call “Selfie Value.”
They Build Stronger Relationships
A lab study by behavioral economist Dan Ariely found when incentivizing people in a task, rewarding employees in the form of Godiva chocolates motivated participants in the same way as receiving a favor would. Equivalent cash rewards were less effective — possibly because of the transactional expectation they set.
Non-cash incentives can establish a social exchange dynamic, as opposed to a pure market exchange. Think about the dynamics you’re cultivating at the office. You expect your employees to give you their attention in and out of work. Do you want everything you reward them with to signify “cash” — as in, “I’m only here for the money?” Or do you want to cultivate a social and reciprocal environment? One where employees feel good about bringing their whole selves to the job?
Cash is spent quickly and forgotten just as rapidly. Tangible or experiential rewards, however, serve as lasting reminders of the company’s respect toward its employees. My dad still remembers the set of luggage he received for hitting his very first sales target, and he’s not alone. It seems like many salespeople his age cherish the gold-plated watches and leather-bound briefcases they earned over the years.
Today, Millennials prioritize personal experiences over cold, hard cash, according to a study by Harris Group. To motivate these employees, companies should consider memorable experiential rewards, such as unique travel experiences, or alternative rewards such as volunteer time.
Building Your Own Successful Reward Program
Behavioral science research offers organizations the foundation to build successful reward programs. By applying basic principles from the psychology of motivation, you can make your programs more meaningful and effective:
- Leverage public and social recognition. Humans are a social species. While individuals vary in how publicly they want to be recognized, we generally want our peers to be aware of our accomplishments. Build a culture of recognition by making it a habit. Leverage gamification and social tactics to nudge people into recognizing others on a regular basis. That may mean running a social feed on your intranet homepage or encouraging your CEO to send a companywide email recognizing an employee once a week.
- Explore external ways to provide intrinsic rewards. Rewards don’t have to be cash or merchandise. Paid time off, social time with colleagues, or a donation to a charity of choice can tap into employees’ personal principles. Spending extra time with friends or helping a cause one truly cares about offers the goodwill cash just can’t deliver.
- Tie your program to your company’s values. Recognition programs are a great way to drive association of values. Reward specific behaviors that exemplify company values, not just a general good job. Therefore, in a company that values teamwork, that might mean honoring someone who assisted a co-worker.
In a business environment, acknowledgement and recognition mean the world to employees. A well-designed reward program can really pay off in regard to employee productivity, loyalty, and performance, as well as in sales and profits. If you are rewarding employees with a trip or a special night out, they’ll come back to work refreshed, re-energized, refocused and ready to return the favor with a job well done.