Cash is king. Or is it? When it comes to motivating and rewarding employees, a cash incentive is great, but it’s hardly the only effective option.
Cash incentives for employees
Ask employees to choose between cash vs. non-cash incentives, and you’ll likely get a unanimous vote for more money. Monetary rewards inspire employees to perform at their best and work toward personal and company-wide goals.
Cash incentive examples include:
- Bonuses for meeting sales quotas
- Team bonuses for meeting production goals or completing projects on time
- Annual bonuses based on the amount of time an employee has been with the company to reward loyalty
- Contests with a cash prize for the individual or team with the highest level of production
- Cash prizes for innovative suggestions
- Profit-sharing to reward employees for contributing to the success of the company
- Pay raises for meeting specific goals or staying with the company
- Matching retirement fund contributions
- Paying for the employee’s education or training programs
- Paid time off for achieving work goals
What do studies show?
In reality, numerous studies have shown that non-cash rewards actually do a better job of motivating people to meet business objectives.
In a study from Wichita State University, researchers asked participants to choose between three incentives with the same dollar value: cash, a high-definition TV, and a cruise. Nearly two-thirds of the participants selected cash. But when researchers asked the participants how happy they would be to receive each of the options, participants consistently chose the TV or the cruise.
Why? The answer might be found in a previous study performed by one of the same researchers. That research compared cash vs. non-cash incentives and motivation in the workplace. The study found that employees prefer non-cash rewards for four reasons:
- Justification. Non-cash incentives give employees things they see as luxuries – things they would not usually buy for themselves, even if they had the money.
- Social reinforcement. Non-cash incentives have “trophy value.” They are visible to family, friends, and peers, which brings attention to the employee’s performance.
- Separability. Cash incentives are perceived as “more salary.” They become lumped in with other funds and lose their impact.
- Evaluability. Cash has a fixed value, but the value of non-cash incentives can be ambiguous. Thus, the harder an employee works for an award, the more they perceive it to be worth.
Non-cash incentives for employees
Non-cash rewards might have financial value, but because they’re not paid out in a check or currency, they introduce something unique.
Goodyear Tire & Rubber Company demonstrated the power of non-cash incentives with an experiment back in 1994. As recounted by Duke professor Dan Ariely, the company wanted to improve sales of a new line of tires. They divided their 60 retail districts into two groups of equal performance. One group would receive cash incentives for sales; the other would receive non-cash incentives of equal value.
“The results were very interesting; it turned out that the tangible-reward group increased sales by 46% more than the monetary-reward group. They also improved in terms of the mix of products sold by 37%.”
Professor Ariely theorized that being able to visualize the tangible, non-cash reward created an emotional response in Goodyear’s salespeople. Cash, on the other hand, lacks the same emotional punch.
Here is a list of non-cash incentives in the workplace that you can try out with your team.
- Travel vouchers for a weekend trip or a week-long cruise
- Tickets to a sporting, theater, or music event
- Fine dining experiences
- A coveted high-tech gadget
- Personal enrichment learning opportunities
- Family photo session with a local photographer
- Lunch with the CEO
- Additional PTO days
- Car detailing service
- A spa day, a round of golf, or other leisure activity
- A coveted parking space
What employee incentive is best?
The decision to offer a cash incentive or a non-cash incentive for employees should be based on your company’s unique situation and desired outcomes. The bottom line is, you need to reward employees for their hard work and dedication, and being an effective manager means knowing what types of rewards your staff appreciates. After all, people are the heart of your company, and showing your appreciation is crucial to your company’s growth.
Want to learn more about retention strategies? Speak to an LHH compensation expert today .