Money Talks, But What's It Saying?

A company that sells gift certificates as incentives for employee performance claims, not surprisingly, that non-cash incentives might be better at motivating employees.

Every year, U.S. businesses spend more than $25 billion to motivate employee performance and customer sales, according to the Incentive Federation. Much of this comes in the form of cash incentives, but there may be a better choice when it comes to motivating employees, says Erika Perrault, senior vice president, Sales and Marketing, Gift Certificate Center, a Hallmark Co.

"Cash incentives tend to be looked at as something employees are due," said Perrault. "But a DVD player, airline tickets or a nice dinner out are things that employees remember and can visualize."

When employees can visualize their reward they tend to work harder to achieve it, she says. Of course, cash could be used to buy these things, but it usually gets spent on bills or other short-term needs and with it goes its value as an incentive.

When designing an incentive program, it's important to choose a reward that has what Perrault calls "trophy value."

"People may be reluctant to talk about a cash incentive, but they have no problem bragging about the new stereo system they were rewarded with. It's very clear that this is recognition separate from compensation," she added.

According to her, other benefits of non-cash incentives are:

  • Inexpensive gifts have more impact than the cash equivalent when on a limited budget.
  • When implementing a larger program, there may be discounts available with non-cash awards, where there are none with cash.
  • Non-cash incentives are extremely affordable and effective, typically costing between 3 to 5 percent of participants' yearly compensation, whereas a cash program can average 5 to 15 percent of annual salary.
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