Cash Incentives Not Always King When Motivating Employees

Sept. 27, 2011
A new study from the Incentive Research Foundation and the Incentive Federation finds that tangible awards often are more effective than cash when trying to motivate employees.

A new research review conducted by the Incentive Research Foundation (IRF) and the Incentive Federation examines a wide variety of studies in various industries and reveals that non-cash awards actually can capture an employee’s imagination better than cash – thereby motivating them to increase performance.

“When used properly non-cash awards, like merchandise and travel, have indeed proven to be more effective and therefore more efficient than traditional forms of compensation when used properly in a total-rewards mix,” said IRF President Melissa Van Dyke. “Our research review showed that non-cash’s influence over people can often be more powerful – and as such, more profitable – than cash alternatives.”

Van Dyke said non-cash incentives such as travel, entertainment and merchandise increasingly are being used by smart businesses as a way to control spending and motivate employees. “It is a real competitive tool in an economy defined by growing austerity,” says Van Dyke.

According to Incentive Federation Chairman Karen Renk, it is incumbent on the incentive and recognition community to teach the nuts and bolts of non-cash strategies to business leaders and demonstrate how they can be used to motivate employees.

“The current business economy is challenging everyone,” said Renk. “Like any other business expense, the funding of reward programs attracts intense scrutiny from business leaders looking to slash costs. For that reason, the importance of these findings cannot be over stressed: travel and merchandise awards often produce greater bottom-line benefits than other incentive alternatives. It is nothing short of a game changer.”

Jeff Broudy, chairman of the IRF board of trustees, concurs. He said such measurable outcomes include increased sales, decreased waste and reduced absenteeism.

“Tangible awards capture employee attention,” Broudy said. “That attention yields better performance and drives several practical business outcomes. The old notion that cash is preferred by employees and is therefore always more impactful is not true. Businesses need to change with the times and their awards strategies must as well.”

The full findings outlined in The State of Tangible Incentive Research: The Use of Tangible Incentives are available here.

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