Deciding how to best optimize your organization’s incentive program varies from place to place. Industry, employee demographics, and more can play into what makes the *best* motivator for them. However, we do know one thing for sure: when you really want to inspire workers, turn toward non-cash rewards.
We’ve shared information in the past about what really motivates people. And while time and trends change, one thing has not: cash is nice, but it’s not quite as effective as many think it is. Cash occupies a certain place in our minds, the “mental accounting” department. It’s more rare than some might think that an employee uses a bonus to buy themselves something nice, and more common that they put the money toward bills, debt, savings, things like that. It’s not to say that those are bad choices. But when we compare it to something else – like earning a travel experience – the delight factor increases exponentially.
That’s part of the findings from a recent article in the Incentive Research Foundation (IRF) quarterly. The researchers started with three hypotheses to test about non-cash rewards:
- Recipients tend to think about them more and differently, as it’s easier to separate a non-cash reward from salary
- When the reward is more about fun or treating themselves, they spark emotions, causing potential recipients to want the reward more than “utilitarian” cash, work harder for it, and remember it more vividly
- Non-cash rewards better avoid the expectation of future reward
Interestingly, none of the three hypotheses took a firm lead over the others when it comes to why non-cash rewards are more effective. It suggests that it’s actually a combination of all of them, with some variation based on the individual and the organization.
The IRF article pins the reasoning down to a “want vs. need” argument. The “wants” in life are hedonistic, or about pursuing pleasure: incentive travel, expensive watches or jewelry, interesting experiences, all those things on which we might not feel comfortable splurging. On the flip side, the “needs” are utilitarian. Money, or cash rewards, are utilitarian. We tend to spend extra money on paying down debt. Groceries. Utilities. Things that are far less likely to activate the pleasure centers of the brain.
However, a caveat to this was discovered. If an organization framed the cash rewards as hedonistic, i.e. communication accompanied the reward encouraging employees to go to dinner or treat themselves in some way, they did perceive it as more of a reward than just a bit more in their paycheck. So, if cash is the only option at your organization for whatever reason, consider the accompanying messaging as well as the reward.
At the end of the day, employees appreciate any and all rewards that can be directed their way. But for organizations that want to consistently drive better results and engagement from their employees? Non-cash incentives are the way to go.