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Noncash Rewards Can Be Effective Motivator
 

By SHRM Online staff  9/30/2011
 

Noncash rewards, in the right circumstances and in the right combinations, can be a more effective motivator than money alone, according to a Performance Perspective executive briefing by Madison Performance Group, a provider of employee engagement and incentive programs.

“Cash should always be front and center in the compensation mix. But does cash alone represent what we really want to get out of the job?” asks Mike Ryan, senior vice president of Madison Performance Group.

As highlighted in the briefing, noncash awards — merchandise, travel, gift certificates, gift cards, a simple “thank you” — are better investments and more affordable solutions for companies looking to “do more with less.”

Additionally, nonmonetary compensation can maximize effectiveness in aligning the goals of the organization with the emotional priorities of its people. "Companies need to take care of skilled workers by aligning reward strategies with what people really want: rewarding work, meaningful relationships, acknowledgement, freedom and flexibility," Ryan said.

For example, noncash enticements can be used to close performance gaps across a wide variety of enterprise-level metrics, and they can be used to encourage improved outcomes at the local level.

“As an uncertain economic forecast continues to place cost demands on companies, it’s time to re-examine the old paradigm that cash is the most reliable motivator,” Ryan noted. “Companies looking to maximize the impact of their compensation costs would be wise to blend noncash elements into the mix.”

Research Findings

Recent studies looking at the role of noncash incentive awards as an employee motivator include an analysis by the Incentive Research Foundation (IRF), a not-for-profit foundation that funds research and develops products for the incentive industry, and the Incentive Federation, an industry association. Their analysis, The State of Tangible Incentive Research: Use of Tangible Incentives, indicates that across a variety of industries noncash awards can capture employees’ imaginations better than cash—thereby motivating them to increase performance.

“Noncash awards have 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 noncash’s influence over people can often be more powerful — and as such more profitable — than cash alternatives.”

Van Dyke said noncash incentives increasingly are being used by smart businesses as a way to control spending and motivate employees. “It is a competitive tool in an economy defined by growing austerity,” she noted.

According to Incentive Federation Chairman Karen 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.”

Jeff Broudy, chairman of the IRF board of trustees, added that 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. Businesses need to change with the times, and their awards strategies must as well.”

Related Articles:

Survey: Noncash Rewards Boost Performance and Morale, SHRM Online Compensation Discipline, September 2011

Nonfinancial Rewards: Finding New Ways to Engage Employees, SHRM Online Benefits Discipline, August 2011

Total Rewards--Motivating With Strategic Rewards, SHRM Research, December 2006

Cash vs. Noncash Rewards, HR Magazine, April 2003

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