In his blog post today, incentive consultant Paul Hebert writes that you can’t replace non-monetary incentives with pay-for-performance. He argues that non-monetary rewards provide a different sort of incentive than more money does and are necessary for keeping employees motivated.
I’m not so sure. I definitely love the idea of getting a gift card to a local restaurant or bookstore as an extra treat for a job well done, but I think if you gave me the choice, I’d rather have cash. Sure, it’s fun to think of going out to eat or buying a book I might otherwise have left on the shelf, but extra money can go toward that or to helping me achieve my personal financial goals, such as paying off my car or saving for a down payment on a condo.
Must employers provide both monetary and non-monetary incentives to keep employees motivated?
Image credit, ImageegamI via iStock
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Appreciate the linkage. Your point is well made and correct. If you survey employees – they will always pick cash as their preferred award. Unfortunately – cash has been PROVEN to be less effective and ultimately damaging to the employee-employer branding.
The point here is that through the use of non-cash incentives (I'm not specific here 'cuz it really don't matter – just not cash) you get more bang for your buck and you distance the short-term tactical behavior needs from compensation.
If we only used cash as a motivator you get mercenaries – the last thing companies need right now. And, as I discussed in the post – cash as an award – unless managed very very carefully is fraught with unintended consequences.
Unfortunately, the "cash is the answer" conversation continues because people always want cash – but businesses don't look at the facts – they simply go with what they "think" they would want – and ignore the evidence. Dan Pink's new book Drive is ALL about how cash incentives are dangerous and should be outlawed. I don't go as far as he does – but the evidence is pretty overwhelming that cash is less effective as a tactical motivator for behavior.
Just give me cash and tell me I'm appreciated often and I'm fairly motivated. I don't like assumptions that a gift or gift card is valuable to me. Usually, they are for something I'm not interested in anyway. With cash I can choose my reward, even if I only choose to pay a bill or buy needed groceries. It's still my choice and it's what I need or want. I also don't like competitions. Then it's a matter of winners and losers. Everyone who works really diligently and goes beyond the call of duty deserves appreciation and reward, not just the lucky one whose name was drawn from a hat or the one most popular.
I think there is a big difference between giving a gift card for a book or restaurant in "appreciation" and saying "thank you" and a Pay for Performance Plan. The latter is actual employment compensation for providing value to the organization and should include a salary, benefits and bonus structure of some kind.
The former is something that most business leaders fail to do and that is recognize small contributions along the way and show appreciation, which I think goes a longer way than most people realize. But the latter is not substitute for the former as I think Mr. Hebert was saying.
In one instance a recent client of mine struggled with having to ask employees to take a 10% pay cut for the first quarter of 2010. He brought this to everyone's attention right before the holidays and then he still wanted everyone to attend the annual company holiday party. He couldn't understand why employees were not enamored and excited about celebrating the holidays with the company.
I had to explain to him that their feelings were if you could splurge on a holiday party why do we have to get a salary cut? I suggested he leave it up to the employees and offer them the holiday party or an extra $100 cash in their holiday bonus. They opted for the holiday cash.
As I explained to him in challenging times such as these the best thing you can do is give people as much control over their circumstances as possible, even small choices like that make a difference.
Angie – I agree that you may feel you want those things but studies (many, many, many studies) have proven that our brain does tricks on us and we perform better for non-cash – regardless of what we think we want. Read the book Predictably Irrational for an eye-opening reveal of how our brains fools us and direct us down irrational ways. I also agree that competitions are bad. We're talking incentives, which are based on your own personal past performance – not someone else's – which is why competition is bad. Two very different things.
Skip – you bring a very important point up – control over one's situation is a very powerful motivator. No non-cash incentive will make up for bad management or poor compensation practices.
My point is that too often we rely on the big P4P cash award and forget about all the small things that lead to it. A system that uses non-cash awards will allow you to guide behaviors toward those goals without the cost and administrative burden of constantly tweaking your compensation program.
Money isn't a motivator. Read Frederick Herzberg's research on Motivation. Money is something that people expect. Unfortunately, the more you give, the more people expect and you will never be able to give enough. When it comes to motivating someone to perform better on the job, real people motivators are things like accomplishment, recognition for accomplishment (non-monetary), personal growth, liking the work you do, etc. Motivating with money is just a vicious circle.
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