LeapComp - Sales Performance Management Blog

I briefly talked about non-cash incentives here, but I need to repeat some of these fundamentals to introduce tomorrow’s topic.

Non-cash rewards are used to motivate employees, reward them for their performance and encourage specific behaviors. Whenever I need to know anything about non-cash rewards, I turn to Paul Hebert who runs the Incentive Intelligence blog. In an old post, Paul says that “cash and non-cash are both critical in creating an engaged audience. Neither is better. Neither is worse.” He defines both type of rewards as follows:

“Paychecks and cash bonuses are transactional - they communicate an “impersonal” relationship. They do focus attention, create direction and communicate goals and objectives. But they are cold. Income and cash bonuses are things that are negotiated. They are bartered and dealt. They are things you don’t talk about at parties with your friends.

Non-cash - whether that be merchandise, travel, recognition, plaques, etc. - are emotional. They are talked about at parties. People show off their pictures of the trip they took or watch the game on the big screen they earned - and brag about it. People don’t show you their bonus check.”

He concludes his post by saying that both type of rewards must be used together to “shape, reinforce, change and maintain behaviors that help people stay in alignment with business goals and objectives”.

Since I wrote my non-cash reward article, the economic crisis became more pronounced. This has caused many people to complain that they really couldn’t care less about all the “useless” rewards they are receiving, and that their company should just give them more money instead. I’ve heard that from people who have been receiving paper weights, company clocks, shirts with a company logo on it, etc.

But on the other hand, many people who have more flexibility in what they can get as a non-cash reward, have been bragging about it. They argue that even if the economy is not great, that their company is still treating them very well!

I think that the obvious conclusion is that sometimes, a non-cash reward can do a better job at motivating the workforce than what the cash equivalent could have done. One of the key for the non-cash rewards to work is to offer something that the employees actually want. Since it is very unlikely that they’ll all want the same thing, flexibility in what they can get is the secret.

Companies should also be careful not to “overdo” non-cash rewards. Employees still care about cash, and still need it. If incentive compensation is significantly reduced at the expense of non-cash rewards, employees could get frustrated.

As with most things, it’s all about striking the perfect balance.

But no matter how well your incentive budget is distributed between cash and non-cash incentives, letting your employees know that they are appreciated does not cost anything and will go a long way in motivating them.