Suppose you are considering an employee recognition program, one that encourages desired behaviors with rewards. Good move, but what kind of rewards are going to generate the excitement needed to launch the program successfully and then keep your employees motivated and actively participating months or years from now?

If you were to survey your employees with the choice between cash and non-cash rewards, their answer would unequivocally be – cash. Recent research on the psychology of decision making (published in Incentives magazine) revealed that when given a choice between cash or a cruise or HDTV worth the same amount people pick will pick cash 63% of the time. When the same research team asked people to rate how happy or satisfied they would be to get either the cash, the TV or the cruise as a bonus (with no choice or comparison) the TV and cruise consistently outscored cash. The hypothesis of the scientists was that people were more excited by and would actually enjoy the non-cash rewards more because of the affective (fun, emotional) properties they possess. But when given a choice between a tangible reward and cash, the utility of the cash would lead many to make a more practical, less satisfying decision.

That said, do non-cash rewards generate more excitement, motivation and higher performance than cash? Goodyear tire ran an A/B test during a 6 month sales incentive program run in 900 company owned stores – in half of the stores, employees were offered a cash incentive for every 12 tires they sold. In the other half, employees were offered a collection of merchandise items worth the equivalent amount. At the end of 6 months the non-cash group outpaced the cash group by 46%. The ROI for the non-cash program was 31%…the cash program ROI was –20%. Needless to say, Goodyear is firmly committed to non-cash incentive programs.
This is consistent with what we’ve seen in over 30 years of incentive marketing – that offering non-cash rewards will make your program more motivating, cost effective and successful. Below is a summary of widely held observations on the advantages of non-cash rewards over cash:
•       Cash has little emotional value and no upside. A dollar is a dollar. Fungibility is its most exciting attribute.
•       The affective, emotional elements of non-cash rewards afford them higher perceived value, aspirational qualities and a greater capacity to motivate
•       Cash has no lasting effect. It gets psychologically mixed in with income, spent on bills (or other forgotten necessities), and almost immediately loses its association with the sponsor of the award and/or the achievement that earned the award.
•       Luxury, non-cash rewards bypass justification or practicality, which can turn them into high value, guilt-free indulgences…thus coveted and very memorable.
•       It is more interesting and acceptable to show off, discuss and acknowledge non-cash rewards, providing positive social reinforcement and the pride of trophy value to the recipient.
•       Merchandise rewards are visible and create a lasting association with the sponsor of the award and reinforcement of the achievement that earned the award
•       Travel awards are persist in the form of positive memorable experiences, which form a lasting link to the sponsor of the award and/or the accomplishment that earned the award
•       Cash tends to become considered an entitlement; non-cash rewards will always be seen as something extra and specifically earned for a particular achievement
•       Non-cash rewards are often enjoyed by family members as well, which elevates interest and motivation in the program

If you’d like to read a more detailed study of the psychology underlying cash and non-cash rewards, here is a link to a paper sponsored by the Incentive Research Foundation:

http://www.loyaltyworks.com/incentive-program-research-articles/benetangnonmon%281%29.pdf

Visit the Loyaltyworks Website at http://www.Loyaltyworks.com to learn more about Web-based incentive programs.