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Why Cash rewards are not the way to motivate your staff

By February 1, 2014 May 6th, 2020 No Comments

Ask someone to work harder and they’ll ask to be paid more. Everyone on the surface prefers cash.

The reality is, however, that cash is an ineffective motivator. A survey of U.S. companies by the American Productivity and Quality Centre found that incentive programs offering non-cash rewards generated significantly more tangible results than those offering cash.

Several reasons exist why cash falls short as a motivational reward. Most importantly it has no trophy value at all. Once it is spent, it’s gone. Often participants feel uncomfortable bragging about cash rewards, but don’t have any trouble discussing a trip they won or the features of their new TV, or even their Gold Class cinema experience. In addition, cash costs more, since its perceived value is exactly the same as its cost, and it promises no lasting association between the work, the prize and the sponsoring company.

Although cash incentives can satisfy certain monetary demands, it does not motivate people to exceed established, comfortable levels of performance. Once subsistence needs are met with cash income, the need for psychic income takes precedence.

Psychic income provides things that money alone cannot satisfy – acceptance, recognition and personal esteem. A cash payment to an employee will often end up in the family bank account, with the funds going towards food or household bills. Furthermore, most people feel guilty about buying gifts, luxury items or exotic trips for themselves for a job well done. Instead they will more likely feel compelled to put their reward earnings into more practical use for their family (such as the children’s education, home maintenance, servicing the car, etc.).

This “guilt factor” associated with cash rewards shouldn’t be underestimated, as it plays a significant role in the overall experience within your staff recognition program. Think of it from this perspective: You reward with cash; your participants associate cash with compensation; compensation is used toward satisfying basic needs such as food and shelter. Cash rewards force participants to make a psychological and physical choice between something they want versus something they need—an item of need versus an item of self-reward. And, rather than coming away with positive memories, they are more likely to recall a sense of guilt regarding the experience. Because of their nature, non-cash rewards have intrinsic recognition value, a lasting trophy value, and promote “guilt-free” spending.

Why Non-cash Awards Work.

Jerry McAdams from the American Productivity Centre notes that alternatives to money are proving to be surprisingly effective in motivating employees, and non-cash incentives can be much less expensive. In a 2012 Boardroom Report article, McAdams noted that non-cash incentives – mainly experiences, travel and merchandise awards, cost only one-third as much as special cash bonus programs for the same results.

But why do non-cash rewards motivate better than cash? In considering the probable cause it’s important to understand how participants in a staff recognition program perceive the offers of rewards.

Research has shown that the way the brain processes information is responsible for non-cash rewards having a greater impact on people than cash awards. Offers of non-cash rewards are visualised or imaged by the right hemisphere of the brain. Such images or mental pictures trigger emotional responses that can be quite powerful.

Conversely, offers of monetary rewards are processed by the left hemisphere, which lacks the ability to create images. When a monetary reward is received, the brains left hemisphere assesses the information and determines whether the offer is sufficient, relative to the time or effort required to earn it. The emotional response is what drives behaviour, not rational thought. With cash, it’s reduced to one issue – how much.

Of course if you offer enough money you can move the needle in most situations, but there’s rarely enough money in a client’s budget to buy performance. That’s why you need the emotional response that only a non-cash reward can provide.

To learn more about how to cost effectively engage and motivate your employees call the Brownie Points team on 03 9909 7411 or email us at info@browniepoints.com.au

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