Is Cash Really the Best Incentive for Employees?
Are Cash Incentives Really the Best Motivation for Employees?
Many employers assume that cash is the primary motivating factor for their employees. In fact, if you asked the head of any major company what kind of incentives his or her employees preferred, you would expect them to say “cash.” A recent study conducted by the Incentive Research Foundation (IRF) suggests, however, that this may not be true. In fact, the findings of this study reveal a truth that is very different from the perpetuated myth that, if given a choice, participants will always choose cash.
What Kind of Incentives Do Employees Really Want?
The study conducted by the IRF was conceived and funded by the Incentive Marketing Association (IMA). This project, known as the “Participant Study,” is one of the largest and most detailed studies regarding the preferences of incentive program participants. According to the results of this study, as many as four-fifths of participants in incentive programs prefer non-cash rewards.
The Participant Study is not the first of its kind, but it may be the most detailed study conducted to date. In previous studies, participants were asked questions like, “If you were to be given a $50 reward from your employer, would you prefer to receive that award as cash or merchandise?” In most situations, the answer to this question would be cash. If you delve deeper into the issue, however, you will find that the real answer is not as simple as it would seem.
The President of IRF, Melissa Van Dyke, explains that the Participant Study involved just this kind of digging, shedding light on the different types of non-cash rewards that program participants valued most. Additionally, this study examined the preferences of program participants regarding who gave the award, how it was presented, and what kind of professional benefits it offered. According to Van Dyke, the results of the study showed that when all of these factors are considered, cash was not the primary motivation for recipients when the reward experience was personally meaningful.
When it comes to rewards programs, there are two main options—a large-award scenario or a small-reward scenario. A large-award scenario is one in which the recipient earns a single long-term reward such as participation in a President’s Club sales program. A small-reward scenario is one in which the recipient is given a spot reward for performance on a specific task or project. According to the results of the study, 80 percent of recipients in large-reward scenarios and 65 percent of recipients in small-reward scenarios chose a non-cash award.
Presentation Is Key, Study Says
In addition to showing that recipients valued non-cash awards over cash rewards, the Participant Study also revealed that the presentation of the award was very important to recipients. According to Richard L. Low, past president of IMA, the method of award presentation is a critical component in any incentive program. He suggests that companies that give out incentive awards tend to focus on the award itself rather than the process. According to the study however, the presentation of the award itself, including who makes the presentation and the professional development opportunities that come with it, carries much more weight than the value of the award itself.
As an example, Van Dyke recalls receiving a very nice pen in the mail as an award. When she received the award, she didn’t even know what it was for—she had to ask someone in her company. The person she talked to explained that the company had a hard time keeping employees for more than one year, especially in a consulting capacity, and the fact that she had reached the two-year mark warranted recognition. Van Dyke muses that many companies are willing to invest in their employees, but somehow miss the purpose altogether.
Evaluating Individual Preferences for Rewards
The Participant Study conducted by the IRF involved the participation of 452 people, and each participant was asked a series of 80 in-depth questions. The study asked each participant to rate their preferences for both large-reward and small-reward scenarios. Options for large-reward scenarios were broken into three categories—gift cards, merchandise, and travel or other experiential rewards. Small-reward scenarios were replaced with various perks like reserved parking and free lunches.
For each question, participants were asked to choose between a variety of rewards, but dollar amounts were not provided. Participants were asked to assume that the value of all rewards were the same. Some examples from the large-reward scenario include gift cards from online retailers (such as Amazon) or gift cards for clothing items (such as Gucci or Chanel). In the merchandise category, options were for items such as camera equipment or home décor items. Travel reward choices included resort getaway options, including airfare.
In addition to gauging the preferences of program participants in regard to the award itself, some questions asked participants to reveal who they would like to be recognized by. Some options included their peers, a manager, or another company executive. There were also questions about how each participant would prefer the reward be presented—in a one-on-one scenario or in front of a large audience. The final questions addressed preferences in regard to professional development opportunities that might accompany the reward—things like special projects or opportunities to attend conferences or seminars.
Making Sense of the Results
After evaluating the results of each survey, the IMA came to various conclusions regarding what kind of rewards employees valued most and how they wanted those rewards to be presented. According to the results of the study, participants who were being offered large incentive awards preferred to be recognized by a company executive. These participants wanted their award to be broadcast on the company intranet and they preferred to attend a networking event as their choice of professional development opportunity accompanying the award. For recipients of small rewards, the study found that for 40 percent of participants, the presentation of the award was more important than the award itself.
Putting all of the results of the Participant Study together, Van Dyke reveals that opportunity is the number one motivating factor for program participants. This result was fairly consistent among men and women, and was also fairly uniform among younger and older workers, as well as those with higher and lower incomes. This study reveals that there is certainly a place in a company’s incentive program for cash rewards, merchandise, and travel rewards, but it is essential not to overlook the importance of presentation and professional development opportunities to accompany the award.