In addressing the incentives space, it is perhaps prudent to examine the age-old question that arises time and time again: “why not just use cash?” Those in the business will answer that without hesitation and point out that non-cash awards are undoubtedly the way to go. But why is this?
Why do tangible awards work more effectively than simple, cold, hard figures in an ever deflated bank account? Intuitively, one may think that simpler is better, and that cash will always be king. But, as with many things that seem obvious, there is more to the incentives space than meets the eye.
The Incentive Research Foundation (IRF) produces in-depth and insightful research, and we’ll be looking at some of their findings in this article. Specifically, the whitepaper examined is titled, “The Benefits of Tangible Non-Monetary Incentives” by Scott Jeffery, PhD and the idea is to represent some of the whitepaper’s highlights.
The research presents four psychological factors that tip the proverbial scales in favour of non-cash incentives. The first two (Evaluability, Separability) relate to how a participant perceives the value of an award. The second two (Justifiability, Social Reinforcement) contribute to the actual way an award brings value to an earner. Let’s jump right in…
Leaving an indelible mark
If I write “Relaxing Island Retreat”, you might visualise beautiful beaches, warm blue waters and stress-free leisure time. Along with these imaginings, you will also probably feel positive emotions and wish that you were there right now, sipping a long island ice tea.
In stark contrast, if I wrote “R20 000”, all the great images and positive vibes evoked by the island retreat would fade into the background and you may think about paying debts, bills, mortgages, and etc. This is pretty mundane stuff.
The psychological effect between the two is marked, and the first leaves a much deeper impression than the second. Simply, the psychological impact of a tangible reward is much greater than the impact of a cash remuneration.
Separating rewards from normal pay
The idea here is uncomplicated, and the suggestion is that people tend to view cash bonuses as being part of their remuneration package, while tangible rewards are seen as distinct from normal pay.
In other words, tangible awards are perceived to reflect the fact that the participant has gone above and beyond normal expectations, rather than simply working for extra pay.
This idea reflects the truth that people are conscientious about spending habits. One can easily imagine someone saying, “Sure those golf clubs are beautiful and exclusive, but I can’t justify the expense”.
If, however, the golf clubs are earned through a rewards programme, the participant can enjoy them without any pangs of guilt. The tangible award is earned through hard work, and is seen as an enduring and physical trophy. As Jeffrey’s points out, “earning the incentive eliminates the need to justify its purchase”.
Social reinforcement vs personal opinion
One of the most important rewards for a job well done is acknowledgement from one’s peers, supervisors, family, and friends. This social reinforcement comes from others knowing about the good performance.
Whereas the details of one’s financial standing are often a personal matter not open to public discussion, a tangible reward can be the topic of a conversation and doesn’t violate any social taboos.
The idea of trophy value is powerful here, and a physical object serves to remind both oneself and others of the achievement. Cash simply lacks trophy value.
The cash vs reward debate is a hot topic in companies looking to implement incentive solutions, and no end seems in sight. Research, however, strongly suggests that tangible rewards like travel, experience, merchandise and gift cards can have more of an effect on motivation than impersonal cash.
The reason for this doesn’t necessarily belong on the plane of the practical; rather, the distinction lies in the realm of human psychology, so it is human psychology that should be taken into account right from the outset.
Additionally, there are compromises that combine cash with physical rewards; one such alternative (like our Kudosh card programme) is a branded card that allows one to buy products at any POS that accepts MasterCards. These cards can also be used for online purchases.
If you are considering implementing an incentives scheme, consider approaching specialists that offer a variety of possible solutions. Their experience and understanding may prove to be vital!