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Is Cash King? The Psychology of Incentives

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!

David Sand

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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.

Related: 5 Surefire Ways to Get Clients to Pay on Time

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.

Justifying it

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.

Related: How Staff Training May Help Increase Your Turnover

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!

David Sand – CEO and founder of UWIN IWIN (Pty) Ltd -1994, with offices in South Africa, Kenya, Egypt, Ghana, Nigeria, India and Brazil. 2013 Global President of Site Global, the professional association for leaders in the motivational events and incentive industry. Regarded as a pioneer in the field on online incentive point banking and online loyalty, recognition and reward fulfilment. David is also the founder of the Youth Employment Index a non-profit company that addresses youth employment issues in Africa.

Managing Staff

Day Zero And Your Employees – What An Entrepreneur Needs To Know

With Day Zero pushed out to 2019, entrepreneurs in the Western Cape are still left with one concerning question: “What will happen to my business should the water supply still run dry?”

Jose Jorge

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Depending on their reliance on municipal water, entrepreneurs could potentially find themselves without the ability to generate revenue in the absence of water. During this time, they will still be expected to pay staff a salary, creating a potentially untenable situation for certain businesses.

It is imperative that entrepreneurs in the Western Cape region start early discussions with their employees to find possible solutions that can be implemented should Day Zero actually hit. CDH provides the following possibilities to consider:

To pay or not to pay, that is the question

The duty of the employer to pay remuneration continues as long as the employee tenders his or her services. This is also the case where an employee is prevented from working, due to an unanticipated or unpreventable act such as a natural disaster.

Related: SME Survey: Day Zero Warning Hits SMEs Hard

An employer would have to pay its employees that tender work even if it cannot provide them with any work. Fortunately for employers, labour law recognises certain measures that can be taken to minimise this burden. The two most common are short-time and the temporary suspension of payment of remuneration. It is also important to note that these two measures can only be implemented if all parties concerned have agreed to it.

Short-time is a system of work that is used for periods when there is little or no work. The system recognises that paying an employee for periods when he or she is not working places undue strain on the financial position of the employer and the employee.

Employees may either agree to short-time in a contract of employment, or an employer may enter into a collective agreement regulating short-time with a union representing the affected employees.

A temporary suspension of payment of remuneration may be implemented when there is some prospect of the work situation improving in the near future and the employer being able to provide the employee with work. This may be implemented as an alternative to a dismissal.

Where there is no agreement to these alternatives an entrepreneur will have to engage with his or her employees, explain the company’s position and attempt to secure an agreement in this regard. If an employer is unable to do so, he or she may have to consider retrenchments.

Can you retrench employees as a result of Day Zero?

This is a difficult question. An employer will have to consider whether employees’ inability to work will be for a prolonged period.

There is no way of knowing how long a drought will continue. With the unpredictable effects of global warming, the weather has become increasingly difficult to forecast. The World Wildlife Fund anticipates that if the Western Cape region receives the same rainfall pattern as last year, the drought will continue for six months.

Related: Why Innovative Employee Benefits Are Your Competitive Advantage

The Labour Relations Act, No. 66 of 1995 allows an employer to retrench employees for ‘operational requirements’. Operational requirements are defined as requirements based on economic, technological, structural or similar needs.

In order to establish that an ‘operational requirements’ dismissal is substantively fair, an employer must determine that genuine operational requirements exist. If the anticipated consequence of the drought is that a business may not be able to continue with its operations – without access to municipal water – this would constitute an operational requirement.

In conclusion, CDH advises entrepreneurs in the region whose business is heavily reliant on water to consider entering into working arrangements with their employees for the duration of the drought. This will ensure that the entrepreneur and the employee are both in agreement regarding available options should Day Zero occur. It will also help provide a sustainable alternative to retrenchments.

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Managing Staff

10 Corny But Undeniably True And Inspiring Quotes About Teamwork

As Michael Jordan said, “Talent wins games; teamwork wins championships.” He ought to know.

Blake Snow

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With two games remaining, my daughter’s soccer team is in second place. They’ve won nine games and lost only one – to the team in third place.

Although that team doesn’t not have as many star players as our side, they beat us on the admittedly widely held but elusive principle that sharing the ball leads to more goals (and better defense) than impressive dribbling or individuality.

In other words, their 11 played better as a team than the three remarkable players on my daughter’s team. Granted, the third-place team probably dropped more games than we did because playing as an effective team in consecutive games is harder to do. After all, it’s easier for a few great players to show up to every game (as we have mostly done) than a reliable team.

Related: 7 Team Building Ideas To Create An Engaged Team

In any case, my daughter’s “club” will square off against the first place team this weekend. I suspect they’ll lose unless they listen to Michael Jordan: “Talent wins games; teamwork wins championships.”

The same is true in business and life in general.

If we want to “win championships” in both of those, we have to get others involved, pass more, risk failure, allow teammates to learn from their mistakes by letting them commit them and putting the needs of the group above our own selfish aspirations.

To that end, I encourage you, my daughter’s soccer team and everyone else interested in winning to consider and internalise my 10 favourite quotes on the importance of competing as a team. Some are a bit corny. All are true.

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Managing Staff

Your Team Will Succeed Only If They Trust Each Other

Trust is difficult to establish, hard to maintain and easy to break.

Angela Kambouris

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Bureaucracy exists were trust doesn’t. Excessive process and micromanaging exist because people don’t trust each other to do what’s right and what’s needed. In a digital era where social tools make you more visible and accessible, you make personal and business decisions based on trust daily.

The 2018 Edelman Trust Barometer, often identified as the benchmark of trust measurement, recently identified that there has been a “loss of trust: The willingness to believe information, even from those closest to us.”

Trust is difficult to establish, hard to maintain and easy to break. In business, trust is one of the most valuable and complex of all your assets. It solidifies your relationships with all people and leads an organisation to thrive. As Richard Branson often says, “Learn to look out for your staff first, and the rest will follow.”

Let me share with you eight principles that determine whom and how you trust in the workplace.

1. How people handle failure

Within an organisation, when people trust each other, their energy is invested in minimising damage and getting on with it.

The involved parties take responsibility without prompting and lead the conversation to see how the problem will be avoided in the future.

A recent Google study, Project Aristotle, was founded on the premise of understanding why certain teams in the workplace struggle while others thrive. Researchers determined that “psychological safety” is the key to building and fostering successful team.

Related: Daily Practices for Cultivating a Positive Work Culture to Support Your Business

When people don’t trust each other, blame and shame runs rapid through the tapestry of the organisation. Taking responsibility embraces your vulnerability and leads people to move forward together.

trust-is-like-a-flower2. Accumulate trust deposits

Trust is like a flower. Once we step on a flower, it’s difficult to revive it. When you think about trust within a workplace, we know that when members trust each other to execute, teams are inherently productive.

When we want to create and build upon an environment that fosters trust, then what we say we will do, we do. We genuinely are curious and listen.

We are honest in how we provided feedback, without the sugar coating. And we don’t engage in gossip, eradicating the “I shouldn’t be saying this, but…” conversations. When we are visible and transparent in the workplace, we create a platform that invites shared thinking from all.

3. Work together to solve pain points

Most projects take more than one person to accomplish. Trusting colleagues is about letting go of the urge to be a lone ranger. Your team members have to be trusted to accomplish their tasks so you can complete yours.

Autonomy is only possible where there is trust. When you trust, you don’t expend much of your time and energy watching your back. Your energy is directed towards productivity and innovation.

Horst Schultze, one of the founders of the Ritz-Carlton Hotels, epitomised what it meant to be a trust-building leader.

Every employee was provided with an induction to the organisation, coupled with extensive training and a $2000 discretionary fund they could use to solve a customer problem without checking with anyone. He honoured his people by collecting their stories in making a difference for customers.

Related: Team Building Without Time Wasting

A team with high trust inspires its members to retain trust through excellence. Time is spent on identifying and breaking through road blocks, inspiring people to share more and working together to resolve pain points.

4. Small actions over time

Trust is not a matter of technique, but of character. You are trusted because of your way of being, not because of your polished exteriors. Building a culture of trust in the workplace occurs one step at a time. It is the small actions over time.

As a leader wanting to build trust, talk about what you want, not what you don’t want. Lend your voice toward what you want to bring to make it happen. When you operate from a place of trust, you demonstrate a commitment toward trust.

You show others what can be by promoting the ideas, talents and contributions of those you work with. Focus on what people can do and help others succeed. Step toward trust from where you are.

5. Sharing stories

Trust can grow rapidly when someone shares with you something touching that happened earlier in their life. You start to build a shared empathy.

When you want to create trust in teams, initiate conversations or invest in team games that help you tell stories you want to tell.

You control what you want to share with colleagues that can break down the divide between people and teams and lead to more empathy. Sharing stories is one way to connect and build trust.

paul-zaks-ted-talk6. What can mice teach us

A study at NYU Langone showed that when mice were given oxytocin, they started caring for the other mice’s babies as if they were their own. The oxytocin hormone enhances bonding, and even after the mice’s oxytocin receptors were shut off, this behaviour continued.

Oxytocin, the trust molecule, can teach us a lot about working together as a team and building great working relationships leading to more trust in the workplace.

Related: Making The Team ‘Work’

The best way to build your team’s internal trust is to be transparent about the overall vision and progress of the business, showing people how and why their work is important. Leaders must provide guidance, schedule check-ins between colleagues, and make room for conversations that strengthen connections.

7. Monkey see, monkey do

Our brains are wired to place survival as the top priority. In the workplace, any person who can demonstrate that they can reduce or eliminate threats to other’s survival is deemed trustworthy.

When we watch someone else, our brain is activated in the same way that the brain of the person you are observing is activated, effectively through what is called “mirror neurons.”

This means you may unintentionally transfer your own feelings of distrust to others. The trick is you can’t fake trust. You must believe that your colleagues are trustworthy to transmit this signal to them. In return, their brain will start feeling trust towards you as a result.

8. https://cm.g.doubleclick.net/pixel?google_nid=adaptv_dbm&google_cm&google_scEmotions impact trust levels in the workplace

There are many ways to treat your colleagues well, but one of the most important initiatives is creating a culture that makes it safe to make mistakes and openly debate and discuss issues without fear of retribution. Your colleagues will trust your ability to help them grow if they know that failures will be treated as teachable moments.

In a time of crisis, how you act in difficult times is the greatest measure of your integrity. Don’t wait to talk about a mistake that happened until everyone finds out about it on social media, and don’t sugarcoat what happened. Take swift action to right a wrong. Taking responsibility preserves trust.

Atlassian, a global software giant, built a culture where articulating why certain decisions are made is important in how they have built trust.

Related: 4 Strategies To Build Trust – Through Trusting Your Team

An “open company, no bullshit” value within the company has provided teams with access to information as quickly as possible, allowing employees to share and express their opinion without feeling they are going to get judged or pulled down. The company supports an environment where individuality is celebrated.

This article was originally posted here on Entrepreneur.com.

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