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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.

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What Would Twitter Do? Lessons On Culture From 5 Top Start-ups

How Airbnb, Twitter, Skillshare, Buffer and Squarespace create and maintain great company cultures.

Sujan Patel

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What do the world’s top start-ups all have in common? They’ve mastered the art of company culture.

Brands from all over have attempted to mimic “start-up culture” – the collaborative, fun and enriching atmosphere that makes employees want to come to work each day. But fostering a start-up culture is not as easy as it sounds, especially as your company grows.

Having a strong culture, however, is the key to success and cannot be neglected. In fact, research from the Department of Economics at the University of Warwick showed that happy employees are 12 percent more productive than the average worker. So it truly pays to have a strong company culture.

But what exactly does a strong culture look like? And more importantly, how can you build one? Follow these five tips from successful start-ups:

1. Keep employees engaged

At Airbnb, employees are kept in the loop on major company happenings and big decisions. This gives them a sense of ownership and purpose in the company, which in turn fosters engagement. According to a Gallup survey, 51 percent of the American workforce is not engaged. But having engaged employees is highly beneficial.

As Airbnb CEO Brian Chesky wrote on Twitter, “A company’s culture is the foundation for future innovation. An entrepreneur’s job is to build the foundation.”

Engaged employees create a more positive work atmosphere. And, with happier employees, as well as increased productivity, your company will have happier customers and boost sales.

Related: To Change Your Company Culture, Change Your Conversations

2. Focus on the company’s purpose

Employees want to feel that the work that they do matters. That’s why Twitter’s purpose-driven environment works so well. Its focus is on creating a collaborative, team-oriented space that helps employees come together and see the value of what they do.

In an article on Medium, Twitter co-founder Biz Stone wrote, “Start-ups have a unique ability to create a culture of compassion that helps us improve; and in so doing, we are more likely to make a difference in the lives of others.”

In 2014, Twitter’s employees were named by Glassdoor as the happiest in the country. Much of that happiness can be attributed to the company’s culture, where employees feel that their voices matter.

3. Be proactive

Culture doesn’t just happen on its own. It’s something that needs to be nurtured and tended. Without culture, your company will have no legs to stand on.

On his blog, Buffer CEO Joel Gascoigne wrote, “There’s no right or wrong with culture, it is simply a combination of [the] natural personality of the founding team, in addition to proactive work, to push the culture in a desired direction and to maintain certain values.”

Since the beginning, Buffer has made culture a priority. At each stage of its business, it’s assessed its company culture and made changes based on the company’s growth. As your company grows, you must also scale your culture. And that will almost certainly mean that the culture for a three-person team will look very different from the culture for a 20-person team.

Related: Strong Company Culture Fattens The Bottom Line

4. Stick to your values

In essence, your culture is your people. Without great people, you can’t have a great culture. That means you need to define what you want your culture to be like from the beginning – starting with whom you hire.

In an article on Medium, Skillshare CEO Michael Karnjanaprakorn wrote, “Because the best cultures derive from actions people take, it’s imperative to define expectations around optimal behaviors, which set a foundation for a value system.”

To ensure all new employees fit in with their culture, Skillshare developed specific hiring guidelines based on its core values. This allowed the company to build a team focused on common goals so people would be able to work together successfully.

5. Show appreciation

Not every employee needs to have fancy benefits like free lunches, yoga classes and snacks – but perks like those don’t hurt, either. Squarespace offers some exciting benefits for its employees, including flexible vacations, catered meals, relaxation spaces and occasional guest lecturers. The company was even named one of the best places to work in New York City in 2013 by Crain’s New York Business.

Employees appreciate being taken care of, but that’snot the sole reason they want to work for a company. Squarespace also boasts a flat organisational structure, which means there is no hierarchy or levels of management. This creates an open space for employees to collaborate and make their voices heard as well as gain access to the company’s leadership.

This article was originally posted here on Entrepreneur.com.

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How The Digital World Has Impacted HR

Here are a few ways in which HR has changed.

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Almost every conversation that happens within a business environment is around growth and how technology is changing the way we do business. With few industries left untouched, the digital world has radically changed the way individuals work, creating an even bigger demand for real-time experiences.

The HR department deals with an influx of messages and emails on a daily basis, so in order to make things easier, digital has introduced a variety of different online tools that have certainly helped set the tone for the future of organisational management. With employee cultures, engagement and productivity being a few of the most important topics circulated internally, HR has a fundamental part to play in getting existing employees to adopt a digital mindset that supports this new-age culture.

The quicker businesses take advantage of technology to manage performance, make the hiring process easier and give people access to their own personal information, the quicker it will separate traditional workplace thinking from today’s thinking.

Here are a few ways in which HR has changed:

Cloud computing and online apps

With previous admin and other HR tasks being done by hand, cloud computing has now made everything faster and simpler. Professionals now have access to the latest online tools that will help streamline processes and allow individuals instant access to their own personal information without having to ask for it. This also speeds up the process and takes a lot of extra, unnecessary work off HRs shoulders.

Related: Is Leveraging Your Resources Getting The Job Done Properly?

In the upcoming years, companies can expect cloud-based HR systems to become more automated and mobile friendly. This means that HR and management will be able to access employee payrolls, CV applications and more, with just the click of a button.

People analytics

One of the many benefits that digital has created for HR is the availability of employee data. More companies have started using online applications to monitor employee performance and company productivity. HR departments have started tracking employee behaviour and patterns through their selected app, making employee feedback easier and more efficient. If any employees have complaints, questions or queries, logging these requests online will make it easier for HR to deal with, considering the amount of content they receive, every day. This will also help them to make more effective decisions.

It’s no secret that a company’s most valuable asset is their people, and when looking to motivate employees, track employee training and individual performance or set up a training programme, then online is the way to go. By having a more holistic understanding of your people and how they’re performing, HR can better support a culture of feedback, engagement and motivation. This kind of approach will also enable employees to better align their personal goals to bigger business objectives.

Real-time feedback

Because the digital age has created the impression that things can get done quickly, in real-time, employees feel the need to give and receive feedback with an instant response. Real-time evaluation is much more effective for something that needs to change than an annual or quarterly review would be.

If new procedures, policies, meetings or activities get announced, employees can immediately give their feedback on a specific topic or outcome. This will also help you know when to make changes both within the organisation and with employees. For example, employees who don’t measure up to their KPI standards can be subjected to additional training or can be let go in favour of someone else who can come in and do the job better than they do.

Related: What Happened To The Workplace? How To Make It More Human

AI, VR and AR

Gone are the days where robots, VR and AR were simply jargon used among tech geeks. These terms have officially made it to everyday conversations, between business owners, employees and HR leaders. Virtual Reality (VR) which can be identified as a recreation of reality, is now being harnessed by companies in their training activities, as well as Augmented Reality (AR) which enhances technology. These elements are starting to become far more integrated into internal activities, helping employers engage better with employees, making activities more interactive and fun.

While many advancements have been made to the HR department and even HR management courses at colleges, there are countless others to look forward to. New tech innovations are introduced every day, creating even greater opportunities for businesses to align their goals with HR.

Professionals will need to keep up to date with the latest trends and develop their own strategies to stay within the path of progress. Much like all things digital, we all have mixed emotions when it comes to new trends but in order for companies to stay relevant, they will need to adapt their company goals to meet these challenges. Technology is only going to keep moving forward.

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Managing Staff

A Culture Of Discipline Critical For SMMEs To Thrive

Employees are the heart and soul of every organisation, especially for Small, Medium and Micro Enterprises (SMMEs).

Thabang Rapuleng

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Employees are the heart and soul of every organisation, especially for Small, Medium and Micro Enterprises (SMMEs). As a result, the implementation, as well as enforcement of clear workplace policies and practices is critical to the success of these companies.

With South African Labour Law as strict as it is, we are still finding a significant number of SMMEs that do not have any formal policies and procedures, which increases the risk of these companies not complying with labour laws.

This is often as a result of SMMEs not having the necessary manpower or finances to have fully-fledged human resources (HR) departments. It can therefore be a common occurrence to find SMME owners at the helm of HR divisions.

An owner-run HR department will also not necessarily be overly familiar with labour laws. The company will often do something that is “good for business” but not advisable in terms of the law. This could lead to poor decisions being made and could be detrimental to the future of the company.

Related: 3 Steps To Find And Keep Top Talent In Your Business

Poor communication of policies and procedures is another area of concern for many SMMEs, resulting in employees often being unaware of HR policies and making them likely to infringe on these policies. New employees may also find it difficult to adapt to the business and employees could end up losing what could have been a valuable asset to a growing business.

A culture of discipline is essential

Discipline with regards to the enforcement of policies must be considered as a day-to-day management function, rather than a once-off or ad hoc event. This approach will ensure an issue is resolved before it spirals out of control.

For example, if an employee takes an extended lunch break, and the employer allows it to happen, it will send a message to other employees that this is perfectly acceptable. Employers will soon find other employees adopting a similar approach, possibly resulting in a large-scale disciplinary process. If the employer took the time and initiated a disciplinary discussion with the one employee, it would have communicated to other staff that this type of behaviour is not tolerated, avoiding a potentially bigger issue.

This is not just an issue in SMMEs. CDH often finds large corporates also struggling to maintain discipline on a day-to-day basis. In some cases, corporates tend to wait until an employee has made a significant mistake or serious act of negligence before intervening.

Record-keeping is your ally

Keeping a record of all disciplinary matters is an essential part of creating a culture of discipline in the workplace. It is critical that all verbal and written warnings are recorded and kept in the employee’s file.

Related: Servant Leadership – Will You Serve?

Under South African Labour Law, an employee must always be allowed to state his/her case in all disciplinary matters, irrespective of the seriousness of the infringement.

Before the employer issues a verbal or written warning, the employer must notify the employee of his/her infringement. The employees must then be given the opportunity to state their case and if the employer is not satisfied with their explanation, the employer may then legally issue the warning.

For more serious matters, which verbal or written warnings will not solve, you must follow more formal steps, such as disciplinary hearings. However, if you maintain a culture of discipline on a daily basis, you will rarely have issues escalating to such a degree.

Correcting an overall workplace culture is far more difficult than rectifying a small incident. When an employer has to correct an entire culture that is deeply entrenched in their business, the process can be more expensive and take much longer.

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