You Could Be Wasting Money on Cash Incentives
Are you one of the growing number of executives questioning whether you’re getting the best return on cash incentives for employees? Does it seem like the more cash you give the less satisfied employees are? Cash can work under the right circumstances but you need to know, it’s not always the best choice for motivating your team.
Some recent studies highlighted in a report by The Incentive Research Foundation make a clear and compelling argument that the influence of non-cash rewards over people can be more powerful and as such, more effective in motivating people than cash alternatives.
In this month’s post we’ll give you:
- Compelling reasons why tangible and experiential, non-cash incentives often work better than cash
- A link to The Incentive Research Foundation report which references the studies
- Four questions to ask about your existing incentive program.
Three Reasons Cash Incentives Don’t Motivate Everyone
Reason 1: It’s been shown that only 18% of the population in North America has a utilitarian value. People with this value are motivated by time and money and many are commission-only, new business sales people. We refer to them as “Finders”. While “Finders” thrive on cash incentives, typically they are not the best fit in a relationship selling environment.
So if only 18% of the population is truly money-motivated, that means there’s a very large employee group who is not generally money-motivated. We refer to this group as the “Minders”. They genuinely enjoy serving, building relationships and minding the business. They are motivated by making a contribution and team recognition rather than money. Conclusion: it’s likely that cash is not the driving motivator for a majority of your staff. (For more on this topic, see our post Are You Hindering Staff Sales Performance?)
Reason 2: When cash incentives are included automatically in a paycheck without any special announcement or verbal recognition from a manager, they tend to be viewed as salary. The cash is now considered an entitlement and no longer works as an incentive. We also find some employees may feel guilty spending the cash on a nice dinner or weekend trip feeling that they must use the money more wisely (see #3)
Reason 3: Many of your employees will use the cash to pay bills rather than treat themselves to a fun experience. Once the money is gone, it’s quickly forgotten so the glow of the achievement is not long-lasting like the memory of a wonderful experience. So if cash is a motivator at all for them, it’s a short term one. That’s part of the reason some employees don’t seem to ever be satisfied with your incentives.
Why We Feel Tangible Rewards Work Better Overall
Tangible rewards are defined as those that carry monetary value but are non-cash in nature e.g. gift certificates, travel and merchandise. Tangible rewards work because they provide a memorable experience that captures the imagination and lasts longer than cash. Most high performing sales organizations in other industries frequently include a nice dose of creative, experiential rewards.
Research in the reports we mentioned earlier and our own experience confirms that when an incentive is tangible, exciting and announced in advance, employees actually perform better in pursuit of it, even when the award was of equal value to the cash alternative. Half the fun is the pursuit of the reward which drives the desire to aim higher. It’s no accident that the insurance, pharmaceutical and other key industries continue to motivate exceptional performance by offering unique travel and other experiences.
There are also banks and credit unions getting great sales performance with just creative non-cash rewards. I (Barb) recall a time I had just finished delivering my popular Dream Big! motivational keynote at a bank sales rally. I sat down to watch the rewards ceremony when up on the screen a picture of a beautiful silver Jaguar appeared. The CEO then announced they had leased the car for one year and each month the personal banker that got the most loan sales and referrals to other divisions would drive the car for one month with gas and insurance paid. He then announced the first winner who along with the crowd went wild. Now that’s what we call a memorable experience!
More Examples of Tangible, Non-Cash Rewards
Believe it or not, the biggest motivators we see are housecleaning, prepared meals and other time saving, personal services. Let’s face it, your staff is not likely to treat themselves to these experiences with their hard-earned dollars, but you can!
If you are on a tight budget but want to reward with high perceived value, offer a one-night stay with a gourmet dinner at a hotel or resort within an hour’s drive of your business. This eliminates airfare and rental car expense.
When you offer your staff and their spouse or guest a memorable experience it creates good will towards your company. Plus, it’s easier to also recognize support staff behind the scenes with non-cash items to avoid jealousy and favoritism.
If your incentive and recognition program needs a makeover discuss these questions with your leadership team:
- Is our incentive program stale and losing steam? Do we really need cash incentives? Can we consider cutting back on cash and ramping up tangible rewards for a nice blend of both?
- What can we do to include personal services and other memorable experiences for our staff so they will feel appreciated?
- Does our current incentive or recognition program get an ROI and positively impact staff morale?
- Are we rewarding behaviors that lead to deeper relationships or “product pushing”?
Thanks for reading our post,
Barb and Bob
P.S. If you like what you read, please share this article with your colleagues.
We are interested in your feedback. In the comments section below, please tell us whether you agree or disagree with the ideas in this post. Also, what challenges or questions do you have that we can answer in this post? Please scroll down to comment.
How to Make These Changes in Your Bank or Credit Union
At High Definition Banking® our goal is to help banks and credit unions generate revenue. However, we know that selling through customer relationship management beats transactional selling over the long term. To learn why, read our post, Declining Branch Traffic – Armageddon or Opportunity?
Ask about our training on onboarding, relationship building and sales leadership, and our relationship culture consulting process, and have Barb give an energizing and idea-packed presentation at your next sales meeting or employee event. Email Bob@HighDefinitionBanking.com for more information or Contact Us.