We’ve all received a bonus check at one time or another. Whether you met a sales goal or aced a performance review, you have likely enjoyed the feeling of that extra cash in your hands. But what did you do next? Pay a credit card bill, buy school clothes for the kids, put a little extra in the Christmas fund? Chances are, that money was gone within the week. While it was probably very motivating at the time, once it’s spent, the effects of the cash begin to wear off.
The funny thing about cash is that it’s an easy solution, but it actually takes a lot more of it to do the trick. An article published by McKinsey Quarterly (2009) stated that it takes 8% of someone’s overall compensation to become a motivating factor when given as cash. It takes only half that much, 4%, when recognition is given as a tangible item. While it may seem cash is king, the research shows quite the contrary.
Since we all love cash, this may present quite the conundrum to many. Physical items do something cash can’t. They have trophy value! When end-of-year bonuses are given, it’s usually a private conversation with a check in a sealed envelope. When an employee cashes in on-the-spot recognition for a new set of golf clubs, there is no hiding that! People can feel uncomfortable talking about money, but they view that new iPad or pair of diamond earrings as a trophy that should be celebrated like a championship-winning touchdown. And every time a person pulls out that iPad, they are reminded of the investment his or her company made in their happiness. Think about it this way. If my company gave me $500 as a bonus, and I used it to purchase a TV, then in my mind, that TV always came from the electronics store. But, if my company paid for and delivered that TV to my home, when asked, I will gladly tell people my company gave me that TV for being a great employee! While it may be technically the same thing, the memory of it is very different.
When creating a recognition program, here are a few things to consider about cash rewards:
Cash costs more. It takes twice as much cash to achieve the same result as simply providing tangible items. There are opportunity costs and liquidity issues involved when gifting cash, and you may qualify for tax deductions if you award merchandise over a certain amount.
People love trophies. Employees want a lasting reminder of their value to a company. When you give them something they really want that they may never be able to justify in their budget, you have given them a shiny trophy to put on display. It not only motivates them, but it serves as a public reminder of the good things your company is doing for its employees.
Make praise public. People don’t typically speak openly about their salary with coworkers; they will likely keep that bonus under wraps as well. Give employees something they can celebrate with their coworkers and be proud to share with people who may be thinking of joining your team.
YouEarnedIt regularly consults with companies on translating cash programs into something more meaningful for employees. If you are interested in learning more, we would love to talk to share our best practices with you. You can reach our team at email@example.com.