by Mike May | April 23, 2018

One of the most important decisions an incentive planner can make is deciding what kind of rewards and recognition offerings they select for their winners. Here we outline some ways to think about these choices and how to ensure the rewards you select have the maximum impact. The article below is part of the larger e-book, 12.5 Steps to a Perfect Incentive Program, available for free download here

Once you have identified your target audience and designed the rules structure, you can focus your attention on determining the most motivational awards. Among the questions you should ask about the recipients: 

What will catch their eye?
Do they have children?
Are they sports enthusiasts?
Do they travel extensively?
What have they done or earned before?
What is the hot destination or cool gadget?
A common trap is for the award provider to select awards they themselves prefer rather than awards the recipient would like. Before finalizing your decision, you may want to survey your participants to see what is most motivating to them.

Cash or Non-Cash?

Everyone asks, "which is better: cash or non-cash awards?" The mob of sales reps clamor, "give me cash, not prizes." Before launching an incentive program, human resources wisdom advises that basic, monetary needs must be met first by existing compensation structures. Conclusion: Cash is definitely king for base compensation and commissions. But next you should ask: "is cash motivational after base compensation and commissions?"

Incentive Research Says:

The all-time classic research paper on this subject is "The Benefits of Tangible Non-Monetary Incentives" by Scott Jeffrey, assistant professor in the Department of Management Sciences at the University of Waterloo, Ontario. The research identified four key reasons for using non-cash awards in incentive or recognition programs:

Evaluability/Daydream Value
When properly presented, non-cash awards ignite the imagination in a way that enhances their perceived value. The participant's reaction to the award substitutes for its actual value. 

Separability/Not Compensation
Non-cash awards deliver more recognition because they don't get mixed with compensation. Cash invariably turns the extra reward into expected compensation. Cash creates entitlement -- you can give it, but you cannot take it away. Non-cash spiffs can be turned on and off without entitlement problems.

Justifiabiliy/Guilt-Free Splurge 
Participants receive special satisfaction from non-cash awards because there's no guilt associated with spending them. If a male participant has 50,000 points, he can guiltlessly select the 80" plasma TV for football season. But if the reward had been $2,500 in cash, he and his wife might debate if instead they should pay off a credit card or start a college fund.

Social Reinforcement/Trophy Value 
People feel free to talk about non-cash rewards in a way that would be inappropriate for cash compensation. It's socially unacceptable to brag about your bonus or commission, but it's acceptable to talk about an incentive trip to Maui. Non-cash prizes provide a tangible symbol of achievement.

We Suggest Adding Two More Benefits of Noncash Rewards:

Memorable/Halo Effect
Surveys show that merchandise and travel rewards are remembered longer than cash, with a longer-lasting boost in performance. They provide a lasting reminder of success and reinforce a positive association with the sponsoring company. For example, try to remember an employee reward, trip, or merchandise you won. Now, do you remember the amount of your bonus that year?

Promotable/Buzz Factor
Cash is hard to promote -- unless you keep increasing the amount. A trip to Monaco, a new HDTV, the latest i-anything from Apple, or big diamonds create visual interest that engages participants' brains -- they see the reward, they want the reward, and they consider how they can improve their performance to earn it. Plus, a buzz factor occurs when employees talk about the prizes.

Final Thoughts: Simple or Motivational?

Proponents of cash rewards argue, "Everybody wants cash! Cash keeps the reward process simple. Non-cash rewards are more difficult to administer and fulfill. And, incentive programs require extra administrative work."

We ask: Is the goal simplicity or motivation? Minimizing costs or increasing performance?

Cash, very definitely, has its clear place in base pay and variable compensation (for commissions and bonuses). Applying the famous Maslow's Hierarchy of Needs, cash compensation is critical for satisfying our first, physiological need and our second need for security. To climb higher on Maslow's pyramid to levels three, four, and five for belonging, esteem, and self-actualization, non-cash rewards are more beneficial. Interestingly, we often see that when cash is the primary award, it becomes expected and easily loses attribution to the desired behavior and performance improvement goals.

Mike May is the 2018 chairman of the Incentive Research Foundation and president of Brightspot, a full-service performance improvement company in Dallas, Texas. Brightspot manages full-service meetings, corporate events, and incentive programs for enterprise clients --with industry-leading creativity, flexibility, and commitment to deliver results.