Cash is not king

Written by
Derek Irvine

06 Oct 2015

06 Oct 2015 • by Derek Irvine

When rewarding employees, too many organisations continue to rely on what is considered to be the easiest and most effective form of recognition, cash. However, in reality, this often holds very little meaning to an employee, which makes the gesture an inadequate recognition tool. Derek Irvine, vice president of client strategy and development at Globoforce, discusses how to inspire and motivate your workforce by designing a recognition strategy that offers them true value. 

Bespoke rewards could benefit your organisation

Indeed, as each employee makes a unique contribution, it’s only fitting that rewards given reflect this and acknowledge the individual in a way that only they would appreciate. 

Traditionally, management has been solely responsible for recognising employees and choosing rewards for doing a good job. However, a single line of communication can frequently lead to actions going unnoticed, while pre-selected awards can create a sense of insincerity and detachment between the manager and employee. To avoid this, organisations need to implement a social recognition scheme that utilises feedback from all employees, not just managers and links recognition to the company’s core values, with accolades that are meaningful to the recipient.  

This bottom-up, peer-to-peer strategy allows employees to recognise each other when they witness behaviour that they believe deserves a reward. By encouraging recognition of behaviour that reflects the values and goals of the organisation, a high-level performance culture emerges. Social recognition is essentially the first step in creating a recognition and reward strategy that maximises loyalty and motivation by building a more meaningful relationship with the employee. 

Cash vs. non-cash rewards

As a tool for recognition, cash has its drawbacks. While it’s highly unlikely an employee will refuse extra money in their pay cheque, it often fails to have the desired long term effect.  It’s not uncommon for bonuses to be swept up within the employee’s standard pay packet and spent on day-to-day outgoings – such as bills, fuel, or a grocery shop.  The motivational effect of the reward is therefore lost as it has no memorable or meaningful connection.  This is particularly true when the reward is given as an annual bonus, as it is unlikely that the behaviour that warranted the reward will be apparent, and, subsequently, won’t be consciously repeated. 

With so many gifts available at the click of a mouse, consumers have also become extraordinarily brand and cost conscious, and expect a wide range of choice in everything from music and clothes to restaurants and travel. This also applies to rewards in the workplace. Employees increasingly want the option to choose a physical gift or experience.  Social recognition embraces this trend and magnifies the moment of recognition with the power of choice. In a partnership of goodwill, the giver determines the value of the award, and the recipient determines the final object or experience awarded. In this way, the recipient becomes a participant in his or her own recognition, as opposed to a passive spectator.

Total rewards and motivation

The human resources concept of total rewards understands that cash is a necessary, but incomplete, component of compensation. The baseline relationship of employer and employee is a contract: cash in the form of salary, benefits, and bonuses, in return for performing the tasks specified in the employee’s job description. On both sides of that contract there is a lot of variability in performance. Some employees regularly go beyond their job descriptions; some workplaces are rich with intangible rewards. Every employer wants a workforce made up of such employees, and employees respond to employers who go beyond the minimum compensation.

The goal of total rewards is to achieve the highest return on investment (ROI) with the optimal mix of rewards. In practice, managers use rewards to attract, motivate, engage, and retain employees individually. That leads directly to improved performance and business results. What businesses are also starting to recognise is that noncash factors, like work-life balance, a sense of mission, and manager appreciation, are far more flexible and adaptable methods of motivating employees than adding an extra £100 in the monthly pay cheque.

A non monetary gift associated with an employer’s ‘thanks’ is ultimately much more engaging, personal, and meaningful – and it is directly associated with engagement. If it’s done right, the award is publicly connected with a behaviour specifically linked to a company value. If it’s done exceptionally, the award is a clear indication of the kind of behaviour that management appreciates – and rewards. An award with just £100 in gift value thus produces many other forms of value and appeals to the intrinsic motivators of pride and gratification at the manager’s genuine expression of gratitude.

Recognition reaps rewards

Recognition has an additional advantage over cash in a total rewards strategy. To state the obvious: there is a limit to the cash compensation that sound financial management will allow. While a recognition practice has a cost, its appeal to intrinsic motivation magnifies its impact in a qualitatively different manner than cash. As part of an optimal mix of rewards, recognition is a highly efficient motivator. And it is much cheaper than spiralling salaries.

Correctly implemented, social recognition programmes that involve personalised reward schemes have a profoundly positive effect on an employee’s motivation, performance, and organisational culture. When it is made explicitly clear to an employee how they are adding value to their organisation, and they are rewarded in a way that they would appreciate, they have a much greater reason to be engaged with their work and strive for greater achievements.  While cash rewards and bonuses will always be welcomed by an employee to some extent, they do not have the long term motivational value that non-cash rewards and recognition can have. By rewarding employees with unique gifts or experiences that they want and remember, organisations have a much greater chance of gaining their loyalty and encouraging others to adhere to the company’s core values. Ultimately, by giving the staff what they want and need, the company will get what they want and need – a more motivated and dedicated workforce.