Cash is No Longer King

Cash is No Longer King

June 16, 2021

By Sean Mayo
In a world where money has a very powerful allure and a lot of it is offered up as a “quick fix” for all kinds of issues and problems, it’s easy to see why cold, hard cash is a popular go-to when it comes to motivating employees. When incentive-based programs first arrived on the scene, cash was the common reward of choice — with employees receiving, on average, $75 to $350.

In a world where money has a very powerful allure and a lot of it is offered up as a “quick fix” for all kinds of issues and problems, it’s easy to see why cold, hard cash is a popular go-to when it comes to motivating employees. When incentive-based programs first arrived on the scene, cash was the common reward of choice — with employees receiving, on average, $75 to $350.

At first blush, cash may seem like a great way to reward employees for a job well done and motivate them to adopt behaviors that boost your company’s productivity and bottom line. But a study done by the Incentive Research Foundation (IRF) debunked a common myth that incentive participants prefer cash when presented with a choice: 80% of program participants chose non-cash awards as part of their “total award experience.”

Professor Scott Jeffrey (of Monmouth University) tested that theory at the University of Chicago and conducted a study seeking to improve the work speed and accuracy of the staff (Strategic Brand Engagement, John G. Fisher). Participants were offered cash, non-cash and verbal rewards. He found that the group that received cash performed 14.6% better than the group that received verbal praise. And the group that received non-cash rewards performed 38.6% better than the group that received verbal praise.

Now, an Incentive Federation study reveals that 84% of businesses are investing in non-cash incentives because they are finding them much more effective at generating excitement and motivating employees in ways that drive business objectives. Read on to see why.

Cash Rewards are Viewed as Transactional

Companies are increasingly using non-monetary incentives to motivate employees and to reward them. But is it what employees want? According to an Incentive Research Foundation (IRF) study, yes. As many as 65% of employees prefer to have non-cash incentives instead of monetary rewards. Money is good, but once it goes in the bank, or is used to pay bills, it is forgotten. Along with a paycheck, cash is expected as part of the employee/employer “contract” where money exchanges hands for services provided. Hence, its transactional nature. But non-monetary rewards — merchandise, award points, gift cards, trips and more — are perceived as a gift that is then enjoyed, shared, and remembered for years to come.

Cash Lacks the Coveted “Fun” Factor

In a study published in the Journal of Economic Psychology, Wichita State University psychology professors Victoria Shaffer and Hal Arkes reveal that when they gave subjects a “hypothetical choice between cash and non-cash incentives, participants chose the cash incentive.” But as soon as the choice was no longer hypothetical, a significant number of people changed their minds. When they were given a choice between cash, a cruise or HDTV worth the same amount, people only chose cash 63 percent of the time, not 100 percent of the time.

Yet, when the same participants were asked to rate how happy or satisfied they would be to receive either cash, an HDTV or cruise as a bonus, the television and cruise consistently outscored cash. The researchers hypothesize that the people were more excited by the non-cash rewards and would enjoy them more because of their “fun factor.” It seems cash only wins out because of its practical use.

Scott Jeffrey and Gordon Adomdza, of Northeastern University, published research findings in Human Performance that “people think more frequently about tangible non-cash incentives (merchandise and travel) than cash incentives.” It’s understandable. Who doesn’t like to daydream about watching the big game on a giant new flat screen or wiggling their toes in the sand on a beach in Maui?

More importantly, though, as they thought about the non-cash incentive more often, their performance improved. “This leads to a larger performance boost for tangible incentives compared to a cash incentive of equal purchasing power,” Jeffrey and Adomdza noted.

Both studies reinforce what many managers have observed — albeit perhaps less scientifically — for years. In most cases, non-cash rewards will make an incentive program more compelling, motivating, cost effective and successful.

Cash Spawns a Culture of Entitlement quickly cash can lose its luster. Maybe it’s because the dollar doesn’t buy as much as it once did. Maybe it’s because most people can never have enough. Most likely it’s because cash is simply perceived as payment for work — it gets lumped in with a person’s pay and co-mingled with money used to pay the necessities — the electric bill, buy gas or upgrade the plumbing — not used to splurge on a “feel good” item or activity. Plus, many employees think of cash as an entitlement they automatically deserve for doing their jobs, rather than a reward.

When more than 1,000 individuals were asked by researchers at Wirthlin Worldwide how they spent their last cash reward or bonus, 29 percent said it went to pay bills, while only nine percent said they used it on a “special personal treat.”

Cash is Nothing to Brag About

If cash is viewed as an entitlement and nothing special, then it’s certainly nothing to brag about as a reward. Without trophy value, an incentive cannot deliver the value-added benefit of word-of-mouth. Strong word-of-mouth by reward recipients goes a long way in promoting your program as a worthy endeavor that yields coveted rewards. Never underestimate how hard people will work for a prize they perceive as highly desirable.

Offering highly valued rewards that tap into aspirational desires not only drive performance, but also nurture peer buy-in through social reinforcement. Employees are more likely to share, show off, discuss and brag about non-cash rewards they view as luxuries or guilt-free indulgences. Perhaps that’s why travel rewards are so popular. Recipients talk about their upcoming trip with excitement. After the trip, they love sharing details of their get-away with co-workers.

The Emotional Allure of Non-Cash Rewards

Whether you offer travel packages, popular merchandise, experiential rewards or gift cards, non-cash incentives allow companies to be very creative when it comes to finding the right reward to spark enthusiasm and drive performance. Cash will always just be cash. But a shopping spree at a popular retailer, a trip to Hawaii, front row seats at a once-in-a-lifetime concert or picking out a shiny new trinket will be remembered and appreciated long after the experiences are over. And because non-cash rewards are sometimes enjoyed by family members, too, it elevates interest in the program even more.

In summary, while many employees think they want cash, tangible non-cash rewards are chosen more often and deliver equal or greater returns to organizations.