A new study, released by the Incentive Research Foundation (IRF), seems to show that non-cash incentives (i.e. prizes, travel, merchandise, etc…) work better than cash incentives (bonuses attached to the paycheck, for example).
The study which says that it gathered data from a variety of sources going back two decades, claims that “non-cash’s influence over people can be more powerful—and as such more profitable—than cash alternatives.
Non-cash is indeed proven to be more “effective” and therefore, more “efficient” than traditional forms of compensation when used properly in the Total Rewards mix, which makes it a more affordable investment. ”
This finding challenges the commonly held belief that cash incentives are preferred by employees.
The study goes on to state that: “when people make a hypothetical choice between cash and non-cash incentives, cash is indeed preferred by employees. However—and here is the hook—when it’s no longer hypothetical, meaning when an award is identified, employees actually performed better in pursuit of it, even when the award was of equal value to the cash alternative.” In other words what they say they prefer is cash but when the results are measured, employees do better when it is non-cash incentives.
The study doesn’t try to explain why this is but one can guess that it has to do with a sense of responsibility vs. a desire to obtain things that one wouldn’t normally justify spending money on. I know that I have bills to pay and that I’m usually behind and could always use more money to catch up, that’s the responsible side of me talking; but there’s the other side that wants fun things, trips, merchandise, etc… While I can’t justify purchasing them for myself as long as I feel that I should spend the money elsewhere, I will strive to do whatever I can if I know that I’ll get to have something I wouldn’t normally be able to because I wouldn’t feel like I could justify it.
You can download and read the whole whitepaper here.