Incentives: Why You Should Use Non-Cash Rewards Over Cash

A study done by the Incentive Research Foundation (IRF) debunked a common myth that incentive participants prefer cash when presented with a choice. Actually, around 80% of program participants chose non-cash awards as part of a “total award experience.” According to IRF, “the study defined the employee total award experience to include not only the specific physical reward itself, but also the person who recognizes the recipient, how the award is communicated, and what professional impact the award carries (for example being allowed special networking, mentors or assignments).”

Here are 5 reasons why using non-cash rewards are a smarter business decision than giving cash as incentives.

1.   The “Fun Theory” (makes non-cash more memorable)

Volkswagen conducted a social experiment in Sweden to prove that just by making an activity fun, you could change people’s behavior for the better. They found that 66% more people took the stairs instead of the escalator when musical piano steps were installed on the staircase of a subway (watch the video.) This “fun theory,” along with a process called mental accounting, explains why non-cash awards are more meaningful, memorable, and emotional.

With mental accounting, a cash reward becomes forgotten. The recipient subconsciously blends the reward with their salary and ends up using it for day-to-day purchases. A non-cash reward is mentally accounted for differently because it’s typically fun, a new experience, time with loved ones, etc.

When businesses use non-cash awards, they are both creating behavior change by offering something “fun” and ensuring it’s remembered by recipients.

 

2.   Entitlement

According to the IRF, offering cash incentives may cause recipients to expect a similar or greater reward in the future. If the company cannot keep up with offering or increasing cash incentives, two major issues can arise; one for the individual and one for the company. If the individual starts relying on this additional incentive money as their salary, they might find it more difficult to keep up with regular bills. For the company, performance, motivation, and engagement may decrease.

When businesses use non-cash rewards, they save themselves from a potentially unfavorable cycle.

 

3.   Trophy Value

It’s social taboo to talk about money. On the other hand, non-cash rewards provide highly visible recognition that people love talking about. Photos of President’s Club trips and new lawn mowers are a subtle way of saying “Hey, look – I’m doing really well at work, and I work for a great company that appreciates me.” Not only is this great for recruiting, but it also creates more impact on your effort. Others in the company will notice and figure out what they need to do for the same type of recognition.

When businesses use non-cash rewards, they are creating a social buzz that can’t be replicated in the same way with cash.

 

4.   Increased Motivation and Performance

An experiment cited by IRF, found that people who were incentivized with tangible rewards thought of them more frequently than those incentivized with cash, leading to better performance. In the same paper, “Professor Khim Kelly explains that when people find a reward more psychologically attractive, they want it more, so they are motivated to work harder to get it. This emotional attachment leads to behavior change: reward earners like the tangible reward more, so they work harder for it and performance increases.”

When businesses use non-cash rewards, the emotional attachment and attractiveness of the reward increase motivation and performance.

 

5.   The Reciprocity Effect

Decades of research and studies support the idea that non-cash rewards are more social (than cash) in nature and feel like a gift. Gifts lead to a feeling of appreciation from the recipient. This appreciation creates the desire to reciprocate. And because cash is thought of as more transactional, the drive to reciprocate is low. Furthermore, as mentioned above, the more an employee remembers receiving a non-cash reward, the more effort they put toward their job. And considering turnover of a salesperson can cost a company up to 250% of their annual compensation figure (Cost of Employee Turnover, William G. Bliss), employee loyalty is one of the most important advantages of non-cash rewards.

When businesses use non-cash rewards, recipients want to find ways to reciprocate the gesture – with more business, employee loyalty, etc.


Non-cash rewards will help businesses get more out of their incentive strategy. They are fun, memorable, and easy to share socially. In addition, they generate appreciation and increase motivation and performance at work. Not to mention, they don’t cause a sense of entitlement or an expectation for more, more, more. Simply put, non-cash rewards create more impact.

Are you creating impact?

Is it time to re-think your incentive strategy?

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