Departments - January/February 2009

The Insider

Making the Switch from Cash

By Catherine Eberlein Pfister


hen readers have questions about running their incentive, reward and recognition programs, they turn to experts in the industry to find new strategies to manage their challenges.

This month, two readers weighed in with their questions, and we found the solutions.

First, we consider how to make the switch from cash rewards to non-cash rewards like merchandise and travel. If you've been relying on cash to motivate and reward your employees, and you're ready to make the switch too, read on to learn how to do so with the least fallout.

Second, we turn to the question of how others are adapting their programs in light of the current economic downturn. Are companies slashing their reward and incentive budgets, or are they recognizing the need to continue these high-ROI programs to ensure maximum engagement?

Reader Question: Our company has always given cash rewards to employees and wants to make the switch to non-cash rewards (merchandise, etc.). What do we need to do to make this a smooth transition and "win" over employees who may not be happy with the switch? What can we learn from companies that have dealt with the same issue and learned through trial and error?

First, congratulations on making the switch to non-cash rewards. You may experience some initial fallout over "entitlement" issues since people often perceive cash incentives as a part of their paycheck—using them to pay for groceries, gas and other bills. But stay strong. As you make the transition, stay steadfast in knowing that people work hardest for tangible rewards and they offer many advantages over cash incentives:

  • Tangible rewards offer emotional engagement. They are both extrinsic and intrinsic motivators, and they provide lasting, long-term performance improvement.
  • Unlike cash incentives that are usually spent on necessities, tangible rewards offer guilt-free enjoyment, which increases their motivating impact.
  • Tangible awards have superior trophy value. They provide opportunities for communicating appreciation to an employee, and an employee can publicly celebrate their success.
  • Tangible rewards offer a recognition link between manager and employee. The relationship is enhanced when "thank you" goes with the actual reward.

To help you get started, we asked for recommendations from Louise Anderson, president of Anderson Performance Improvement.

"There are two best practices that we have used successfully over and over again with some of our new clients that wanted to switch from cash to non-cash award points," she said. "The first best practice is making the business strategy and growth connection. Make sure the award opportunity is tied to a key business strategy. And show how more people will be recognized for engaging and helping the company change and meet its goals."

People have to understand the program's purpose and the behaviors that tie to performance improvement.

"Point out that you want everyone to set an award goal and encourage managers to focus on what the individuals that report to them are shooting for," Anderson added. "Managers have to commit to giving them performance improvement opportunities to get there. Now this is motivation and the key to increased productivity!

"The second best practice is communications," she added. "Take the time to give examples of what a person might do to earn a grill, diamond earrings or a trip for two to Las Vegas. Everyone can do it, it just depends on what they do!

"Always, always remember that tangible rewards are much easier to publicize than cash so make sure you are leveraging communications, whether it is periodic e-mails or posters of your team members along with some of the rewards they are working toward. Also include what participants say they are going to do to get that reward."