Feature Article - January/February 2014

Why Cash Still Isn't King

Merchandise Outshines Cash in Employee Rewards

By Deborah L. Vence

When it comes to rewarding employees for a job well done, merchandise, travel rewards and gift cards beat out cash by a landslide.


Experts say that the recipient of a tangible reward is more likely to remember it and relate it back to the company, while cash probably will be used by the recipient for household necessities or other basic supplies, rather than an indulgence purchase.

"In my eyes they are more effective because it becomes a trophy you can show off or an experience that leaves a lasting memory that can be talked about for years," said Kevin Dougherty, director, special markets, Seiko Corporation of America.

In fact, a 2003 study from the Incentive Research Foundation together with Scott Jeffrey, Ph.D. (now management professor at Monmouth University), titled, "The Benefits of Tangible Non-Monetary Rewards," showed that non-cash awards were a very effective motivator for four primary reasons.

"One, the recipient's perceived value of the non-cash award was evaluated as higher than its cash equivalent. Two, individuals mentally separate non-cash awards away from accounts that go to bills, making them 'feel' more rewarding. Third, individuals allow themselves to justify obtaining a non-cash award more so than they would receiving an equivalent amount of cash (and subsequently paying for the same award). And finally, non-cash awards are more socially reinforceable, meaning you can show them off to your peers and family ... not so with cash," said Melissa Van Dyke, president of the Incentive Research Foundation.

Incentive industry professionals agree that cash holds no trophy value and employees who receive cash as a reward will most likely use it for everyday purchases, such as groceries and gas, which defeats the intended purpose of the gift.

Non-cash awards, such as watches, pens, desk sets, etc., can be traced back at least to the early 1900s when they were commonly used to commemorate significant sales or service anniversary milestones.

"Over two decades ago the American Compensation Association (now World at Work) began offering courses on 'Alternative Rewards' that included non-cash awards and pay-for-performance elements," Van Dyke said.

And, a little more than eight years ago, World at Work released the Total Rewards Model, which fit all types of rewards at work into a single model, including base compensation, pay for performance, work-life balance, and recognition and rewards.

"World at Work's release of this model was an acknowledgment that the nature of work was changing and that the tools businesses were using to motivate workers were changing as well—especially where recognition and non-cash rewards were concerned," Van Dyke added.