If cash is king, rewards are queen

Why money can’t equal rewards when it comes to recognition
By Razor Suleman
|Canadian HR Reporter|Last Updated: 02/15/2008

If cash is king, rewards are queen — and everyone knows who rules the castle. Companies looking to drive long-term performance through incentives will find a much higher return on investment using rewards than with cash.

This is not to discount the importance of compensating employees fairly. Compensation is a very important component in recruiting and retaining staff. But compensation is only the ante into the game. To get the most from employees in terms of engagement and performance, rewards typically bring the results employers want.

Addressing hierarchy of needs

To borrow from Abraham Maslow’s theory of motivation, the hierarchy of needs, cash addresses only the very basic physiological needs. Cash will feed, clothe and shelter employees and their families.

However, moving up the pyramid to the esteem needs — the need for recognition — cash does very little to satisfy employees’ higher needs. A cash bonus, added to a biweekly paycheque, will only give employees a temporary and slight boost to address their physiological needs. There is little or no impact on the recognition front.

In contrast, an immediate reward tied to performance and recognized publicly will satisfy a person’s inherent need for recognition and in turn drive performance for the company.

Trophy value

Assume an employee performs the desired behaviour this holiday season to earn $170 in bonuses. If the employer chooses to reward the employee with cash, it will be tacked on to her January pay and be taxed at the highest marginal rate.

At the end of the day, the employee will only see about $119 of the $170 in deserved value. This likely will go directly into her bank account and be used to pay off a credit card bill from the holidays. Many people use cash bonuses to pay bills and likely don’t even remember, in a few months, how they spent the bonus.

Cash rewards also run the risk of becoming an entitlement, part of employees’ monthly salary unrelated to the behaviours for which they received it. Since the cash bonus is not associated with a specific action — or is quickly forgotten — the chance of employees repeating the desired behaviour is very low.

But if the employer took that same $170 and gave the employee a reward — such as an iPod Nano — it would have a very different and more desirable effect.

The worker now has the trophy value of showing off her reward and bragging about her accomplishment to co-workers, friends and family. The employee will remember exactly why she received the gift and the chances of her repeating the behaviour are greatly increased.

People are people

People are the same whether they are at home or at work and they respond the same way to stimulants. Therefore, employers shouldn’t try to reinvent the wheel when it comes to recognizing positive behaviour.

Think about how people treat friends, family members, partners or anyone else with whom they have an important relationship. If they want to show appreciation, they typically buy something such as flowers. This has a huge affect on the recipient that goes far beyond the gift itself.

People would never give loved ones a $100 bill with a note on it that said, “Thanks for being so wonderful.” This is just not an acceptable way to show true appreciation outside the workplace. And, realistically, the person would spend the $100 soon after they got it — likely on an everyday living expense — and the gesture would soon be forgotten. Why should the work environment be any different?

When someone receives flowers at work, it is not the actual flowers that are significant to the recipient. The best part about getting flowers at work is the fact someone has publicly recognized the recipient.

This is as true in the workplace as it is in personal life. Take the time to recognize employees with rewards that are truly meaningful to them and it will go a long way to engaging employees and increasing their performance at work.

Razor Suleman is founder and CEO of I Love Rewards in Toronto. For more information visit www.iloverewards.com or e-mail info@iloverewards.com.

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