I’ve written before in Compensation Café about the difference between compensation and employee recognition (and the rewards often associated with recognition). To summarize: Cash compensates. It does not motivate.
This is largely true for three reasons:
1) Cash is expected in a set “trade” agreement.
Simply put, cash is the expected (and in many cases, legally required) recompense for services rendered. Employees expect to be paid in cash for the work they’ve provided according to agreed terms. Yes, cash is often the medium of reward given to employees in terms of a bonus, but like a paycheck, these bonus often become an expectation as well (e.g., Wall Street’s bonus culture).
Even when cash rewards are given more frequently, most organizations slip these rewards into the paycheck. This means employees often don’t realize the reward has been given as the extra cash slips right out again, leading to the second challenge of cash rewards…
2) Cash is not memorable.
When company leadership goes to the effort of investing in employee recognition and rewards, immediate benefits are the increase in positive working relationships built through the “power of thank you”. This leads to increases in employee productivity, retention and engagement.
Rewards associated with that recognition extend these benefits long after the formal recognition moment occurred. Cash, when used as a reward, loses this benefit because it is too easily spent on things of daily life – gas, rent, groceries – leading to the third challenge of cash rewards…
3) Cash cannot elicit long-term positive associations and memories.
A knock-on benefit for companies that include personal, meaningful rewards with recognition is the lasting association of positive memories with that reward for the employee. Every time the employee sees the reward item, they are reminded of the value the company places in the employee and in their work.
I was reminded of this point when skimming through an article on the power of wedding gifts – long after the wedding (and sometimes the marriage!) is over. Here’s one example:
“When my husband and I got married, we were young and very broke, and our friends and family at our very small wedding all gave us cash, at our naïve request. I regret that now. After many years and two children, the few durable wedding presents (some Tiffany plates, a blue casserole dish) hold good memories of good times. The cash, on the other hand, a stunning fortune of some $300, is long gone on something ephemeral like rent.”
Note the treasured durable presents are likely far less in value than the amount of cash, but those are also the gifts far more treasured. Similarly, strategic employee recognition and reward programs do not require a significant monetary investment – but they do require time and thought.
The same is true in employee recognition and rewards. Leave cash where it belongs – in your compensation plan. Take full advantage of your investment in employee recognition with tangible, meaningful and highly personal rewards.
As Globoforce’s Head of Strategic Consulting, Derek Irvine is an internationally minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the world. His articles on fostering and managing a culture of appreciation through strategic recognition have been published in Businessweek, Workspan and HR Management. Derek splits his time between Dublin and Boston. Follow Derek on Twitter at @DerekIrvine.