Lately cash has a bit of a bad rep when it comes to total rewards. Oh, sure, we all still like it and want more of it but doubt has been cast on its role in motivating employees.
For example, a recent survey published at WorldatWork found that non-monetary incentives have more impact on employee engagement than financial rewards.
Findings like these combined with tight fiscal budgets have lead companies to keep a tight lid on salary increases while shifting to more variable incentives such as bonuses and lump sums, in order to reduce total salary entitlements and increase strategic alignment.
Of course, variable pay is still cash and used improperly, cash incentives can lead people to do very silly things that aren’t in the company’s long-term best interests.
Therefore we also see a growing trend toward a total rewards approach that includes non-cash incentives such as recognition, flexible work options, career development and creative rewards like gift certificates, extra vacation and free stuff.
What's interesting here is that non-cash rewards programs are often designed by incentive and/or talent management consultants rather than compensation specialists, even though research shows that a combined rewards strategy using financial and non-financial levers has the highest impact on engagement.
So here’s my question: If the purpose of compensation is to motivate, and non-cash compensation rewards have a high motivational value, why aren’t compensation specialists leading the charge on non-cash rewards?
Recently Compensation Café writers teamed up over at Incentive Intelligence to discuss this (Paul Hebert’s insightful write up here) and basically, it comes down to a few things:
- Comfort zone – Compensation and incentives specialists typically have different comfort zones. For example, most of the compensation specialists I know love numbers and spreadsheets, while incentives specialists tend to be more interested in human behaviors that can’t be captured in spreadsheets.
- Expertise – Compensation professionals can get certified in commonly accepted compensation practices, whereas the education available for other kinds of incentives is less plug-and-play.
- Span of control – Even compensation specialists with a holistic view of rewards may not be in a position to influence organizational development, management quality, work life balance or company culture.
- First things first - Some companies aren't ready to make the move to total rewards because they're focused on getting base pay and benefits right.
- Most of the evidence is still anecdotal – Base pay and (to a lesser extent) variable pay best practices are reasonably well-documented but when it comes to non-monetary incentives, the findings are less straightforward.
Despite these reasons for division of labor today, I think companies will continue to pursue a more holistic approach to employee motivation and rewards. And then?
I don’t have a crystal ball but if the trend toward total rewards continues, it stands to reason that companies are going to start expecting broader expertise.
Think about it: If you had a choice between paying two experts with different specializations in the same field or paying one specialist with expertise in both, which would you choose?
Of course, maybe spreadsheets are too boring for the incentives folks and non-cash incentives are too airy fairy for the compensation folks and they’ll never meet in the middle. But for those who view rewards holistically, what better time than now to expand your skillset?
Thinks of compensation as peanut butter and incentives as chocolate, two great skills that go great together: It’s just a matter of time until someone starts selling peanut butter cups.
Why not you?
Picture courtesy of Wikipedia Commons.
*This post is not an advertisement for Reese's and no chocolate incentives were received for mentioning yummy peanut butter cups in this post.
Laura Schroeder is a Compensation Strategist at Workday, headquartered in Pleasanton, CA. She has nearly fifteen years of experience designing, developing, implementing and evangelizing global Human Capital Management (HCM) solutions and is currently pursuing a certificate in Strategic Human Resources Practices at Cornell University. Her articles and interviews on HCM topics have been published in the US, Europe and Asia. She lives in Munich, Germany and enjoys cooking, reading, writing, kick boxing and spending time with friends and family. You can follow her on Twitter @WorkGal.
Can’t totally agree that most of the evidence for non-cash incentives is anecdotal.
Granted, I’ve been out of the incentive consulting trade for some years now, but I can attest that I’ve attended more conferences where firm hard financial justification was supplied subsequent to successful gainsharing and other non-cash incentive programs than I’ve ever seen for cash compensation award programs. Maybe nobody is sharing those "soft" incentive success stories any more.
It would not surprise me to discover that modern productivity improvement program providers are restricting their proofs to the top management tier rather than addressing the “mere” HR and compensation folk. Since most of us don’t talk the language of the executive suite, it is only natural that vendors of truly effective incentive programs want to show their hands to the final decision makers.
Also, please remember that what is rewarded tends to be repeated, and there are as many perverse incentive stories dealing with non-cash reinforcements as with cash programs. Without cash being involved, people still do plenty of stupid things for fame, glory, status, recognition, etc.
Posted by: E. James (Jim) Brennan | 07/26/2010 at 02:00 PM
Thanks for weighing in, Jim. You're absolutely right that there's plenty of evidence in favor of non-cash incentives, although not all companies are willing to share their 'secret sauce.' But I was thinking more about the fact that you can look up a 'safe' answer for what a senior developer in Madison should be earning, whereas with non-cash incentives - even with the success stories - you still have to feel your way.
Also, great point about all the non-monetary reasons people do crazy things!
Posted by: Laura Schroeder | 07/27/2010 at 09:21 AM
As more and more companies scale back employee numbers, yet require heavier workloads for those who remain, we are hopeful that companies who truly want to keep their employees engaged seek the resources of incentive experts. Incentive houses (the best ones) can advise and assist in determining a complete plan that truly fits, in full partnership with HR. Sure, they can go at it on their own, and hope for the best. But where will they be when they realize it’s not enough?
In full disclosure, we supply retail gift cards to many types of incentive programs. From Fortune 500 to small businesses, we continue to see the incentive industry grow. The tools may change (gift cards, cash, merchandise, experiences), but the need is consistantly there.
Posted by: Kim Hartranft | 07/28/2010 at 08:03 AM
Thank you for reading and commenting, Kim. Great point that when it comes to executing specialized incentives programs such as gift cards, companies are unlikely to have that expertise in house.
Posted by: Laura Schroeder | 07/28/2010 at 08:25 AM