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As always, Chris, a wonderful post.

So, to pull the thread, should we dispense incentives and awards in cash? (I can't help but conjure up an image of some poor HR disbursing officer with a large coffer of cash ... which may be enough to derail the idea in its nascent stage.)

But, if cash is king, what does it mean when an employee receives a modest award in their monthly/biweekly paycheck as opposed to if we handed them the same amount in "Benjamins"?

Okay, so I keep stumbling over the image of the HR specialist with the cash box. But, surely there is a way to incorporate this psychology into incentive design.

I'm curious what that might look like.

Talk about a strange confluence of telepathy and shameless shilling in support of this topic. And I mean all that in the nicest possible way . . .

Seriously, I considered adding something to the base article that was almost exactly what Joe is alluding to. While a cute idea (HR people paying off people with piles of cash), clearly that's not practical. What I did briefly contemplate was a variation on what Joe suggests - but in the form of an encrypted pre-paid card, that might actually require you to go to a bank, and have them count out money in front of you.

I think something valuable may have actually been lost, in the transition to and efficiencies associated with direct deposit. Maybe the pre-paid "debit card" isn't the exact answer - but I think this challenge of restoring the motivational effect of the physicality of financial outcomes is solvable.

Early pyramid-scheme promoters regularly spiced up their big every-seat-taken conferences with "... look under your chair" announcements. Finding a $100 bill many years ago would marvelously charge up their enthusiasm. Cash has a distinctly powerful effect on perceptions and attitudes, far beyond the power of proxy substitutes that create psychological distance from "money."


Ahhh cash...that wonderful and perplexing phenomenon. You laid out nicely how it impacts us differently than cash substitutes (chips/credit cards). There is also a substantial body of work on how cash works as an incentive vs non-cash. Scott Jeffrey did some great research on people stating that they would prefer cash as an award over a non-cash experiential award (i.e., a massage) but actually working harder and performing better on the task for the non-cash award. This type of study has been repeated numerous times with other non-cash awards (merchandise, travel, etc.). As Thaler points out with mental accounting, we tend to place our money into different mental accounts. So spending my incentive money on a massage or luxury vacation is unlikely (just like the gambler being more reluctant to bet a big wad of $20's vs chips) - at some level, it is supposed that we know this and our performance suffers as a result. Of course, there are other drivers of this as well...but I've already gone on too long. Thanks for the thought-provoking piece.

Yep, tons of elements that could have been woven into this, if not for the article length limits.

I'm frequently surprised by how little we (We = Any People) seem aware of the influences we're regularly subjected to, primarily from a selling/marketing perspective. Talk about a target-rich environment to draw lessons from. Regarding your point about how we mentally segment our financial income streams, and how some "streams" are more likely to be directed to discretionary spending.

My favorite in this area that gets targeted by marketers is the new car advertising (and lots of other big ticket items) that seems to reach a near-frenzy pitch right around the time that federal income tax refunds begin to arrive. Because those "big" refund checks represent free money, right? That situation could only be made worse from a behavioral perspective, if those refund checks were able to be paid out in casino chips.

Oh wait . . . I'm sure that's already happening, somewhere. Thanks!

Awesome thoughts. Could be the reason people tend to spend more with credit cards is because they derive less satisfaction.

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