Editor's Note: Cash is king, goes the old saying. Is it really true? Derek Irvine goes after this Classic assumption head on.
If you polled your employees and asked them, “What kind of rewards would you prefer?”, how do you think they’d respond? The vast majority of the time, the answer is: “Cash.” Of course we all want more cash. But what employees say they want for rewards, what actually works best to motivate employees, and what employees enjoy as rewards are entirely different things.
Cash-based rewards can be touchy subject, I know. Cash does have a place in a Total Rewards plan, when used judiciously. But the bottom-line we must all remember is this:
Cash is the currency of compensation. Recognition and rewards requires an entirely different currency.
A blog I read yesterday illustrated this point well. Commenting on a “survey” of preferred rewards by sales pros, the blog author Ley Borlo shared a couple of examples of sales rep reactions to questions about incentives programs. From these comments, there are two clear lessons here.
Compensation and Recognition Rewards Are Different
“The next example was for ‘Jim, who says that about 60% of his income comes from sales spiffs. Now, that's going right to operating my home, paying my mortgage and just doing the family thing.’ Sounds like a compensation program to me.”
Ley’s right. If majority of your income derives from your spiffs, then it’s not a rewards program. It’s compensation. This is an excellent illustration of why recognition needs its own currency, distinct from cash. Sure, commission is a common compensation structure for sales reps, but it’s clearly defined as compensation – not rewards. (And some companies are moving away from the commissions model, with good results.)
A Vast Selection of Rewards Works Better than One Incentive Goal
“The consumer electronics rep didn’t like the award program because he already had and iPad and didn’t need a second one. But that isn’t a reason to use cash; it is a reason for the company who ran the program to use more options as rewards. Single item programs never work very well for that reason.”
Again, Ley’s right. That’s why offering a wide range of rewards is critical. Employees must be able to choose from a vast selection of rewards that are personally meaningful and culturally relevant for them – especially in global organizations. Offering hundreds of rewards options to US-based employees and only a dozen options to China-based employees is lazy at best and insulting to the employee at worst.
More to the point is being sure the recipient of recognition is the one choosing their reward, not the giver (whether that be a peer or a manager). Case in point – just last week my team shared amongst ourselves some reward practices we’ve uncovered in our analysis projects. One in particular stuck out to me. Managers always selected the reward for the recipient, and they could only choose from two reward options – chocolates or wine.
What if the recipient is a diabetic teetotaler, or merely allergic to wine (or chocolate)? What if the person is on a diet? Now the well-intended reward is received as a useless slap in the face.
Let the Recipient Choose
While an extreme example, it highlights the importance of letting the recipient choose their own reward. I’ve shared before stories of why manager “goodie drawers” are a bad idea (giving a gift card to a steakhouse to a vegan employee; giving tickets to a local theatre production to an employee with kids for whom the securing and paying for childcare makes the night out not worth it; giving an iPod to a deaf employee).
The bottom line: Cash has a place in Total Rewards, but not when the intent is to frequently recognize and reward employees for demonstrating desired behaviors on an ongoing basis.
What kind of reward systems does your organization use?
As Globoforce’s Vice President of Client Strategy and 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. He is a leader in the WorkHumanmovement and the co-author of "The Power of Thanks" and 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.
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