Employers are always looking for ways to maximise the motivation of their staff, and incentives are an important part of the mix. If you get the right incentive scheme for your staff, then the benefits can be significant, resulting in improved sales, productivity, customer service, efficiency, engagement and profits.
One of the primary incentives many employers use to improve motivation is monetary rewards. But many companies opt to shun this form of reward in favour of non-monetary alternatives, believing them to have a longer-term influence on employee motivation. So which is best for your business?
Monetary incentive schemes
As the name implies, monetary incentive schemes give employees a financial reward when they achieve a goal or exceed expectations. In most cases, this means cold, hard cash but in some organisations monetary rewards also include stock options or profit-sharing.
Money is a universal reward, and as a result, your employees can choose how to spend it in a way that suits them. They may spend it on an immediate treat, such as a meal out or the latest gadget, or they can put it towards something more expensive such as the cost of a holiday, a new car or some home DIY. However this cash may equally be used to cover everyday expenses and therefore lose it’s motivational value.
Non-monetary incentive schemes
Non-monetary incentives are far more complex due to the breadth of options available. In addition to rewards in the form of merchandise, travel, experiences and gift vouchers or cards they can include other options.
Andrew Ballentine, Nora McKenzie, Allen Wysocki and Karl Kepner of the University of Florida found that non-monetary awards tend to come with the promise of an opportunity. These opportunities can include extra annual leave, leaving early on a Friday, flexible working, the best parking spot for a month, or their manager doing their paperwork. Non-monetary incentives allow employers to get creative with the rewards they offer, and as a result can often have a higher perceived value to your employee.
Problems with both schemes
There are problems associated with monetary and non-monetary incentives. Ballentine, McKenzie, Wysocki and Kepner at the University of Florida noted that performance-based monetary awards encourage compliance rather than creativity and innovation. When offered monetary incentives employees acted in a way that enabled them to receive the monetary award, rather than to think creatively.
Non-monetary rewards don’t stifle creativity and innovation but if you choose the wrong type of non-monetary reward, then you can do more harm than good to your employees’ motivation levels and performance. Also, employees can have unrealistic expectations of the value of the gift they will receive, which can lead to disappointment if the gift does not have the expected perceived value.
Which is best?
First and foremost incentives must take into account the employees for whom the scheme was created, and perhaps a balance between monetary and non-monetary incentives will be needed to satisfy diverse needs and interests.
Incentive schemes as whole will always have its dissenters who say that true motivation is intrinsic and, therefore, cannot be influenced by external factors. But I believe they do have a place in today’s workplace, helping improve employee motivation and change employee behaviours.
Monetary and non-monetary incentives vary in their effectiveness and appropriateness, so the scheme that is best for you will depend on your organisational objectives, budget and what truly motivates your employees: there’s not a one-size-fits-all solution.
Bob Nelson, the so-called “guru of thank you,” reminds us that one of the most important rewards that employees report receiving is simply appreciation, praise and recognition from the people they work for and with. A simple “thank you” is often just as effective as any type of incentive.