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Employee Rewards

5 reasons to offer non-financial rewards to your employees

The Incentive Research Foundation's Award Program Value & Evidence Study takes a look at the broad benefits of financial versus non-financial rewards and the role they play in employee recognition programs. The findings of this study were fascinating, so we wanted to break down the key learnings and share them with you. Non-cash rewards for employees are more than a passing trend. As we’ll explain, the data speaks to why and how non-financial rewards lead to more successful employee recognition results for organizations because they are more meaningful to people and activate new, lasting workplace behaviors and performance.

The growing trend of non-financial rewards for employees.

When it comes to non-cash rewards versus cash rewards, which one wins? A growing body of research has found that tangible non-financial rewards deliver equal or greater returns to organizations than an equivalent cash reward. In fact, a McKinsey Quarterly report indicates that employees who earn sufficient salaries are more motivated by managerial praise and one-on-one conversations with leaders than by monetary rewards, stock options, or even pay raises.


This trend of awarding non-monetary incentives is being reflected in the behaviors of companies as well. As of 2016, 84 percent of U.S. organizations have turned to non-cash incentives, which represents a three-fold increase from twenty years earlier when only 26 percent of organizations used non-cash rewards. Why is this? Research points to a few reasons, which we’ll cover in the next section. 

5 reasons why non-financial rewards outperform financial rewards.

The Award Program Value & Evidence Study identified potential theories as to why non-cash rewards tend to outperform cash rewards when it comes to employee productivity. Here are the most compelling reasons for the success behind offering non-monetary rewards: 

1. Perseverance, effort, and performance.

When people find a reward more psychologically attractive, they want it more, so they’re motivated to work harder to get it. What makes a reward psychologically attractive? Ultimately, offering more meaningful, personalized activities––like experiences–– as incentives that involve the aspect of choice, aren’t repetitive or predictable, and involve spending quality time learning something new and with friends and loved ones. Changing the reward motivation in this way eventually leads to sustained workplace behavior change. Since non-financial incentives, like a trip to Hawaii, are likely to be more attractive to someone than a cash bonus, they’re going to work harder for it and, as a result, performance will increase.

2. Mental accounting.

Cash rewards are known to trigger a process of mental accounting, which is when the recipient blends the cash reward with salary and uses it for a utilitarian purpose such as paying the bills, buying groceries, or making mortgage payments. As a result, they derive very little meaning from this type of reward. Non-financial rewards for employees, on the other hand, can linger in a reward earner’s memory for years (and don't just take our word for it––check out a real Blueboard reward recipient's experience in the video below!). For example, experiential employee gifts that revolve around travel can create lasting memories and positive associations with the organization that provided the reward.


3. Effort justification (a.k.a. “The Ikea Effect”)

“The Ikea Effect” describes the phenomenon in which people place greater than market value on things they’ve worked to build or achieve (like building furniture). For example, this could include sales reps hitting higher goals to earn a unique sales incentive such as VIP concert tickets to see their favorite band. Even though a non-financial rewards aren't more economically valuable than equivalent cash, recipients often place a greater monetary value on awards they’re attracted to and that are more personally meaningful to them.

Blueboard recipient's post of his experience on Instagram.

4. Social signaling.

Non-financial incentives are highly visible. For example, if an employee wins a skydiving experience, they’ll post about it on social media and share details of the experience with coworkers the following day.


On the other hand, discussing a cash bonus might come off as bragging and be considered socially unacceptable. Since non-cash rewards generate greater anticipation, discussion, and “afterglow” than cash rewards, the positive side effects, including happiness and productivity, tend to stick around longer. 

5. The Reciprocity Effect.

Cash tends to be viewed by recipients as transactional, which means they lack any relationship-building and positive emotions. On the other hand, an emotionally impactful non-monetary reward triggers appreciation, which leads to a greater desire to reciprocate the gift because the recipient believes that more thought was put into choosing this gift. 

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Why employee recognition matters.

The study made a strong case for the power of employee recognition programs and the tremendous benefits they provide for employees, stakeholders, and organizations. Here are the statistics and insights about employee recognition that stood out the most to us: 


Examples of non-cash rewards for employees.

As studies suggest, recognition programs are a must when it comes to the success of both employees and organizations. And there are multiple research-backed reasons why non-cash rewards for employees, like personalized experiences, are more powerful than cash-focused rewards like gift cards or bonuses.

Some of the best ways to reward employees with non-financial incentives include: 

  • Providing professional development opportunities. An annual learning and development (often referred to as “L&D”) stipend supports employees to pursue a new skill that will help them in their role (or one they are working towards), or gain more proficiency in an area they already practice. One option: pair employees with mentors in their current field of career focus or the one they want to move into. These coaching sessions provide an external outlet to bounce off ideas, ask for feedback on projects, or to define goals and plans to reach them. 
  • Sharing words of appreciation. Hearing how our work positively impacts others is an important tool for building workplace community and for reinforcing our own purpose and connection to what we do. And everyone responds to and holds dear different languages of appreciation. For example, for employees whose language of appreciation is “words of affirmation,” collect kind words from the employee’s colleagues in a card or send a personalized note of appreciation
  • Learning something new or trying a new experience. An experiential reward––experiences your employees choose to challenge their comfort zones, indulge in their passions, or discover a new hobby––can be anything from local pottery classes to global travels—it all depends on what your employees feel is most meaningful for them.

Find more non-monetary incentive ideas to boost employee motivation here. If you’re curious to learn more about offering non-financial incentives and experiential employee rewards as part of your recognition program, we’d love to hear your thoughts. Feel free to reach out to us with any questions or request a demo.

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