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EMPLOYEE RECOGNITION
The Case for Non-Cash Rewards
3 MIN READ
Sophia Lee
July 26, 2019

The Incentive Research Foundation recently published the Award Program Value & Evidence Study, which takes a look at the broad benefits of cash versus non-cash rewards and the role they play in recognition programs. The findings of this study were fascinating, so we wanted to break down the key learnings and share them with you. 

Recognition at the forefront

The study made a strong case for the power of recognition programs and the tremendous benefits they provide for employees, stakeholders and organizations. There were multiple statistics the study cited - here are the ones that stood out the most to us: 


Non-Cash vs. cash rewards 

When it comes to non-cash vs. cash rewards, which one wins? A growing body of research has found that tangible non-cash rewards deliver equal or greater returns to organizations than an equivalent cash reward. In fact, a 2003 report in the McKinsey Quarterly indicates that employees who earn sufficient salaries are more motivated by managerial praise and one-on-one conversations with leaders than by cash rewards, stock options, or even pay raises (Dewhurst, Guthridge, & Mohr, 2009). 

This trend is being reflected in the behaviors of companies as well. As of 2016, 84 percent of U.S. organizations have turned to non-cash rewards, 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. 

Why non-cash rewards outperform cash 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. We share a few of the most compelling reasons below: 

#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. This eventually leads to behavior change. Since non-cash rewards, 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-cash rewards, on the other hand, can linger in a reward earner’s memory for years. For example, employee recognition gifts that revolve around travel can create lasting memories and positive associations with the organization that provided the reward.

#3 Effort Justification (“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). Even though a non-cash reward isn’t more economically valuable than equivalent cash, recipients often place greater monetary value on awards they’re attracted to and that are more personally meaningful to them.

#4 Social Signaling 

Non-cash rewards 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 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-cash 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. 

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 as to why non-cash rewards, like personalized experiences, are more powerful than cash-focused rewards like gift cards or bonuses. You can find the Award Program Value & Evidence Study here. We’d also love to hear your thoughts on the findings in the comments section below!

If you’re curious to learn more about offering experiential employee rewards as part of your recognition program, we’d love to connect. Feel free to reach out via the Request Demo button at the top to learn more ^^, or give us a shout in the Live Chat window at the bottom right corner!


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