Non-cash rewards are more efficient because they are more effective. Let me break this down for you.
First of all they have a higher dollar-for-dollar impact than payroll, bonuses or stock options because they can be promoted publically. That gives companies the ability to make the connection between an employee’s efforts and the desired organizational outcomes more effectively.
Second, when you reward an employee’s actions (or for that matter aptitude) you stroke their intrinsic desires to bond and learn.
As more and more CEOs become increasingly concerned about their ability to attract and retain top talent in the most cost efficient manner possible, non-cash rewards (and by that I mean catalogue merchandise, gift and debit cards, and individual travel) are becoming a bigger part of the total rewards formula. Why? Because they do more than cash alone can.
Compelling arguments and points that should be made in your business case; but even with this rational you can expect pushback. And it will probably come in the form of a business leader saying something like, “interesting but I have other issues that are more important.”
That’s why the best business cases do three things; anticipate and address objections, frame the benefit in the language of finance and position the proposed solution—in this case the role of recognition—as a tool that will help the business accomplish key objectives.
Want to know how to translate these benefits into tangible financial outcomes? More importantly do you want to see exactly how it works within a recognition portal? Give us a call and well show you how to build a better business case for recognition.
Presented by: Mike Ryan, Senior Vice President, Marketing & Strategy
Wednesday, May 15, 2013
9:00-10:00 AM EDT
Wednesday, May 15, 2013
3:45 – 4:45 PM EDT
Have we reached a tipping point in the cash vs. non-cash utilization? Have the value spreads between what constitutes a cash bonus and what is an acceptable amount for a non-cash award narrowed?
Most companies use cash for the big bonuses and non-cash for the smaller ones. But according to the Incentive Research Foundation, the gap is becoming less prominent. About two-thirds of companies give their employees gift cards, says the IRF. Almost half as holiday gifts or year-end bonuses.
And while these particular IRF findings (published late last year but recently discussed in Time Magazine) don’t address other forms of non-cash compensation like; catalogue merchandize, company sponsored debit cards and individual or group travel, I would venture to say that the trend is rising across the board.
Why is that? Most business leaders understand that non-cash awards deliver more “bang” for the compensation buck. They recognize that non-cash awards are more efficient because they are more effective. They have read the studies that non-cash awards can do more to capture an employee’s attention than bigger cash bonuses can. And because of their celebratory nature, they realize non-cash is more promotable within the organization. These aspects play a huge role in helping companies more effectively connect individual behavior with organizational goals.
As compensation leaders examine the impact of any and all elements within the total rewards framework, the debate over where and when to use each has shifted. Non-cash awards are now seen as a growing and more viable component within the comp mix; options that employers can rely on more when trying to motivate employees.
Are you giving employees what they really want?
Is non-cash playing the proper role within your totals rewards mix?
The use of pay for performance (PFP) has been increasing in businesses. Depending on which sources you cite, up to 83% of all companies have some form of a performance-based, cash payout component in place.
While these businesses have bought into the concept of PFP, the majority also feel that they are not getting the desired rate of return. That “satisfaction gap” comes from relying too much on cash and opens a window for compensation leaders to examine additional non-cash rewards as an alternative incentive. Advocates of PFPs will stipulate that when implemented correctly they do increase employee productivity.
The question worth asking is this: When it comes to optimizing pay for performance, do you have the right award mix in place?
Companies that rely on cash alone, but fall into the “unsatisfied” camp may be interested in a study out of Wichita State University that found when people make a hypothetical choice between cash and non-cash incentives, cash is indeed preferred by employees. However—and here is the hook—when it’s no longer hypothetical, meaning when an award is identified, employees actually performed better in pursuit of it, even when the award was of equal value to the cash alternative . In other words when employees can zoom in and identify something that they really want they really prefer the non-cash alternative.
As organizations look to do more with less, the argument can be made that introducing a non-cash component to a PFP scheme (remember the majority of executives feel they are underperforming) may make the PFP more effective and there for more efficient than one with an “all cash” payout.
Are companies using every tool at their disposal to retain their best employees? It’s a question that’s on the mind of CEOs everywhere. Why now? While “net new job creation” has been stubbornly soft, the actual number of monthly “hiring events” has been up significantly. That means that companies on growth trajectories are going out and poaching top talent from competitors.
In the coming months it will be increasingly difficult to hold on to good people. Faced with the possibility of losing them, business leaders are raising wages. According to CareerBuilder’s 2013 hiring forecast, 72% percent of employers plan to increase compensation for their existing employees in the upcoming year. The need to retain talent is the main driver.