Cash incentives have frequently been the easiest way to reward employees. With many of the current market challenges, merchandise and points programs are one of the best tools available to lower your budget and still keep the motivation alive in your division. The below information from Alex Palmer comes from ManageSmarter.
A door closing on cash bonuses may open a window for non-cash incentives
By Alex Palmer
A new study reflects the major challenges faced by companies relying on cash incentives to motivate employees in this economy. And, according to experts, these challenges are driving many employers to look at non-cash rewards, including merchandise, to boost employee performance during these tough times.
As stock prices fall and earnings decrease for many U.S. companies, employers are reevaluating their traditional bonuses and cash incentive plans, according to Deloitte Consulting LLP. In its study, “Retention Strategies During Difficult Economic Conditions,” released in mid-October, of the 151 companies surveyed, 59 percent expect their annual bonus and incentive plans to pay out below target, with 11 percent expecting no payout at all.
“In this market, many companies are carefully evaluating ways to motivate and retain their valued employees, as financial results and compensation values are plummeting,” says Michael Kesner, Deloitte Consulting LLP principal and leader of Deloitte’s Executive Compensation service line.
Over half of these companies (53 percent) are planning to adjust their plans next year, by modifying performance targets or changing performance measures in response to the economic conditions.
These adjustments reflect how sensitive cash-based incentive plans are to economic circumstances. While the survey does not explicitly examine which alternatives to cash incentives are on the radar, it does indicate that a number of “other retention strategies” are also being explored, such as implementing or expanding flexible work programs, as 59 percent of companies are considering. Other Deloitte experts agree that non-cash rewards are attracting corporate interest.
“In general what I’ve been hearing from clients in the industry is that yes, as companies are cutting their merit budgets and cutting back [cash] incentive plan pools…they’re definitely looking at, ‘Are we using non-cash incentives as much as we can?’” says Greg Stoskopf, a director with Deloitte Consulting’s Human Capital practice. He cites incentive merchandise and days off as two non-cash options that may entice employees and employers alike, and emphasizes that companies must be sure that whatever incentives they use fit the preferences of the workers. “Say I work on a project and I get something that’s tangible at the end; there’s something about that tangibility that helps to make up for what the award might not have in [monetary value].”
While Stoskopf describes such an increased interest in non-cash rewards as going “hand in hand” with the decrease in earnings, others emphasize that these non-monetary awards should have been used all along.
“It’s not that these are new rewards that nobody’s ever heard of,” says Steve Kerr, former chief learning officer for GE and Goldman Sachs and author of Reward Systems: Does Yours Measure Up? (Harvard Business Press). “As long as we’re hurting from the economy, people are going to be extremely receptive to ways to attract and retain and excite people without going to [cash] that they don’t have… The non-financials are powerful.”
Kerr taught a workshop in early November to managing directors from Goldman Sachs on “Managing Without Money.” He says the benefits of non-cash incentives hold in good times and bad, but sometimes it takes losing the option of using cash for these truths to be embraced.
“It’s like anything else. When people are feeling good, they can lose track of things that are important,” says Kerr. “You want rewards that are reversible, available, performance-contingent, and financials usually don’t work because they’re limited, while non-financial awards are in a sense magic: they’re inexhaustible, they create their own supply.”
I really think there is great insight to this. When you look at the percentages between Incentive travel and Rewards Merchandise, you might get a better look at how you should reward your employees.
Professional Gifting is a marketing communications, incentive travel / rewards and promotional product supplier to companies throughout the USA. We can be found at www.ProfessionalGifting.com.
