Which should you choose?
Employers are always looking for ways to boost 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 huge from improved sales, to better productivity, customer service, efficiency, engagement and profits.
One of the main incentives a lot of employers use to improve motivation is monetary rewards. But there's probably a bigger argument to be made for non-monetary rewards, which provide a great deal of alternatives to cold, hard cash, and have been shown to be equally - if not far more - effective. 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 cash - but in some organisations, monetary rewards also include stock options or profit-sharing.
Money is a universal reward, and your employees can choose 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, when times are tough, this cash may also end up just being used to cover everyday expenses, losing some of its motivational value.
Let's break the key pros and cons down:
- Monetary motivation schemes tend to be easy to understand for employees - if you achieve this goal then you will get this financial reward
- Monetary rewards appeal to all levels of staff, from the office administrator to the CEO
- Money is a universal reward and the employee can then choose how to spend the reward in a way they suits them
- Monetary bonuses have the unexpected consequence of encouraging a risk-taking culture - just look at what happened in many of the organisations that contributed to the financial crisis
- Monetary rewards are often just paid as part of an employee’s salary, which means the reward disappears into the employees monthly outgoings, and isn't presented with any fanfare
- It's difficult to sustain participant interest through monetary motivation schemes over the long term
- Not everyone is motivated by money - for your younger team members, it might be about having more free time to travel, or for those employees with a family it might be about receiving leisure vouchers to use on a day out with the kids
Non-monetary incentive schemes
Non-monetary incentives are a bit more complex than some extra cash, with a whole range of options to choose from, such as merchandise, travel, experiences and gift vouchers or cards.
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, or the best parking spot for a month. 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.
Let's break down the pros and cons again:
- Non-monetary motivation schemes can mean more to employee engagement as the reward on offer can be linked to key behaviours and integrated with an overall incentive theme
- With non-monetary motivation schemes you can reward your employees almost immediately without having to submit requests to the payroll team and wait for the employee’s monthly salary to be paid. rewarding your employees as close as possible to the event for maximum impact
- Simple things like a timely but public thank you, or small rewards, can create a passionate, hard-working team that is as committed to growing and improving the company
- Non-monetary motivation schemes don’t have to break the bank. By creating formal reward and recognition programmes using third party suppliers, businesses can save money on the cost of days out, trophies and vouchers. It also means that the employee can choose their own reward from a wide selection
- If you are giving gifts as a reward, it can be easy to give the wrong gift, which shows that the company or manager doesn’t really know their employee - which in turn can be demotivating.
- Employees may have unrealistic expectations of the value of the gift, which can lead to disappointment if the gift does not have the expected perceived value
- Some employees do not like to have the spotlight shined on them in a public presentation. Be sure to tailor your presentation methods to suit the different personalities in your team
Which is best?
Incentives should always take into account the employees the scheme was created for, with options needed to satisfy diverse needs and interests.
Monetary and non-monetary incentives vary in how effective they are and how well they work, so the scheme that's 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.