Employers may think giving their workers cash rewards is the best way to keep them happy, but it turns out, its those non-financial awards that lead to loyalty and productivity among employees.
“Cash rewards don’t have a long lasting effect,” says Susan Heathfield, About.com Guide to Human Resources. “Most people fritter it away and don’t spend it on something tangible or significant in their lives and as a consequence its impact doesn’t last.”
According to a recent international survey of HR managers and professionals commissioned by SuccessFactors, the business execution software company, non-financial benefits topped the list of employee requests granted, with 81% citing training and 73% naming flexible working hours as the most popular non-financial rewards.
“With the ever-growing need to attract and retain top talent, companies must invest in creative engagement programs that go beyond rewarding employees with cash,” says Dr. Karie Willyerd, chief learning officer at SuccessFactors. “Rewards, regardless of type, work when they make an employee feel happy, valued and appreciated.”
Giving employees awards is great, but according to Paul Dorf, managing director of Compensation Resources Inc., in order for it to boost morale, breed loyalty and increase productivity the employee has to be paid fairly to begin with. “You have to take care of their basic needs. Non-cash awards over and beyond that can be valuable and very motivating,” says Dorf.
According to compensation experts, the reason non-cash rewards work is because with it comes recognition of a job well done. It lets the employee know he or she is important to the organization and can serve as a reminder that the company cares about its employees. Cash rewards are gone quickly so they aren’t something the employee will look at a year later and remember why he or she has that TV or coffee mug. Indeed, Heathfield says employees given cash rewards with a note accompanied with it saying why they got the award will spend the money but hold on to that note for a long time.
Take Sikorsky Aircraft as an example. At one of its plants, which employs more than 5,000, at the main entrance is a parking space that’s reserved for the employee of the month. Making the parking spot, where everyone going into the plant will see it, doesn’t cost the company any money, but according to Dorf, it is a huge motivator because everyone knows who gets that recognition each month.
So how can a company go about creating a non-cash rewards program? Compensation experts say they can either take the formal approach where awards are given on a regular basis when certain criteria are met or on an informal basis where awards are given randomly when someone has gone above and beyond their role in the organization. Rewards can also be given on a group basis as well. For example free lunch every Friday or a company outing paid for by the boss. They types of awards can also vary and can include pretty much anything the company thinks will make employees happy and appreciated. It could be a day off, a flexible work schedule, a flat panel TV or even a coffee mug.
“Unlimited vacations, yoga classes and “bring your own device” policies are all perks that are becoming more and more common as companies look to stay relevant with the millennial workforce,” says SuccessFactor’s Willyerd. “Companies like Google and Facebook have focused on building campuses that act as a home away from home, offering services like childcare, dry cleaning and on-site gyms. These benefits may blur the lines between work-life balance, but they generally make employees feel appreciated and want to come to work.”
Any company considering meting out awards has to tread carefully. They don’t want to be accused of having an unfair system or playing favorites. Nothing can be worse to morale than employees who think they are getting the short end of the stick. To prevent that experts say the company needs to set fair criteria and parameters for when awards are given out and employees have to be evaluated more than once a year to determine if they deserve the award. The award has to also match the contribution, says Dorf. For instance the boss may want to award his assistant for staying late all month to help on a project by giving her a gold bracelet when a more appropriate award would be letting her leave early a few days or getting an extra day off. “You can’t give too little or too much,” he says.
