Published by: The Forum for People Performance Management and Measurement
- Executive Summary
- Cash vs. Non-Cash Employee Motivation Programs
- Research Methodology
For a complete copy of the study, click here.
Forum for People Performance Management and Measurement
Department of Integrated Marketing Communications
Dr. Jimmy Peltier, University of Wisconsin-Whitewater
Dr. Don Schultz, Northwestern University
Dr. Martin Block, Northwestern University
December 23, 2005
In a study of marketing, human resource and other people-influencing managers in the United States, it was found that both cash and non-cash awards were widely used to motivate employees. Managers, however, reported different levels of effectiveness for cash and non-cash awards depending upon the specific business situation they were facing. This implies a strong need for managerial attention to their application to insure the greatest results.
The study was conducted using a survey approach with 235 self-identified managers who reported they were “users of reward and recognition services.” The sample frame was based on managers who attended one of four award/motivation oriented events. Those events were (1) the National Association of Employee Recognition Conference, (2) The Motivation Show, (3) The Integrated Marketing Summit, and (4) the Fall Promo Expo. Providers and vendors of reward and recognition products and services were questioned at these same meetings but their responses were specifically excluded from this analysis and report. Respondents completed a self-administered questionnaire which was tabulated and summarized by the study authors. The analysis is from the perspective of what managers perceive is most motivating for the employee and not necessarily what is most efficient for the organization.
It is important to note that the preliminary findings from the qualitative and quantitative study provided some evidence that managers differ slightly in their definition of “reward and recognition programs” and “motivational programs, and what constitutes cash- versus non-cash based awards. Although we refer to reward and recognition programs and cash versus and non-cash awards broadly in terms of their ability to motivate employees, it is essential that future research drill down to distinguish between programs and tactics and the scenarios under which they are most appropriate. In addition, the terms “awards” and “motivational programs,” which are not identical concepts, are used to reflect what employees receive for their efforts. For reporting purposes this report focuses primarily on awards as the broad nomenclature for describing the rewards and recognition that employees receive.
Overall managers expressed a preference for non-cash reward and recognition programs. They view them as more important, more effective, and generally superior for achieving the majority of the specific organizational objectives listed in the questionnaire although non-cash awards were reported has being the most commonly used approach. (Cash awards were reported being used by 3 out of 5 reporting managers).
The leading non-cash tactic was employee recognition, reported as being used by over 4 out of 5 managers responding to the study. This was followed by gift certificates, special events, merchandise awards, and email/print communications. Non-cash awards were also rated as more important than cash awards for motivating employees. Non-cash approaches were also rated as being more likely to grow in importance in the future.
Specific non-cash awards were judged to be the most effective motivational tactics. The leading tactics, in order, were employee recognition, gift certificates, cash rewards, merchandise awards, worklife benefits, special events, and individual travel. Employees recognition, judged to be the most effective tactic, was seen as being quite useful in achieving key organizational objectives such as (in decreasing order of effectiveness) (1) motivating specific behaviors, (2) increasing retention and loyalty, (3) creating positive internal communications, (4) increasing sales, (5) reinforcing organizational values, (5) increasing customer satisfaction, and (6) improving teamwork. Measures of effectiveness of the most used motivational tactics were employee surveys, followed by employee turnover, and sales growth.
Overall, non-cash awards were felt to be more effective for nearly all of the organizational objectives assessed in the study. In contrast, cash awards were seen as being more effective for increasing sales and to some extent for improving customer acquisition and referrals. Further, non-cash awards were believed to be superior for customer service personnel, support staff, and to a lesser extent management personnel.
Cash awards, on the other hand, appear to be superior for sales, manufacturing personnel, and call center personnel. Part of the reason for this is that these areas tend to have easily identifiable and tangible goals. Alternatively, cash awards have a shorter-term orientation when compared to non-cash awards. There was also a stated belief that most managers thought their organization was more successful in utilizing non-cash awards to motivate employees.
Lastly, and importantly, perceptions of cash versus non-cash reward and recognition programs in general, and across different types of reward and recognition programs specifically, differed somewhat based on whether respondents were more involved in marketing/sales or human resource management. As an example, although non-cash rewards were generally rated higher across both groups, on average marketing and sales personnel gave higher ratings and use of group travel and cash rewards than did human resource personnel. This makes sense given that sales/marketing managers are more likely to use travel and cash rewards as sales-oriented motivational tactics, particularly given the costs-benefit tradeoffs in this area. Importantly, future research comparing cash and non-cash reward and recognition programs across different problem solving scenarios has considerable value. In addition, research that clearly delineates programs from tactics, and reward and recognition initiatives from motivation initiatives, is noteworthy. Lastly, the research reported here focused on the views of managers. Research is also needed that closes the loop by addressing all organizational publics, including upper management, middle management, first-line management, and employees.
Organizations use Cash and Non-Cash awards, rewards and recognition programs to influence employee behaviors. Managers assume adequate compensation will help motivate people to do their jobs. However, organizations attempting to achieve specific business goals through their people often have a need to address other organizational concerns to optimize personal, team or corporate performance. Some of these organizational needs are: to influence how employees feel from day to day in the workplace, the degree to which they buy into and support organizational goals and their willingness to align their behavior accordingly, the degree of understanding employees have about organizational goals and their ability to assist in their achievement, and their feelings about the support or recognition from management for their efforts.
Beyond employee-based considerations, the organization must weigh the benefits derived from rewarding and motivating staff against both short-and-long-term financial objectives and profitability of the firm. Moreover, while compensation makes sense for rewarding ongoing contributions, organizations need a meaningful way to drive and extend employee performance that does not become construed as compensation that might be expected on a year-to-year basis. Although a research stream exists that has focused on intrinsic and extrinsic employee compensation and the impact on employee perceptions, there is a paucity of formal, objective research that investigates how organizations can and should implement award/motivational programs and the extent to which these programs can achieve the broad range of organizational objectives often expected by management. Even less is understood about which types or forms of award and motivational programs are best suited to achieving the widely varied organizational objectives that management requires and requests.
Clearly, research is needed that extends beyond today’s primary objective, employee satisfaction. There is a clear need for management decision criteria and a set of guidelines on how organizations can efficiently and effectively develop and implement various award programs. This would include both Cash and Non-Cash approaches since both provide inputs for the long-term betterment of the organization. Thus, the goal is to provide strategic guidance that will assist the organization in knowing when and where to utilize such programs, how to determine the type of motivation and award program that should be used and some type of measurement process that will enable the organization to understand the level of investment to make and the type of return that might be expected.
The research reported in this document is designed to investigate the effectiveness of Cash and Non-Cash award, reward, and recognition programs and to provide strategic guidance for those organizations that incorporate them into their motivation plans. Specifically, we summarize the findings from surveys conducted with attendees at four different conferences/events: (1) National Association of Employee Recognition (NAER) Spring 2005 Conference, (2) The Motivation Show (Fall 2005), (3) The Integrated Marketing Summit (Fall 2005), and (4) the Fall 2005 Promo Expo. Of note, this report considers only responses from individuals who identified themselves as “users of reward/recognition services.” Because of the potential for bias, responses from “providers/vendors” has not been included in the analysis.
Of significance, these conferences were selected for three important reasons. First, and as the findings will show, these conferences are attended by individuals who have experience across a wide range of cash and non-cash reward and recognition programs. As such, they are relatively experienced in reward and recognition programs and are likely to have insights into their relative merits. Second, and again as the results will show, a large percentage of the attendees are responsible for the selection of reward and recognition programs for their organization. Third, many of attendees at the Promo Show and Integrated Marketing Conference are involved in marketing and sales. As a consequence and in combination, these conferences represent a cross-section of individuals who will be selecting, implementing, and using reward and recognition programs. Moreover, and as the results show, there is also a good cross-section of human resource and marketing personnel.
The Forum for People Performance Management and Measurement seeks to generate a better understanding of how organizations can and should implement award/motivational programs and the extent to which these programs achieve the broad range of organizational objectives often expected by management. In terms of “general objectives,” the research project is designed to:
- Investigate the effectiveness of Cash and Non-Cash Rewards under various situations and conditions,
- Understand which types or forms of motivational programs are best suited to achieving the widely varied organizational objectives that management requires and requests, and
- Provide insights to support future research regarding strategic guidance for organizations that are both providing and using reward/recognition programs.
Prior to developing and administering the survey questionnaire reported here, a series of qualitative research components were undertaken to accomplish the following objectives:
- Identify potential problem areas and issues from both an internal and external point of view,
- Provide a foundation for “triangulating” the findings from the quantitative portion of the research process, that is, to identify areas of consistency, and
- Ultimately, to develop potential question content areas and answer/response categories specific to the research project through the use of qualitative research, i.e., designing what needed to be included on the final questionnaire.
Regarding specific research outcomes, the quantitative research stage was designed to:
- Gain understanding on current use and perceptions of employee reward and recognition programs of managers that use the various award programs.
- Assist in determining when and where employee R&R programs are used.
- Determine the type of employee R&R program used and the measurement process that enabled the organization to understand the level of investment made.
- Develop the foundation for (Phase 2), which is to develop further data based on employee or other empirical data to reflect the employee point of view or actual outcomes, if possible, based on awards used.
The complexity of the issues under investigation required a research perspective that built knowledge from the bottom up. Thus, a multi-stage process utilizing qualitative and quantitative research components were used. The qualitative research stage included (1) the formation of an Advisory Committee, which included an Expert Delphi Panel, (2) a Review of Existing Literature/Research, and (3) Key Informant Interviews. The quantitative stage consisted of the distribution of an extensive questionnaire at four conferences attended by individuals knowledgeable about employee motivation programs.
Review of Existing Literature/Research: Previously collected secondary research and an electronic review of untapped secondary data was conducted. Special attention was given to incorporating findings from the CANE model of motivation conducted by the SITE Foundation. (citation needed here) In this way, current research efforts were utilized and previous work extended.
Established an Advisory Committee: This included participation of individuals close to the project for the purpose of (a) creating consensus on establishing concrete objectives, (b) identifying key research issues, questions, and (c) using a Delphi Technique to construct and finalize the questionnaire used.
Key Informant Interviews: Interviews were conducted with a number of individuals to help understand the nature of the current motivational environment. These interviews were held prior to developing the questionnaire. They included (how many) individuals at the NAER Conference.
Based on the review of existing literature and other resources, the following list of key research needs and areas of interest were developed, many of which were addressed in this report. For a full review of the literature readers should examine the report entitled “Literature Review: Cash/Non-Cash Award Programs and Research Studies Concerning Such Programs.”
The key issues covered in this report include:
- Cash vs. Non-Cash: Which of these two broad areas work best and in what situations and under what conditions? Currently, very little research exists that compares and/or contrasts the two options.
- Types of Non-Cash Awards: What are the different types of Non-Cash awards currently used by organizations? And, what is their effectiveness?
- Types of Social Awards: What are the different types of social awards currently used by organizations and what is their effectiveness?
- Goal Levels: How do performance goal levels affect the award programs and employees’ feelings toward those programs?
- Individual vs. Team-based: Do individual award systems work better than team-based awards, and, if so, under what conditions? Especially important to understand is whether competition for awards (i.e. only top % receives awards vs. anyone that reaches a stated level of performance) is beneficial or detrimental.
- Cost Benefits of Awards: Little research currently exists on the cost benefits of various types, forms and value of awards. In past reported studies, Cash resulted in performance increases that were twice the size of increases created by Non-Cash awards. The studies, however, did not examine the actual costs of the awards. If the Non-Cash awards cost half as much as the Cash awards, then the cost benefit may have been greater than the use of Cash awards.
- Performance Baselines: There is a need to correctly measure the effects of awards among a relatively large group of organizations. It is important to establish baselines to measure the true changes that occur. In many of the studies reviewed by Condly, Clark, and Stolovitch (2003), many reporting firms did not have baseline measures in place; therefore, they were not included in their meta-analysis.
- Type of Activity/Task: Another variable that may affect the effectiveness of awards on performance is the type of activity/task employees are undertaking. That should help identify possible patterns or situations in which Cash, Non-Cash, or social awards would be most effective.
- Reinforcement Schedule of Awards: Is it best to provide the awards on a contingent/non-contingent basis, continuous, variable, or some other reinforcement schedule? And, do these schedules differ by award type?
- Other variables: What other variables may be affecting the increase/decrease in performance when awards are used? This will help in identifying what makes programs more successful by identifying what variables need to be controlled/minimized
Based on input from the qualitative research stage, a survey questionnaire was developed. This was finalized through an on-line Delphi process conducted with the Advisory Committee. The questionnaires were then distributed at four conferences from Spring through Fall, 2005. The conferences included (1) 2005 NAER Conference (April 10-12) in Los Angeles, California, (2) 2005 Motivation Show (September 27-29) in Chicago, Illinois, (3) The Integrated Marketing Summit (September 27) in Chicago, Illinois, and (3) the 2005 Promo Expo (October 17-19) in Chicago, Illinois. Attendees at these conferences included individuals from both the practitioner/user and vendor side of employee reward and recognition programs; however, only responses from “practitioners/users” are reported here. After eliminating responses from vendors (about 250), a total of 235 “user” surveys were collected.
These four conferences were selected for three main reasons. First, given the importance of comparing Cash and Non-Cash award, reward, and recognition programs, it was critical to survey individuals who have a clear understanding of the varied ways to motivate employees. These conferences were thus identified as having attendees with a high level of expertise in the subject. Second, these conferences offered the ability to survey a large number of attendees involved in selecting employee motivation programs. Lastly, these conferences ensured a relatively equal split of individuals involved in the Human Resource and Marketing functional areas.
Specific question content areas included: (See Appendix A for a copy of the actual survey))
- Use of Various Reward/Recognition Tactics: The survey identified which types of motivational tactics are currently being used.
- Importance of Cash and Non-Cash Programs: Four questions addressed the current and future importance of Cash and Non-Cash Reward/Recognition Programs.
- Effectiveness of Different Motivational Tactics on Organizational Objectives: Respondents rated the effectiveness of both reward/recognition programs at motivating employees in general and their ability to achieve various organizational objectives.
- Comparison of Cash/Non-Cash Programs on Objectives/Job Functions: A main goal of the research was to identify when Cash and Non-Cash programs are the most effective. Four questions directly compared the two types of programs. A third question asked respondents to choose the best program for specific organizational objectives.
- Perceptual Statements Related to Cash/Non-Cash programs: Respondents indicated their level of agreement with eight statements related to Cash and Non-Cash programs.
- Selection and Measurement of Reward/Recognition Programs: Respondents indicated who at their organization is involved in selecting motivational programs as well as what they use to measure the success of any programs implemented.
- Respondent demographics.
For a complete copy of the study, click here.