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Awards: Compensation Vs. Recognition

Ask most consumers, employees, or companies what type of award they prefer, and the majority will usually answer cash. But because awards play a far more subtle role than simple motivation, the answer to this question does little to help the planner.

Recipients say they prefer cash because of the trust issue: They know the value of cash and like the option of using it for whatever they desire. Organizations often prefer cash, because it’s so easy; it’s often little more than an extra entry on the pay check or a deduction from an invoice in the case of customer incentives.

Organizations that use non-cash awards such as branded merchandise, gift cards, group travel, etc., do so because they want to make a special point of adding value or providing recognition in a way that clearly distinguishes the program from compensation or pricing issues.

Cash is the currency of compensation and pricing. Use cash and it becomes part of an individual’s compensation package or a customer’s pricing program. Invariably, if you offer a cash incentive to any audience, internal or external, it becomes a benchmark against which future compensation and pricing issues get measured, leading to a condition known as “program addiction.” Because cash quickly gets mingled with other compensation or expenses (in the case of customer cash expenses), it has very little residual or marketing value. Nothing tangible remains to remind participants of the program once the cash is consumed. Non-cash awards, on the other hand – especially those targeting internal audiences – have a far greater chance of breaking through the promotional clutter than a straight cash award or discount. Employees, in particular, often feel uncomfortable talking about their receipt of a cash award, thereby reducing the potential “buzz” factor desired to promote organizational values.

The goal of any incentive, reward, and recognition program usually involves creating buzz, promoting values, creating excitement, and fun, etc., whether in an external or internal promotional program that may or may not be repeated the following year or promotional period. Offering non-cash awards supports this goal by increasing the communication and promotional components while reducing the chances that people will grow to expect the award in subsequent years.

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