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What Motivates Employees Better Than Cash? A Break.

What motivates employees to perform at their best? Rewards, yes, but perhaps not the kind you’d expect.
COLLABORATORS Adam Vaccaro
MotivateLarge.iStock

BUILD STAT
96% of employees say they are motivated by travel incentives, and 72% who earn the reward say they feel increased loyalty to the company.


TALENT MANAGEMENT

A special Build supplement in the December 2013 issue of Inc. magazine.

The Build Report: Talent Management Powers Growth

How to Screen Candidates for Curiosity and Positivity

What Motivates Employees Better Than Cash? A Break

12 Questions to Gauge Employee Engagement

You know that employees perform best when they are rewarded not only with a suitable paycheck and benefits package but also with additional incentives. Performance and profit-sharing bonuses are common (even to the point of being taken for granted). Although employees rarely give back a check, when it comes to getting them to really lean in, there may be a better way to go.

Recent studies show that employees respond better to noncash rewards and other incentives than they do to an extra injection of moolah. It is, however, a fine line. According to the Journal of Economic Psychology, employees do choose cash over noncash rewards when given the choice in the abstract. But they change their minds when presented with a specific noncash reward. More important, other research suggests that noncash incentives produce a greater measurable boost in productivity than cash does.

Effective Environmental, a Texas-based environmental services company, subscribes to this theory. Every year, Effective Environmental doles out an all-inclusive family vacation to five employees. Managers in each of the company’s divisions submit nominees, and the senior leadership team chooses the winners based primarily on who is deemed to have given maximum effort day in and day out.

Why vacations? Travel, it turns out, may be the most effective incentive of all. According to a study by Site International Foundation and the Incentive Travel Council, 96 percent of employees say they are motivated by travel incentives, and 72 percent who earn the reward say they feel increased loyalty to the company.

Offering travel incentives may also be good for your bottom line — even before accounting for its effects on productivity. The U.S. Travel Association notes that “in order to achieve the same effect of incentive travel, an employee’s total base compensation would need to be increased by 8.5 percent.”

Effective Environmental also treats its employees to a generous benefits package, which includes higher-education tuition assistance for employees’ dependents. The company also covers 100 percent of workers’ health care costs. Studies have shown that health insurance not only motivates employees but also plays the single biggest role in attracting new talent.

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THE PLUS

For many bosses and employees, cash is still king. But when is the best time to give it? Most often it is doled out at the end of something (a fiscal year, a big project, etc.). But some argue that bonuses pack more punch when you give them in advance. Yes, there is a catch: If bonus recipients don't deliver, they have to give the money back.

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