Inventive Incentive Programs

To motivate and retain employees, and generate high performance, employers need to use incentives. There has long been discussion as to whether noncash rewards is a better motivator than cash rewards or vice versa. Again and again research has shown us that most employees are not motivated solely by the amount on the paycheck. However, many employers are still using cash rewards as a sole motivator or as the prime motivator instead of considering more financially aware options such as noncash rewards.

Maybe you, as an employer have thought about updating your incentive program but just never got around to start that project. Here follows some advice and basic information that could help you get started.

What Should be Rewarded?

Ask yourself what behavior you, as the employer, want to reward through an incentive program. Do you want to reward employees for the effect of their performance on the bottom line, or on how they live company values? This question can be divided into two categories: performance-based rewards and value-based rewards.

Performance-based rewards – for example exceeding sales expectations – can easily be rewarded with hard cash. This means you are rewarding behaviors that translate into an economic benefit for the company. Using performance-based rewards can be good when you want to meet specific goals and generate a lot of business, however, these types of rewards can easily create a competitive atmosphere amongst employees.

Value-based rewards can be more subjective. They acknowledge behavior such as teamwork or traits such as ability to build morale, and they don’t have to be cash-based to work effectively. Value-based rewards are good for creating and establishing a strong company culture and help long-term future goals.

Which Rewards Should be Given?

Realize that every employee is different, and therefore prioritize different things in life. Some will be motivated by a higher salary and some will be motivated by working part time.

It is important that you understand your employees and what motivates them. To do this look at both demographic and psychological factors. For example: an entry-level employee with a lower income level might have more basic needs and might prefer cash, but an experienced and well established employee earning a higher income might prefer something with trophy value that enhances their self-esteem.  

To explore these psychological factors, simply ask employees what types of behavior they would like you to recognize, and how. A survey takes out the guesswork, and employees will appreciate the fact that you asked.

Communicating the Rewards

People have a tendency to repeat a behavior when they are rewarded for performing in that particular way. How well they are motivated is a function of how clear the connection is between rewards and performance, and how valued the rewards are.

How well the incentive program is communicated is vital in making the whole project actually function. The rewards for specific performance or behavior should be clear to all employees. For example: if you are using performance-based rewards to motivate sales staff to reach certain call quotas, it should be fully clear to the employees how many calls are expected of them. They should also know what happens if they don’t reach the call quota, or what happens if they reach it with great exception.

The simplest way to communicate the incentive program is through creating a company policy, which shows the specific behavior, what goals to reach and what will be rewarded for reaching them.

The Power of Noncash Rewards

Let’s examine the power of noncash rewards. Maritz, a sales and marketing service company focused on employee motivation, recommends using non-cash rewards because they are clearly separated from pay. Employees treat cash, no matter when it is offered, as pay. This makes the reward less of an incentive tool and more as a form of compensation for hard work already done.

A Hay Group research representing about four million employees worldwide, shows that some of the most common reasons for leaving an organization are connected to nonfinancial issues. These include: lack of career development opportunities; poor work climate; lack of challenging work; direction of the organization and lack of recognition. To work closer with these issues might lead to stronger employee retention.

My own experience with this topic has shown me candidates will leave long term career positions with highly paid benefit packages and great salaries to try out new positions and assignments. When I interview candidates, and the topic of compensation comes up, most of our candidates answer that they are flexible dependent upon the circumstances of the available position. Also, when discussing why they left their old job, many of the candidates talk about the environment and the atmosphere or specific assignments and tasks rather than the compensation and benefits


I hope this article has given you some advice and information to help you get going on the project of updating your company’s incentive program. More information about this subject can be found at these links: 

Also, check out DanielPink’s presentation “The Surprising Science of Motivation” at TED(can be found on Youtube or at 



Staffing Intern 


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