The Money or the box? Cash vs. non-cash incentives

Are your employees likely to be more motivated by cold, hard cash or a week-end getaway for two paid for by the company? Who knows the answer to this $64,000 question? Your employee does. Who should know? You should. Teresa Russell talks to three companies that believe they know the answer to the question of whether to pay their staff cash or non-cash incentives

Are your employees likely to be more motivated by cold, hard cash or a week-end getaway for two paid for by the company? Who knows the answer to this $64,000 question? Your employee does. Who should know? You should. Teresa Russell talks to three companies that believe they know the answer to the question of whether to pay their staff cash or non-cash incentives

According to Australian research published by Mercer in September 2002, 55 per cent of organisations offer non-financial rewards. Among these, 76 per cent found that non-financial rewards were an effective way of thanking employees for achieving a specific goal and 71 per cent found them an effective way of motivating employees.

Although these results are very encouraging for suppliers of non-cash incentives, the fact remains that 25–30 per cent of organisations didn’t believe these incentives did what they were supposed to do. What was missing?

In June 1999, the Corporate Leadership Council published six characteristics of a best practice reward and recognition scheme (see box). Perhaps the disaffected employers failed to communicate their incentive programs effectively or perhaps it wasn’t done in a timely fashion. The following organisations have identified another factor in effective reward and recognition schemes – personalised and flexible rewards.

Gadens Lawyers Sydney

Gadens Lawyers is a large national law firm that employs 240 people in its Sydney office, including lawyers, paralegals, clerks, legal support, marketing, IT, finance, HR and knowledge management (library) staff. Jane Bury, director of human resources for Gadens Sydney office, manages the company’s ever-evolving reward and recognition scheme. “Everybody responds positively to recognition of success, whether they are a highly paid lawyer or a lower paid clerk. We try to keep our rewards program lively and retain an element of surprise,” she explains.

Like many companies, Gadens Lawyers Sydney uses a combination of cash and non-cash incentives. Senior managers are eligible for annual cash bonuses equivalent to 1–6 weeks salary. At the end of the financial year, everybody in the firm gets a gift. There was excitement last year when the firm gave each employee a $500 Liveyourlife gift voucher, which they could redeem for a large range of products or services.

Bury says they also give out a lot of on the spot rewards, such as movie, CD, and department store vouchers. Then, on a monthly basis, Bury formally canvasses all the managers and partners to identify any exceptional performance and asks for a recommendation about the type and value of a reward. “The person gets a personal thank you letter from the firm’s managing partner, along with an individual gift, which has ranged from a dishwasher, to furniture, to weekends away with their partners. This confirms that we know them as a human being, rather than just an employee, and recognises their efforts in a meaningful and personal way,” Bury says.

Other rewards they use include Tiffany gift vouchers for employees of five, ten and fifteen plus years standing and a one-off health bonus payment to employees who did not use 90 per cent of their sick leave in a previous year. “We didn’t advertise that one, because we don’t want people who are genuinely sick to come into work, but we did want to thank those who didn’t take unnecessary days off,” Bury explains.

“We don’t think about the cost of the rewards and can’t do any meaningful ROI calculation, but we get anecdotal feedback which makes us believe we’re on the right track,” she says. Recently, an L&D consultant who worked for Gadens commented to Bury that she couldn’t believe it was the same firm, when comparing the motivation levels of the staff to when she last did training for the firm five years ago.

Bury says that the secret to any reward and recognition program is to continually change it and retain the element of surprise. “The moment a reward becomes regarded as an expectation or an entitlement, it fails to work,” she says.

She doesn’t officially compare her firm’s incentives to that of Gadens competitors, but says she stays in touch with other people in the industry. “I suppose if we were losing lawyers to other firms, I’d look into it, but most lawyers who leave us opt for a career change,” Bury explains.

Australian National Credit Union

Australian National Credit Union (ANCU), one of Australia’s largest credit unions, has introduced non-cash incentives for all its 400 staff in order to drive a change in corporate culture. Tony Touma, head of human resources, explained that the incentive scheme at ANCU has changed dramatically in the last 18 months. “Three years ago, all incentives were built into the enterprise agreement. When it was renewed 18 months ago, staff wanted a high fixed increase and removal of the sales incentive scheme. However, we negotiated a modest pay rise and promised to bring in a more flexible and appropriate incentive scheme for every employee that was linked to a change in behaviour, aligned with our core values,”says Touma. All of the incentives are now outside the workplace agreement and enshrined in company policy, so they can be amended regularly if required.

At ANCU, senior management receive an annual cash incentive linked to corporate and individual KPIs. The sales team, which focuses on growth, can earn 5–15 per cent of their salary in cash rewards. The recently introduced non-cash incentives program, known as REAP (Reward Employee Achievement Program) is available to all staff and is designed to reward employees for exceptional performance and behaviour based on the organisation’s core values –trust, relationships, innovation, proactive and service.

Any employee can nominate a colleague for demonstrating and living ANCU’s core values. Touma says that one of the reasons this program has been successful is that it’s not management driven. The employee’s manager has to approve the nomination and decide on the number of points that will be awarded. In the nine months since the program launch, there have been 600 nominations, 500 acceptances and an average number of 40 points awarded per nomination. These points accumulate and can be spent on the Wishlist website, which offers 600 products and services. Wishlist manages the nominations and fulfilment, administering and reporting on the program back to ANCU.

Touma says that although it’s hard to draw a direct line between the cause and effect of the incentives program, it appears to have driven a cultural change over time. The REAP program is a significant investment and Touma intends to evaluate its effect through staff surveys during the next 12 months.

“The most important thing we have taken away from this change in direction is that incentives mean different things to different people. One size does not fit all. People are not interested in movie vouchers or pizzas on a Friday or anything else. Giving them choice in the rewards they receive has been a popular move,”Touma says. He adds that it is important to communicate incentive programs well: “Incentives need to be kept alive and not become something expected.”

talpacific

talpacific is a wholesale travel provider specialising in premium holidays in the South Pacific. It employs 70 staff in sales (field and phone), accounts, documentation, ticketing and marketing and counts the large retail travel agencies among its clientele.

When Colin Slark became the general manager for talpacific Australia two years ago, only sales staff were able to access “some obscene rewards on some things, even though they needed the support of all staff to achieve the sales”, he claims.

Slark introduced both cash and non-cash incentives for all staff and now changes the program every 12 months. The cash portion, budgeted at $125,000 per annum is dependent on both quantitative and qualitative results and is assessed annually. “The quantitative results are usually linked to profit, but I recently ran an incentive that was based on volume and was thrilled to see we maintained profitability. I’ve added lots of bells and whistles like monthly massages, staff member of the quarter, work/life balance consultations and various cash and non-cash monthly and quarterly incentives.”

Slark has had a few real crowd pleasers in terms of incentives. His personal favourite is a barefoot Chinese doctor who does annual talks to the group as well as private consultations (talpacific pays for the initial consultation). He has also recently introduced Concierge Desk, another supplier of a large number of products and services. “It’s too early to really measure the effectiveness of this one, but I hear lots of good vibes,” he says.

Slark occasionally compares talpacific’s incentives program with those of competitors and says he always feels his is a little weaker on the cash side, but that the program looks after the staff better.

The most important thing about setting up an incentives program is to “Tell ‘em, tell ‘em and tell ‘em again so it sinks in how good it is for them – explain it carefully, then explain it again,” he advises. Slark also suggests involving line managers when trying to decide what sorts of incentives staff would prefer.

High performance reward cultures

• Strategically manage and link schemes to key business objectives

• Make schemes inclusive so all employees are encouraged to achieve their best

• Support and communicate from the top

• Make schemes contingent on key business issues/results

• Base schemes on clear measures with credible assessment process

• Make recognition timely and meaningful

Source: Corporate Leadership Council

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