There are good reasons why talking about money is considered a taboo topic. Many people have experienced anxiety, shame, or embarrassment when talking about income, net worth, and paying down debt. Why? Aside from other things, it’s just…awkward. We believe conversations about cash belong in salary negotiations, promotions, and personal finances—not incentive programs.
A Gallup survey of 1.4 million employees at every pay level, across every industry, in 34 countries found that job satisfaction has little do with money. When polled, most participants said they want to earn enough money to pay for housing, look after their loved ones, afford personal luxuries, and have enough left over for unexpected life events. The survey results also revealed that when organizations think outside-the-box to reward their employees, the return-on-investment yielded higher results than a cash bonus.
So, if cash isn’t the king of incentives, then what is? As the Gift Experience Experts, we believe the best incentives are those recipients get to select for themselves. Here’s why:
The pressure to perform
According to a study by the University of Florida, the more an employee gets paid rarely leads to better results. This research suggests that the link between money, motivation, and performance is much more complicated than that. It goes further to point out that “even if companies let people set their salary levels, they still wouldn’t enjoy the job more.” But what about other monetary incentives like cash bonuses to motivate employees? Researchers at Duke University put this exact hypothesis to the test with an experiment titled, “It’s (Not) All About the Jacksons.”
For this research, scientists incentivized three groups at different levels to perform specific tasks. One group was offered a single day’s pay to do well, the second was offered two weeks’ pay to do well, and the third group five months’ salary to do well. The tasks required participants to use attention, memory, concentration, and creativity to perform—for example, one task was to play a memory game while throwing tennis balls at a target. The outcome of the experiment? Groups one and two performed at precisely the same level as each other despite the second being incentivized at ten times the pay rate. And group three, who could have pocketed five months’ pay, performed worst of all.
Why? When incentives are “supersized,” they become cognitively distracting, which weakens performance rather than improving it. This study showcased that people tend to either panic or are overpowered with fear of failure in high-pressure circumstances. Even more so when money is involved. In this instance, it’s safe to say the groups overthought the task at hand and how bad they may potentially feel if they didn’t earn the cash bonus. Thus, they failed.
More money, more problems
Not only do we know that cash incentives lack direct correlation to better performance, but we also know that it often doesn’t appreciate or inspire as well as our gift experiences for multiple reasons:
1. Cash goes directly into household spending.
When given as an incentive, cash is often considered “just” income to recipients. While $50 will go in all directions, none of it seems worth much when it’s rolled directly into household spending and expenses. However, psychology tells us that the power of having choices (i.e., the option to choose a gift) can make recipients feel more rewarded and in control, which has a much higher perception of value.
2. Cash has no lasting value and is quickly forgotten.
When was the last time somebody showed you their paycheck? If an employee is recognized, they’re more likely to tell everyone they know, signaling how proud they are. However, when given a cash bonus as a form of recognition, recipients are less likely to showcase or talk about their rewards. Meaningful recognition makes people feel valued, sparking meaningful conversations and shareable stories that build buzz and excitement around recognition efforts.
3. Cash programs usually lack purpose.
An encouraging pat on the back or “do your best” comment are not goals. Goals help to arouse excitement while motivating employees to surpass expectations and reap the rewards of their hard work. Without a specific target to work towards, employees are more likely to tire and burn out easier.
Unfortunately, the issues with monetary incentives don’t stop here. There’s no way to know if the recipient will use their cash reward to treat themselves, pay bills, or buy a gift for someone else. Furthermore, once organizations begin handing out cash payments as rewards, it sets the bar even higher for future bonus programs. Soon enough, that initial amount isn’t enough to motivate, appreciate, or excite recipients; thus, the expectation for more increases with each program.
When it comes to job satisfaction, there’s a common misconception that employee happiness and productivity equates to income. There are many different reasons why people do things. Sometimes people are motivated to act because of internal desires and wishes, but at other times, behaviors are driven by a desire for external rewards. While cash may seem like an easy alternative to reward and recognize recipients, that simply isn’t true. A monetary approach to incentives has more cons than pros and can lead to more problems down the road.
Remember: it’s the stick, not the carrot, that motivates.