Every now and then I run across a client who is interested in learning more about non-cash incentives. These are non-monetary awards that go out to individuals in lieu of cash, either for certain predetermined outcomes or as an after-the-fact bonus for a job well done. On the surface, such programs appear very attractive and I used to be a big fan of them. They can really add spice to an otherwise dull and boring pay program, and in many cases are far less expensive than cash payouts. For someone making $90k per year, a $2,500 cash payment might not be all that exciting, but a couple can go on a pretty nice trip for far less and have a really good time -- especially if they can treat themselves to a guilty pleasure that they would never afford on their own (like a spa weekend with all the trimmings).
Over the years, however, I started to take stock of these programs and noticed some rather disturbing trends. Surprisingly, they weren't nearly as popular or well-received as I expected. In fact, people groused about them a fair amount. Here are the difficulties I observed:
- It is difficult to conceive of a single trip that will motivate everyone. For example, I would really get excited about an adventure travel experience in Antarctica, but I would have no interest in a gambling trip to Las Vegas. My wife, on the other hand, is exactly the opposite.
- Let’s face it, there are a lot of people who simply don’t like to socialize with colleagues from work and this, in and of itself, is enough to stunt their interest.
- People with small children can have real issues at home when one spouse goes off on a fun-filled extravaganza and the other is left home to deal with the screaming kids.
- If spouses are allowed to come, then to be fair significant others (boyfriends, girlfriends, same sex friends, gay lovers, you name it) should also be included. If spouses aren't invited then you get the issue I just mentioned.
- Trips can be notoriously unreliable when it comes to the quality of the experience. Even the best resorts can have weather problems, construction issues, service issues, not to mention travel delays, etc. Travel today is very hit and miss and a poor experience can ruin everything.
- There are many stories about the embarrassing (even humiliating) things that happen on company outings. Drunken outbursts, extra-marital affairs, sobbing on ropes courses, can haunt a work-group for years. They do, of course, make great stories that never seem to get old in the re-telling.
- People’s lives are complex, and things happen. Employees get sick, relatives get sick, there are birthdays, anniversaries, graduations, etc. and if someone works all year to qualify for a trip that conflicts with some important expected or unexpected event, they are out of luck.
- Trips are very complicated to plan and pull off. Some of my bigger clients used to have whole departments dedicated to planning and executing them.
- The value of the trip needs to be imputed as pay and the participants (or the company on their behalf) must pay taxes on the value they receive. This can be a huge mess.
THE PERFECT PAY PLAN
That pretty much takes care of trips, but what about other non-cash options? I really like the idea of a manager having at his or her disposal a stack of sports or theater tickets, restaurant vouchers, gift cards, travel vouchers, massage certificates. and handing them out on the spot when a person does something wonderful. I have seen this work extremely well and have used it myself to great effect. But when it comes to making non-cash rewards part of a formal compensation program in lieu of cash, I think that is a bad idea. At the end of the day, cash really is king, and people prefer to receive their rewards in a form of common currency that allows them to decide what they do with it -- even if that means paying off a some stubborn debt which isn't such a bad idea either.