Price: Monetary and Non Monetary Incentives for Desired Behaviour

Price

A value that will purchase a finite quantity, weight, or other measure of a good or service.

As the consideration given in exchange for transfer of ownership, price forms the essential basis of commercial transactions. It may be fixed by a contract, left to be determined by an agreed upon formula at a future date, or discovered or negotiated during the course of dealings between the parties involved.

Monetary and Non Monetary Incentives for Desired Behaviour

Money doesn’t grow on trees, but you’re thinking about extending a branch from your desk. It could “grow” from there, in the form of monetary and non-monetary incentives to your employees. As a small-business owner, you well know: No matter how driven an employee is, there’s nothing like an incentive to light the fire of motivation. Incentives can improve employee morale and bolster productivity, leading to improved customer service, efficiency, sales and profits.

If you’re new to the concept of incentives, what you may not know is that there’s a difference between monetary and non-monetary incentives. They obviously differ in form, but they also differ in how they’re perceived by employees. These differences are worth considering before you put a pair of hedge clippers next to your desk.

Monetary Incentives

If you want to get technical about it, as human resource professionals are prone to do, monetary incentives are designed to reward employees for outstanding job performance or longevity.

As its name implies, a monetary incentive has an explicit monetary value; an employee knows exactly what one is worth. In addition to cold, hard cash, monetary rewards can take the form of:

• Bonuses
• Commissions
• Merit pay
• Profit sharing
• Stock options
• Vacation time (beyond an employee’s normal paid time)

Non-Monetary Incentives

Non-monetary incentives are designed to recognize a special achievement or the completion of something that enhances an employee’s job performance or value to a company. Such a meritorious category might include the attainment of a sales goal, the culmination of a special research project or graduation from a training program that leads to a desirable certification.

A non-monetary incentive does not take the form of cold, hard cash, but this doesn’t mean an employee cannot discern its monetary value. Some traditional favorites among employers include:

• Healthcare benefits
• Life insurance
• Promotion
• Vehicle or vehicle allowance

Expand Upon Traditional Non-Monetary Incentives

If you’re considering using non-monetary incentives as a motivational tool, it’s fair to say that they’re limited only by your imagination, and maybe the needs or wants of your employees.

If you’re looking for ideas, employers are known to turn to non-cash incentives such as:

• Charitable donations made in an employee’s name.* Concert tickets.
• Gift cards.
• Luxury gifts, such as designer clothing, watches and laptops.* Vacation packages, including airfare and accommodations.

Study Reveals Strong Preference

Despite the differences, there are no hard-and-fast rules governing the use of monetary and non-monetary incentives. In other words, who’s to say that you can’t write a bonus check to an employee who just finished an intensive training program? Or that you shouldn’t surprise an employee celebrating his 10th anniversary with your company by gifting him a weekend getaway package?

You’re the boss, so it’s up to you to decide how best to incentivize your employees. However, if you’re interested in knowing how other business owners are lining up on the topic, then you might cast your lot with non-cash incentives. Between 1996 and 2016, the number of businesses that rely on non-cash rewards increased from 26 percent to 84 percent, according to The Incentive Research Foundation.

How does the foundation explain such a dramatic increase? Two possible influences in the world of work may account for it:

CEOs play a more hands-on role in the day-to-day operation of businesses, putting them in the same realm as employees more frequently than in the past. This greater insight compels CEOs to reward employees more often.* Many employees’ roles have expanded well beyond their basic job description, and CEOs feel duty-bound to acknowledge employee contributions, beyond their usual paycheck.

Assess the Advantages of Monetary Incentives

Before you officially cast your vote, you may wish to assess the advantages and disadvantages of monetary and non-monetary incentives. Some of them may surprise you, especially if you think nothing “talks” more persuasively than money. Monetary incentives:

• Are instantly recognizable and simple for employees to comprehend.
• Hold universal appeal.
• Are favored by employees who prefer to add them to their annual salary.
• Do not require personalization in the way that a non-monetary incentive requires forethought.
• Can solve a financial dilemma for a small-business owner who may want to give an employee a pay raise but cannot afford to do so.

Assess the Disadvantages of Monetary Incentives

You would be hard-pressed to find an employee who would say, “No thanks, boss; I don’t care much for money.” Remember that in this context, as an incentive, money might talk, alright. It just might speak a different language. It’s wise to consider that maybe – just maybe – the monetary benefits you hope to reap could backfire if:

• Employees don’t see a clear and direct correlation between the benchmark and the incentive. These employees could undercut even the most lucrative incentive program unless they view it as worthwhile.
• They create a sense of inequality. Since “top” employees often get monetary rewards, those who are left out may become a drag on employee morale and teamwork. They lead to a sense of entitlement among top employees, who may even turn up their noses to the non-monetary incentives you offer. They “supercharge” cut-throat, competitive employees to sabotage the work of their colleagues to attain the incentive.* They are unfairly distributed among a group. This is why many business owners get ahead of this approaching storm cloud and either establish individual incentives or distribute incentives to all team members.
• You include them as an addendum to an employee’s paycheck. In this case, the incentive doesn’t stand out; it’s simply absorbed in an employee’s earnings and probably goes to pay the rent or mortgage and other monthly bills and is quickly forgotten.

Assess the Top Advantages of Non-Monetary Incentives

The businesses that The Incentive Research Foundation found are turning to non-monetary incentives may be on to something: Employees seem to ascribe a greater value to gifts, even if they can place a dollar value on them. As an employer, you may see little difference between, say, writing a $1,000 bonus check and bestowing a $1,000 laptop on a deserving employee.

But the employee? Multiple research studies show that employees show greater enthusiasm and appreciation for tangible things they can use (like a laptop), enjoy (like a vacation) or show off and brag about to others (like jewelry and clothing). And the more they can use or show off these incentives, the more likely they are to think of the employer in a favorable light.

If this still doesn’t compute to you, try relating non-monetary incentives to the burgeoning gift card industry. Give someone $50 in cash and they will surely appreciate it – before putting it promptly in their wallet and probably forgetting about it. But give them a $50 gift card and they will regard it for what it is: A gift, and something they can redeem for something pleasurable. Gift cards are stamped with a dollar amount, just like cash. But somehow, they signal greater thought and consideration on the part of the giver.

Assess the Other Advantages of Non-Monetary Incentives

Research also shows that the psychology of offering non-monetary incentives intensifies when employees are given a choice or are at least asked about their preferences. This is no small insight for any small-business owner who hopes to incentivize her staff.

In addition to being tangible items that hold bragging rights, non-monetary incentives:

• Serve as a lasting reminder of an employee’s accomplishment.
• Can serve as an in-house marketing tool, especially if you photograph the employee with the incentive and post it on your business website.
• Can be used as a recruiting tool if you “advertise” the incentive in the same way.* Can be deducted as a business expense.

Assess the Disadvantages of Non-Monetary Incentives

It would be wrong to say that non-monetary incentives have no drawbacks. They exist, but they seem to be mostly self-inflicted by the business owner who neglects to:

• Ensure that the incentives are appealing to employees. A weekend ski package or a Las Vegas getaway may be up your alley but not necessarily so for an employee who has never snapped on ski boots or who doesn’t like to gamble.
• Do his homework when selecting employee incentives.

Like many business owners, you might need to experiment with monetary and non-monetary incentives, until you find the right offering for your employees. But compared to the other dilemmas you face, this task might be one of the most fun – with or without the hedge clippers.