CONDUIT

Cash is no longer the catchall.

We cannot kick off a blog devoted to the subject of employee motivation without addressing that big old elephant in the room. That’s the question of which works better, cash or non-cash, when motivating employees?

“Cash is King!”  We are guessing that may still be the perception of many sales and HR executives looking to gain the attention of employees, dealers and distributors. They are not alone. For decades a debate has raged over the pros and cons of non-cash versus cash awards.

That question has been debated, researched, and discussed to death. Last fall The Forum for People, Performance, Management and Measurement released data that suggested that while, cash rewards are often part of the mix, and they are not viewed as the most successful tool in driving the desired result.   

The open minded answer is that cash and non-cash when properly combined, can create a successful and flexible motivation solution.

More on the issue of cash and non-cash later…

So when do progressive companies use cash? When do they use non-cash? In other words, when is non-cash a better idea worth considering?

CONDUIT found that there is a trend to utilize non-cash programs as a strategic response to market changes that need to be dealt with quickly.

In fact of the 52 programs we audited (across 7 industries and 22 business models) 18 or 34% were not designed during a predefined and planned budget period and came as a reaction to market conditions.

In looking more closely at the question: When is non-cash a better idea worth considering? Here is another perspective.

“When the foundation for your core compensation program is established and in place and you need to make an adjustment to performance,” said one HR manager.

Non-cash programs are not generally viewed as compensation and can be launched without the level of approvals, planning and negotiation that cash plans require.

In that way non-cash gives the planner a significant speed to market advantage.

Here is another viewpoint. This time the benefit is flexibility. Non-cash plans can also be ended, changed, or altered without the associated drama inherent with cash changes. This is increasingly relevant for companies that know an adjustment or new focus is temporary. For example, when pipeline analytics suggest that a temporary push needs to be made in a particular product or service area and you need a quick solution, non-cash may be faster, more flexible and more cost effective.

How about change management? CONDUIT is seeing companies use non-cash as way to drive utilization of new tools. New work processes like CRM and Sales Force Automation are great examples. Research suggests that SFA/CRM deployments have on average a failure rate that exceeds their success rate. And when they are successful they rarely reach levels of performance promised in business cases.

We are not here to pick on CRM or SFA systems. But they are good illustrations of why most change initiatives under perform. While they do not fall short in their strategic or technical aspects, they do fall short in their social facets. In short, their planners fail to provide the targeted constituencies with enough personal motivation to make the transition. In cases when communication/motivation or context is provided for early on, it is rarely continued. The majority of failed initiatives stem from a lack of sustained activity resulting in stalled momentum after rollout.

Another thought on the issue of cash and non-cash: Properly designed, non-cash offerings are also a great way to stretch your budget when you want to reward and recognize more people than you can otherwise afford. It’s only natural that companies devise cash payouts that reward the very best performers. But is that the smartest approach? “The same people always win” is a common lament among participants. In the process of trying hard not to upset top performers, companies run the risk of overpaying them and disenfranchising the bulk of the employee population. Top performers do deserve the most attention but are additional dollars the best solution? By slightly tweaking funding rates (easier to do in a non-cash program) to more strongly motivate the middle segment of the population, aggregate incremental gains will be stronger.   In addition, you can devise payout structures that are variable (using games of chance for winnings) are also good ways to control costs. The effect is a fix cost approach to a variable incremental gain.