TM - December 2007 - (Page 29)

recruitment & retention assessment & evaluation compensation & benefits performance management learning & development succession planning Figure 1: Performance Uplift (Relative to No Incentive) 38.6% tive recognition program also can facilitate employee retention, but it’s critical for companies to choose the correct program. Why Do Companies Continue to Reward With Cash? 14.6% Companies continue to reward their employees with cash awards due to convenience. Many organizations don’t want to take the time or effort to design a world-class recognition program. They opt for “no hassle” recognition and use employee surveys to protect outdated cash programs. They survey employees, who say they want more cash. This makes sense, since most employees will respond likewise, but companies may not be asking the right question. Tangible Reward Cash Reward Figure 2 Further, what employees say they want and what they actually work hardest to receive do not always match up. In a 2004 University of Chicago study, staff members came to a behavioral laboratory and engaged in a word game in pursuit of an incentive. One group of employees was given a cash reward in exchange for good performance. A second group had the opportunity to earn non-cash rewards of varying amounts depending on their performance. These rewards were based on market value, so the comparison was fair. After performing their task, the group in pursuit of the non-cash incentive was asked their level of agreement with the following statement, “I would prefer to receive the cash value of the prize rather than the prize itself.” An overwhelming majority, 78 percent, said that they would rather receive the money. However, the study found that while most people stated a strong preference for cash, their performance was noticeably better when they were in pursuit of the non-cash incentive. Performance improved by 14.6 percent when a cash reward was offered, compared to a dramatic increase in performance of 38.6 percent when a non-cash incentive was used. (See Figure 1.) This new evidence suggests that if companies ask their employees, “What do you want?” they will respond with, “More cash.” But, what companies should be asking is, “What will motivate, retain and truly engage my workforce?” Although employees prefer cash incentives, statistics say they will not work harder to receive them. Why? Cash rewards are typically thought of as compensation, therefore, employees use this award on necessities. In a 1999 Wirthlin Worldwide survey, 1,010 people were asked how they spent their last cash reward, cash incentive or cash bonus. Some 29 percent said they spent 29% Bills 18% Did Not Remember 15% Never Received Cash Reward/Bonus 11% Gift for Family 11% Household Items 11% Savings 9% Special Personal Treat 5% Vacation 2% Something Else 28 December 2007 talent management magazine www.TalentMgt.com http://www.TalentMgt.com

Table of Contents Feed for the Digital Edition of TM - December 2007

Talent Management - December 2007 Editor's Letter Contents Letters to the Editor Human Performance Leading Edge Capabilities The Engaged Difference: What People Want Analytics in Talent Management: The Sports View The Use of Merchandise for Employee Recognition Taking Aim at Performance Appraisals Talent Management Drives Organizational Change Generational Diversity: Mastering the Boomer-X-Y Divide Dashboard: Security-Savvy Workforce: Designing a Security Awareness Program That Works Application: Hilton Hotels Corporation:Checking Out the Merits of Paperless Efficiency Insight: Unlimited Engagement: Innovative Corporate Communication at Deloitte & Touche USA Advertisers' Index Editorial Resources Foundations

TM - December 2007

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