Everybody knows that if you ask the participants in an incentive program what kind of award they prefer, they'll always say "cash." But like many things that "everybody knows," this universal preference for cash awards doesn't stand up to scrutiny.
That is the core finding of the largest and most complex study to date of how incentive program participants really prefer to be rewarded. Conceived and funded by the Incentive Marketing Association (IMA) and planned and carried out by the Incentive Research Foundation (IRF), the new research project, called the "Participant Study," offers what may be the best proof yet of the motivational power of non-cash incentives, while refuting what IRF President Melissa Van Dyke calls "the myth that if you give participants a choice, they will always choose cash."
In fact, the study found that as many as four-fifths of program participants would prefer non-cash awards as part of a "total award experience."
Making Motivation Meaningful
That last phrase -- total award experience -- is the key to this study. Most of the research done about cash versus non-cash awards takes a very simplistic approach, asking something along the lines of, "If you are going to get a $50 award, do you want cash or merchandise?" Van Dyke says. And yes, that question has largely drawn the answer, cash. "We've done a lot of studies that have gone down that path," she adds.
The "Participant Study," however, spent a lot of time figuring out exactly what type of non-cash award each respondent would prefer in an incentive program with a large award, like a year-long President's Club sales program, and with a small award, such as a spot reward for doing a good job on a short project.
Another big difference was focusing just as much attention on each individual participant's preferences about who gives the award, how they give that award, and what doors it opens for the recipient professionally.
When all of that was factored in, Van Dyke says, the research showed that "when recipients find [the total award experience] personally meaningful, cash did not have the strength that we often think it does in these scenarios."
In fact, she says, the study found that 65 percent of people in a small-reward scenario and more than 80 percent in a large-award scenario will choose the non-cash award.
But it also showed that whom the recipient is recognized by, how the award is communicated, and especially what professional development opportunities come along with the award, carry far more weight with participants than anyone in the incentive industry realizes. In fact, when it comes to large incentives, those three factors together carry slightly more weight than the award itself.
"The way that an award is presented is a critical part of any program," says Richard L. Low, vice president of Special Markets for Citizen Watch Company and immediate past president of the IMA. "Companies that run incentive programs do not always factor that in when planning those programs. A manager giving a $1,000 Citizen watch as an incentive award can forget to focus on the way it is presented, and how that motivates and educates others in the company. They focus on the item, rather than the process."
Convincing the people running corporate incentive programs that it is worth training managers and executives on how to present an award is an issue that the incentive industry has struggled with over the years.
"Not everyone knows [how to give an award], and getting it wrong can reduce the impact," says Van Dyke, who recalls the way she received a length-of-service incentive award as a consultant at Ernst & Young.
"They sent me a pen -- a really nice pen -- through the mail, but I didn't even know what it was for," she recalls. "I actually had to go ask someone. They told me that in consulting, it's really hard to keep people for more than a year, and I was at my two-year mark, so they recognized me. [But] nobody knew I was getting it and I had to ask somebody else who'd been there longer than me -- one of the few --what it was for. It's so funny because we'll invest some money in the thing, but miss the purpose altogether."
Low, who was president of the IMA when the study was conceived, adds, "One of the things this study shows is this should be a top [priority], something that we all need to remind the companies that we work with."
Getting to Individual Preferences
Factoring all of that information about the personal preferences of each of the 452 people who participated in this study was a complex and monumental task, with each participant asked more than 80 in-depth questions.
First, each person was asked to choose his or her preferred award for a large incentive in each of three categories: merchandise, gift cards, and travel or experiential rewards. This was repeated for a small incentive, except that travel/experiential awards were replaced with perks such as free lunch or a reserved parking spot for a week.
The award-choice questions went into a great deal of detail, but did not provide a dollar amount for any award, instead instructing participants to assume all awards were of the same value. For example, in the large incentive category there were 10 categories of gift cards to choose from, such as "a gift card from an online retailer (e.g., Amazon)" and "a gift card for apparel/clothing items (e.g., Gucci, Chanel, Brooks Brothers)."
Merchandise had a dozen choices, such as "camera/camera equipment (e.g., Canon, Nikon)" and "home décor items (e.g., Vera Wang, Waterford)."
Travel rewards had five choices, including a "three- to four-night resort getaway for two, including airfare" and a "four-day, three-night trip for you and a guest, with top performing peers, hosted by executives."
After that, the questions turned to whom each participant would most like to be recognized by -- for example, their peers or team, a direct manager, or company executives. Next, came questions about how each person would prefer to have that award communicated, such as being recognized one-on-one by a manager, in front of a large audience, or on the company's intranet. Finally, the questions asked what type of professional development opportunities would most excite them -- like being paired with a mentor, given more challenging work or a special project, or the opportunity to attend a conference or seminar.
Putting It All Together
Part two of the research involved pairing each participant's preferred award and an equivalent cash award with what had been learned about each participant's individual preferences in these three categories:
1) Who delivers the recognition
2) How the recognition is communicated
3) The professional development opportunities that accompany the award
For example, a participant receiving a large incentive award who prefers to be recognized by a company executive who is using the company intranet to deliver the news of the award, along with a networking event that will provide a professional development opportunity, would be asked to rank his or her award preference from the following choices: travel award (the resort getaway), merchandise award (camera), gift card (apparel), or cash.
Once the top reward choice was determined for each person, the questions started varying the three presentation characteristics -- the recognizer, the communication, and the professional development opportunity -- to find out how important each of those was to each respondent. Factoring that all together, you get each individual's preferred total award experience.
Taking all of those 452 responses together, the "Participant Study" found that for small incentives, nearly "40 percent of an individual's preferred total award experience was determined by the award presentation," Van Dyke says. "That was striking to us -- 40 percent being presentation and only 60 percent being reward."
The Biggest Motivator? Opportunity
The importance of professional development opportunities was one of the major surprises of the entire study, Van Dyke says. "It was almost one-third of the preferred total award experience," for large rewards. Those results, she adds, were "pretty consistent, across the board, for men and women, for younger workers and older workers, and for people with lower incomes and higher incomes."
What all of this amounts to, Van Dyke says, is the demolition of a second widely accepted myth of the incentive industry: that a company should -- or even can -- try to find the "right" non-cash award to motivate all of its employees.
"Of the 452 respondents, 448 had unique scenarios for their preferred total award experience," Van Dyke says.
In fact, Low says, for him one of the key outcomes of the Participant Study was that it "solidified the idea that there is a definite place in any company's [incentive] program for cash, merchandise, gift cards and travel awards."
From an IMA perspective, "recognizing that each incentive [award type] has a place is critical," Low says. "Some people will always prefer cash, but an overwhelming majority prefers merchandise, gift cards, and travel over cash. A properly designed incentive program will find the right award mix." IMA members' role, he adds, is to help clients find it.