Cultivate Blog

Part 3: Debunking cash incentives

Posted by Tara Doherty on 11/8/22 8:00 AM

Mama Mia said it best, “money, money, money, must be funny in a rich man's world.” For the majority of us, the topic of money is far from funny. It oftentimes leaves people experiencing anxiety, shame, or embarrassment when talking about income, net worth, and paying down debt. Why? Aside from other things, it’s just…awkward. We believe conversations about cash belong in salary negotiations, promotions, and personal finances—not incentive programs.

A Gallup survey of 1.4 million employees at every pay level, across every industry, in 34 countries found that job satisfaction has little do with money. When polled, most participants said they want to earn enough money to pay for housing, look after their loved ones, afford personal luxuries, and have enough left over for unexpected life events. Despite the need to pay for all the things mentioned above, the survey results also revealed that cash bonuses motivate employees far less than non-traditional methods of recognition and rewards. 

If money isn’t an effective motivator, then what is? As the Gifting Experts, we believe the best incentives are those people get to select for themselves. Here’s why.

The pressure to perform

A study by the University of Florida found that the more an employee gets paid, rarely leads to better results. This research suggests that the relationship between money, motivation, and performance is much more complicated than we thought. The study reads, “even if companies let people set their salary levels, they still wouldn’t enjoy the job more.” Now that we know salary isn’t a huge motivator, what about offering cash bonuses? Does that yield the same results? Researchers at Duke University tested this hypothesis with an experiment titled “It’s (Not) All About the Jacksons.”

In this experiment, scientists incentivized three groups at different levels to perform specific tasks. One group was offered a single day’s pay to do well, the second was offered two weeks’ pay to do well, and the third group had five months’ salary to do well. All three groups were tasked to use attention, memory, concentration, and creativity to perform. What was the outcome? Turns out that groups one and two performed at the same level as each other despite the second being incentivized at ten times the pay rate. And group three, who could have pocketed five months’ pay, performed worst.

The results of this study might have you in disbelief, but it turns out that when incentives are “supersized,” they become cognitively distracting, which weakens performance rather than improves it. Furthermore, showcasing that people tend to let the fear of failure in high-pressure circumstances overpower their ability to perform, even more so when money is involved. 


More money, more problems

Not only do we know that cash incentives do not equal better performance, but we also know that it often doesn’t appreciate as well as a gift of choice for multiple reasons:

  1. Cash goes directly into household spending.

When given as an incentive, cash is often lumped into ‘income’ and used by people to make that extra payment. While $50 will go in all directions, none of it seems worth much when it’s rolled directly into household spending and expenses. Yet, psychology tells us that the power of having choices (i.e., the option to select a gift) can make people feel more rewarded, empowered, and in control, which in our minds has a much higher value.

  1. Cash has no lasting value and is quickly forgotten.

When was the last time somebody showed you their paycheck? Going back to the beginning of the blog, many of us feel as though the discussion of money is off limits, therefore making it unlikely that receiving a cash bonus will be mentioned and more likely to be brushed under the rug.

However, if someone is effectively recognized with a gift of their choice, they’re more likely to tell everyone they know, signaling how proud they are. Meaningful recognition makes people feel valued, sparking meaningful conversations and shareable stories that build buzz and excitement around appreciation.

  1. Cash programs usually lack purpose.

An encouraging pat on the back or “do your best” comment is not a goal. Goals inspire excitement while motivating people to surpass expectations and reap the rewards of their hard work. Without specific targets to work towards, they’re more likely to tire and burn out easier.

Furthermore, once organizations begin handing out cash payments as rewards, it sets the bar even higher for future bonus programs. Soon enough, that initial amount isn’t enough to motivate, appreciate, or excite people because it lacks the feeling of receiving something new; thus, the expectation for more increases with each program.

When it comes to job satisfaction, it’s time to debunk the misconception that people’s happiness and productivity are equal to income. A monetary approach to incentives has more cons than pros and can lead to more problems down the road. It is difficult to pinpoint what motivates each individual as we are all different. Still, it’s safe to say that incentivizing people by offering them a choice to select what motivates them will result in success each time.

Ready to learn more about Cultivate’s variety of gifting solutions? Connect with our team of experts today—we can’t wait to tell you more!

Topics: Experts

Leave Comment

Most Popular Blogs

Access the Holiday Hub 🎁 🎄

New call-to-action