When defining your incentive activty, it’s tempting to try and get instant performance results, such as increased sales. But this can result in a degree of short termism, and may only be applicable to certain staff or participants.

Direct behaviour such as increased sales, or reduced costs, are easy to measure, but unless other things change there is likely to be a limit to how far these performances can be improved.

Indirect behaviours are one or more steps removed from revenue generation or cost savings. Examples of one-step removed behaviours might be to increase the number of leads, or improved customer support, things that will lead to more or greater business in the future.

Long terms goals are used to drive the core values of the company, and enforce a positive company culture. Measures might include improving employee satisfaction, enhancing the public reputation of the organisation, or increasing market share. The benefits to the bottom line are long-term but profound. Ultimately the DNA and success of the company will be a result of the long-term behaviours. Rewarding long-term goals means identifying and communicating behaviours which contribute towards them.

Are you rewarding direct behaviours, indirect behaviours, or longer term goals?

Ideally you should reward across all three.

Over at the Compensation Force blog, Ann Bares groups the measures of an incentive plan into 3 categories, Lead Measures, Operating Measures, and Lag Measures. She defines a lag measure as reflecting success that has already happened, generally recognised through accounting practices, such as stock price. Bares continues: “Running an organization solely on the basis of lag measures is like steering a boat by watching its wake.”

Are you rewarding achieved success or future growth?

When people are asked what they would like to receive as an incentive, they will almost inevitably say cash. But they’re not thinking about it from their company’s perspective, and what is the most effective form of incentive compensation.

Taken from a company’s viewpoint, looking to motivate staff and drive performance, cash is actually a very ineffective form of incentive.

Cash given as an incentive quickly becomes compensation, especially if given as part of a pay packet. It gets absorbed into household budgets, and satisfies needs not wants.

Because of this, recipients often feel unable to use monetary rewards for a special gift that they might treat themselves to. This prevents users connecting a special product or experience or memory with the behaviour that won them the award. Cash has no trophy value, whereas gifts give a chance to say thank you or well done.

With iD-points, users have no choice but to spend their points on great products or experiences.

No incentive reward can be effective if the employee is underpaid. But if cash rewards become compensation, they cannot effectively promote behaviours that lie outside of a user’s job description. And of course, once people get used to cash bonuses, they are hard to take away.

One area where cash certainly can’t be used is to reward outside your organisation – i.e. your business partners, or business customers. It smacks of bribery, and is open to misuse and corruption.

Cash is an easy option for companies that aren’t thinking smart. It’s the first thought for people who don’t want to consider the alternatives, or perhaps worry about the effort in putting together a structured, tactical incentive.

Money is easy to distribute, and requires no need to set up a means of distributing it. But this also means that cash provides no opportunities for additional engagement. There’s also no built in way to record what you gave away.

Non-cash rewards often have higher perceived value. If giving cash, you will generally need to give more. Studies have shown that it can take 7 times as much cash than the cost of non-cash rewards to get results.

With an online points system, you can report on your expenditure, where it went, how the points have been used, and track recipient engagement.

A structured motivation system uses rewards as the starting point for two-way communication, driving user engagement and performance.

Cash as a reward is an endpoint. Engagement stops as soon as recipients have their reward.