Still thinking cash is king?

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.