Human Capital – Your Company’s Greatest Asset

Human Capital – Your Company’s Greatest Asset

June 11, 2018

The true value of a company lies in its people. Today’s leading corporations are not only valued for their brand and financial reserves, but for the relationships, human capital, and managerial expertise that set them apart from their competitors. According to a study by the Incentive Research Foundation (IRF) 80% of the market value of publicly-traded firms today is attributed to intangible assets – qualities like exceptional company culture and employee retention. There are surefire strategies to help create a unique and competitive workplace, that drive not only the company culture, but also its value.

Motivating The Workplace

Incentive experts know by now that cash is not king. Employees view cash rewards as mere additions to their paychecks. “Mental accounting” causes them to spend the extra money on regular expenses. Once it’s gone, they forget they ever had it. Cash lacks the lasting “trophy value” offered by non-cash rewards such as physical gifts and memorable travel experiences. This is why top companies balance their incentive programs with cash, tangible non-cash, and intangible non-cash rewards.

When reviewing the effect of cash rewards vs. non-cash rewards, the IRF found that companies associate cash rewards with quantifiable changes like revenue increases or sales goals. On the other hand, non-cash incentives can also drive revenue and sales results along with long-term perceptible improvements, such as employee retention, satisfaction, and participation in external activities like after-hours events. Consider the pizza experiment by psychologist Dan Ariely, which showed that the increase in motivation from rewards like pizza or compliments left a greater long-term impact on worker motivation than cash bonuses did. Since non-cash rewards drive such lasting, behavioral improvements among employees they are viewed as essential features of employee recognition.


The Facts and Figures

In the same study, the IRF found that non-cash incentive programs are 50%-150% more likely to be linked to employee retention, satisfaction, and improved performance than cash-only alternatives. On average, employees rated the overall effect of instituting a reward program at 5.5 out of 7. Roughly one-third of respondents firmly believed they increased engagement within their organization through their incentive programs. Additionally, the increased participation in after-hours events resulting from non-cash incentives demonstrates strong organizational culture.

Effective Use of Incentives

 The ultimate goal in the workplace is to establish a community of hardworking, intrinsically motivated employees. The psychological contract between the employer and employees should guarantee recognition of their hard work. However, the employees themselves should also feel that their work fulfills a higher purpose. Maslow’s hierarchy of needs suggests that beyond survival and belongingness, the ultimate goal in life is self-actualization – the fulfillment of one’s own talent and potential. Intrinsic motivation and fulfillment relies on personal satisfaction with one’s work on a daily basis.

That being said, it’s important to use incentives strategically. Increased engagement among employees may only last the duration of the campaign, especially if companies repeatedly use the same reward. The IRF compares the persistent use of the same reward to a carrot dangling on a string. Employees shouldn’t feel that they are constantly striving for the same thing. Otherwise, the law of diminishing returns comes into play and the reward loses value.

Key Takeaways

The benefits of non-cash rewards programs, although difficult to measure, demonstrate significant intangible value that distinguishes top companies from the rest. Coupling recognition and rewards systems to reinforce desirable behaviors serves to intrinsically motivate employees. The IRF’s extensive research on effective use of recognition and rewards systems provide valuable insight that can help you develop a unique, motivated workforce for your company.


Read more about non-cash rewards here: