Cash Out Your Rewards Program

By Malcolm Fleschner

Ask sales professionals what they want as a reward from their incentive programs and you’ll likely hear one answer more often than any other – cash. But ask Bruce Bolger, managing director of the Forum for People Performance Management at Northwestern University ( whether cash works as an effective sales reward and he’ll reply that cash isn’t a reward at all. It’s compensation, and woe to the companies that confuse the two.

“Many companies fail to understand the difference between cash and noncash rewards,” Bolger says. “Cash is compensation. People expect it. They think compensation will always go up. Even with commissions, salespeople always think their territory is going to grow and get annoyed if their territory is reduced. Even if cash is used in what the company considers a rewards program, salespeople will come to consider that cash as part of their compensation package.”

Incentives used as part of a company’s reward and recognition program should be used differently and outside the compensation program, Bolger says. “Noncash rewards should be used when you want to create a buzz in the organization and for the types of programs you don’t want people to come to expect,” he explains. “You want people to know about the incentives, to hear about them and to brag about them. People don’t talk about cash. If I get a cash bonus I don’t want anybody to know about it – that’s nobody’s business. But if I win a trip to Hawaii I want everyone to know. “

Bolger adds that savvy companies use cash exclusively for compensation and commissions while reserving noncash incentives for special types of promotions they won’t necessarily repeat.

“These companies know that next year, when people are not offered a trip to Hawaii, they won’t feel like they got a pay cut,” he says. “These companies use incentives when they’re appropriate and when they make sense. If they don’t make sense, they don’t use them. You can’t do away with compensation but you can do away with an incentive program. You want it to be a part of your tool kit. Each year you have different needs. For example, one year the big issue may be training and the incentive might focus on a big training program. Smart companies identify those changing needs and then develop one-time noncash reward programs that stimulate behaviors in the desired direction. A lot of companies could make great strides by using incentives this way and leaving cash for what it does best – compensate.”