Only Use Cash to Motivate Increased Performance?

According to Geoffrey James in this post on the BNET, bonus plans should only use cold hard cash as the award to motivate employees.  His article states 8 rules to use to have the best bonus programs, and the #1 is…  

“RULE #1: Show Me the Money…Everything else is just so much horse manure when it comes  to motivating people.”   

Now Mr. James is certainly welcome to his opinion, but experience of hundreds of thousands of sales and non-sales employees alike just don’t bear this out.  In the article you really can’t tell is he’s speaking about sales or non-sales employees but let’s assume he’s talking about sales people as his bio titles him a “Sales Machine.”  The problem when you overly generalize about how to make an incentive program successful, without defining the parameters, is that you run the risk of designing a system that will not produce results.  The broad statement that money is the only thing people want is just, well, silly and uninformed.  It’s the pitfall that many compensation experts run into when they are confronted with an objective to achieve and think that cash is the only award to use to achieve it.

If we are about talking structuring a compensation program here, then his rules might be correct, if this is an add-on to compensation, he very well might not be.   When you add a cash incentive program on top of a cash bonus program already in place, we don’t agree with him at all.  That’s like saying your comp plan didn’t work so throw more money at it and it will work.  If it were that simple, the $60 billion plus awards industry wouldn’t be in existence.  And while I surely don’t mean to say that every non-cash awards program being implemented these days produces incremental results, there are thousands that do.  In fact, non-cash awards such as travel, gift cards and any other form or merchandise or life style experience awards can and do motivate incremental performance of both sales people and non-sales people alike. 

I’ve listened to these “cash is the only award to use” experts’ for years.  They are cash motivated and successful; it works for them therefore it should work for everyone.  Sorry, in non-cash after non-cash program, the opposite is true.  Companies often use cash as the stimulus for incremental performance but don’t achieve their goals for another pretty simple reason.  Everyone has a comfort level and will achieve results right up to that comfort level.  It’s called their standard of living.  If cash bonus programs were they only way to go, every salesperson,  with an incremental cash bonus program would be earning lots of money.  But guess what?  They don’t They can be moved off their comfort level, but it takes different stimuli to do it, not the normal cash that is contained in their paychecks. 

Mr. James show us 8 rules to ensure a successful incentive program.   Except for our comments on the #1 rule, incentive program design experts and thought leaders like Paul Hebert at i2i – Incentive Intelligence would heartily endorse the other seven rules.  They are the same basic parameters that are used to design effective non-cash programs.  

The only exception might be…

 “RULE #8: Publicize the Wins. While the bonus should definitely involve money, you’re getting less bang-up jobs for your buck if you don’t make sure that everyone else knows that an employee won that bonus.”

Publicize the results of your program?  Absolutely!  But in working with hundreds of Fortune 1000 companies from coast to coast, I don’t recall any of them parading out their top sales guns on the stage or heralding them in the house organ that “Janie Doe earned $78,542 in the latest incentive program…Congratulations Janie!”  Have you?