Why non-cash trumps cash, every single time, for everybody

Posted on 06.11.2014

 A research study on the benefits of non-cash rewards, conducted by Dr. Scott Jeffrey of the Department of Management Sciences at the University of Waterloo in Southern Ontario found that four different psychological processes explain the higher perceived value of tangible non-monetary incentive awards over cash-based awards that have the same market value.

He introduces the psychological mechanisms of evaluability, separability, justifiability and social reinforcement. Evaluability: noncash award recipients are likely to place a higher value on the award than it’s actual cost. Separability: cash incentives tend to be aggregated with overall compensation, noncash awards stand out as rewards for performance. Justifiability: when a non-cash award is something a program participant would not purchase on his or her own, the participant can justify the award, and being able to justify the award means it has greater power to be motivational. Social reinforcement: There are social taboos associated with discussing cash and compensation; non-cash incentives are free of those taboos and recipients are free to discuss the award with coworkers thus increasing the perceived value of the award and its trophy value.

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