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What's the Better Motivator: Cash or Kudos?

cashorkudos.jpgI've been enjoying a lively exchange of ideas with Derek Irvine, who writes the Globoforce Blog about employee recognition. He recently challenged an assertion I made when writing about motivation in a rotten economy, where I opined that offering more money to employees can be both a motivator and a welcome reward for hard work.

Derek writes,

I do need to disagree with your point on the "allure of cash." We at Globoforce do not advocate cash-based recognition programs, which neither maintain program consistency on a global scale nor ensure local participants feel motivated and involved in the organization. Additionally, people become habituated to cash no matter how much you give them, viewing it as an entitlement. An August 2008 study recently highlighted in the New York Times found that in eight of nine tasks, the promise of a bigger bonus actually significantly decreased people's performance.
Multiple studies have proven that simple recognition delivers better results than cash. A Japanese National Institute for Physiological Sciences study found "paying people a compliment appears to activate the same reward center in the brain as paying them cash." White Water Strategies found acknowledging staff achievements --praising employees -- had the same impact on job satisfaction as a 1 percent increase in pay, which would equal £5.2 billion for UK businesses alone. These 2008 studies reinforced research results from a 2004 University of Chicago study that found non-cash incentives were 24 percent more powerful at boosting performance than cash incentives.

Non-cash recognition programs save money by reducing manual intervention and eliminating the paper chase while also creating a positive work environment where employees see that best practices, strong ethics and exceptional performance are recognized and rewarded consistently, openly and fairly -- an environment that encourages loyalty, commitment and honesty of effort. It is this kind of environment that drives greater morale and productivity when company leaders need it most.
I can't argue with Derek's facts, and when it comes to my own motivation, I agree: recognition and praise have always gotten me far more fired up than a few extra dollars. I'm not alone; back in May, I wrote a piece about evil bosses that included a five-choice poll on the best way to motivate a team. The hands-down winner, with 74 percent of the vote? Respect and recognition.

But times, and economic situations, have changed. Could be that cash is now king. I have several friends who insist that all the public lauding in the world (or a free lunch, or a coffee mug, or a swell parking spot) couldn't possibly motivate them more than a bonus or a raise.

So I thought I'd put the cash versus kudos question to the test with Team Taskmaster readers. What do you think?

[poll id=29]

(image based on work by Tracy O and aspirationsf via Flickr, CC 2.0)

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