New Study Emphasizes Non-Cash Employee Rewards and Incentives

by: Nichole Gunn January 9, 2012

A new report on employee rewards and incentives reveals the importance of using tangible, or non-monetary, incentives to increase a company's overall morale and productivity, as well as foster high employee retention rates.

A global business improvement company released the "Keeping up with the Joneses" article, which discusses the Hedonic Treadmill theory and its relation to annual salary increases and the lasting positive impact that non money-based rewards can have on an employee's behavior.

"Hedonic Treadmill is a behavioral theory that states we as humans adapt surprisingly fast to circumstances, such as an increase in income," said Tim Houlihan, vice president of the reward systems group at BI WORLDWIDE.

He added managers are learning that annual salary increases lead to momentary jubilation for employees, but that celebration is short-lived as the employee's expectations and desires rise with their salary. Once the raise goes through and they see that first bigger paycheck, they become complacent, and their output could fall in the process.

"At the end of day, employers should realize their employees will consider nominal salary increases as non-events," Houlihan said, "but by assigning tangible rewards to actions aligned with corporate objectives, employers can optimize employee engagement levels and realize a more effective compensation program."

"Keeping up with the Joneses" also touches on a recent study from the University of Illinois, in addition to the Hedonic Treadmill theory. The study probed happiness and anaylzed what factors influence an employee's level of happiness. It revealed that regardless of the wealth of the country, happiness is influenced by how people perceive their peers and compare their well-being to others.

New Directions Behavioral Health, an employee assistance and mental health management firm, recently announced plans to move its headquarters to Kansas City, Missouri. According to The Kansas City Star, more than $7 million in incentives is responsible for bringing the company to its new War Parkway site, with 170 jobs carrying an average salary of $73,000.

“It largely ties to how our company has grown over the past several years and our trajectory looking forward,” Griff Docking, senior vice president and chief marketing officer, told the newspaper. He added the company has grown from 75 employees four years ago to 170 in the Kansas City region and expects to add at least 50 employees over the next several years.