Want to reward your employees? Avoid cash rewards, give them an iPad

That’s obvious right? I mean, who wouldn’t want an iPad. But the point I’m trying to make here is bigger. As a HR professional, how often have you been faced with a situation where you’ve had to reward a resource for their outstanding work, outside of appraisals. If your company has been doing well for itself, you’ve faced this quite a few times.

So what do you do? Who can possibly know what every employee likes? Might as well give them an attractive cash prize and be done with it, right? Wrong.

You want to give your star performer a good gift. A souvenir that will remind them of their achievement. And not some memento that they can keep on their dusty display shelves. And definitely not a cash prize that they’ll spend over a weekend or so. You want to be able to give them a great gift.

So what is a good gift?

Dan Ariely, the author of the international bestseller, predictably irrational, shared that a good gift is something that circumvents guilt. On his blog he says-

“A good gift is something that someone really wants, but feels guilty buying it for themselves.”

“I think that the best gifts circumvent guilt in two key ways: by eliminating the guilt that accompanies extravagant purchases, and by reducing the guilt that comes from coupling payment with consumption.”

The first point is fairly straightforward – buy them a gift they would be guilty of buying themselves. An expensive pair of shoes, a premium end electronic gadget or a great coat that is outside a justifiable price range. These are far better than cash prizes, as they probably wouldn’t have been spent on these things because of the guilt associated with it. And it is guaranteed, that they will not only enjoy using it, but will also be a souvenir of their achievement.

The second point further proves the point against cash prizes. Humans are generally wired to feel bad while making a cash transaction. Dan Ariely even attributes the popularity of the use of credit/debit cards to this. He says in his blog –

Imagine that you have just finished a fantastic meal and have the option to pay with cash or with a credit card.  Which one will “hurt” a bit more?  You probably think that paying with cash will be a more miserable way of spending your money – but why?  Because, as Drazen Prelec and George Loewenstein show, when we couple payment with consumption, the result is a reduction in happiness. When we pay with a credit card the timing of the consumption of the food and the agony of the payment occur at different points in time, and this separation allows us to experience a higher level of enjoyment (at least until we get the bill).

Many companies offer joining bonuses to an employee. But there are some which attract candidates using gifts like. For example, Hike, a company taking part in our Android Hiring Challenge, offers all of it’s new recruits the computer and phone of their choice. The cost of this could be equivalent to the exorbitant joining bonuses that some companies offer, but the prospect of having an iPhone 5s and a Macbook on joining a company seems more attractive to me at least.

So the next time you’re handing out that cash prize for being an exceptional perform, you might actually not be making a person as happy as he/she can be. Give them a gift that matches the same cost, and you might just have a happier employee.