20 Dec 2012
This post was adapted by an article by Emma Collins. Click here to find MBA Online’s top 2012 programme rankings – a compendium she helped put together.
Historically, corporations and accounting firms have recruited talent by offering highly competitive monetary compensation. In recent years, however, many companies – particularly those within the startup sector – have begun to supplement employee salaries with a list of non-monetary benefits in order to not only attract skilled applicants, but also retain their services in the long run.
Large corporate entities like the Big Four accounting firms (Deloitte, Ernst & Young, KPMG and PwC) have traditionally used monetary incentives to draw in suitable job candidates. In addition to high salaries, these sorts of benefits often include things like profit sharing, project or annual bonuses, stock options and extra vacation time. The logic behind these incentives was simple: many people are motivated by money. However, a common criticism of these “rewards” was that they fostered an environment that favored compliance over creativity. If employees are paid for merely completing a job or task, then they will often take fewer risks and focus less on innovation. In addition, many criticize monetary incentives as being extrinsic, rather than intrinsic, motivators: employees who strive for these incentives are driven by financial success, rather than contributing to the collective good. As a result, many individuals are forced to regard their colleagues as competitors, and these roles often hinder development of positive workplace relationships.
Non-monetary incentives, on the other hand, appeal to employees by providing bonus perks that foster a positive workplace dynamic. In addition to on-site training, MBA tuition-funding and other career advancement opportunities, non-monetary benefits include a flexible schedule, sabbatical leave and continuous recognition of excellent employee performance by company executives. Over the years, corporate leaders have been forced to tailor their non-monetary incentives to meet the demands of the current generation. Baby Boomers, for instance, historically valued flexible retirement options, on-the-job training opportunities and sabbatical leave. Generation X and Y employees, on the other hand, value professional development, constant feedback from managers and a work environment that rewards creativity.
Some prominent companies have gone beyond career-related, non-monetary incentives to provide an enjoyable workplace filled with complimentary services. The trend is especially common among the firms of Silicon Valley. At Sun Microsystems, for instance, employees are entitled to free mechanical services, consultations with an on-site physical therapist and use of the company’s expansive gym facility. Oracle rewards its workforce with dry cleaning, shoe repair, floral deliveries and other perks. And Netscape, one of the oldest web development firms in the country, workers can take advantage of in-house dental services, chair massages and office assistants to manage meetings and travel logistics.
While these additional services may initially represent a sizable company investment, Sun Microsystems corporate public relations manager Anne Little told Wired that bonus, non-monetary incentives ultimately drive productivity by treating employees to a luxurious workplace experience. Jerry McAdams, co-author of the American Compensation Association’s annual report, told the U.S. Office of Personnel Management that non-monetary incentives are more effective than cash rewards for four reasons.
First, non-monetary benefits have more ‘memory value’; employees cherish informal recognition for years, while money is often forgotten once it is spent. Second, non-monetary incentives have “trophy value”: workers can display plaques, certificates and other awards to their peers, while bragging about paychecks or cash bonuses is generally frowned upon within the workplace. Certain non-monetary awards, such as T-shirts or coffee mugs awarded to a team that accomplishes a specific task or wins an in-house competition, also build office relationships and recognize excellent performance. Finally, McAdams notes that employers spend considerably more money on monetary incentives than they do on non-monetary benefits.
Historically, the success of big firms has been determined by the wealth and economic prosperity of their employees and partners. However, the current generation has spoken: money is still the standard of professional success, but non-monetary incentives build office relationships and boost productivity much more effectively than high salaries or cash bonuses can.
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