At the end of this year, the 33 employees at Unreal Marketing Solutions will have a decision to make: Will they take their end-of-year bonuses in cash, or in American Express points redeemable for merchandise and travel?

If recent history is any indication, most will go for the points, says Michael Stalbaum, who founded Unreal Marketing, an online advertising agency based in Narberth, Pa., at the end of 1999. One reason is that Mr. Stalbaum encourages employees to take points by making them worth about 50 percent more than a cash payout. But he says he believes that many of his workers feel that merchandise — whether a new computer or a flat-screen plasma television — is simply a better reward than cold, hard cash.

One employee used last year's points to decorate her home using Pottery Barn gift certificates; another redeemed them for a night at a Ritz-Carlton hotel.

"Cash can be easily spent on an electric bill or to pay the mortgage," Mr. Stalbaum said. "But the points offer something more tangible. People can use them to buy something they've wanted for a while."

Mr. Stalbaum's is not the only company using noncash bonuses to reward employees this year. At Imre Communications, a branding company based in Baltimore, employees will get an extra week of vacation time during the Christmas holiday as a reward for helping the company reach its financial goal.

Dave Imre, the firm's president, told employees in January that if company revenue grew 19 percent or more, they would each get the extra vacation time. In mid-December, it appeared the company would exceed that goal by more than three percentage points.

"I don't think people would have been as gung-ho if I had simply offered extra cash," Mr. Imre said.

More and more companies are opting to offer noncash incentives — ranging from popular gadgets to plastic surgery to vacation time — to motivate employees, not just at holiday time, but throughout the year, compensation experts say.

"We've seen an increase in companies looking to recognize employees with things other than money," says John Farrell, senior director of Carlson Marketing Group, a relationship marketing and loyalty company based in Minneapolis.

Indeed, of the 37 percent of companies that will offer holiday bonuses this year, 49 percent of them plan to offer gift certificates from retailers, compared with 37 percent that will offer cash. The rest give a variety of items, mainly food. Noncash bonuses awarded at other times of the year also are on the rise, says Mark Peterman, vice president of Client Solutions for Maritz Incentives, a performance improvement company based in Fenton, Mo.

Mr. Peterman says the use of noncash incentives this year is up 20 percent compared with five years ago, and "many companies that have over time moved away from noncash to cash are now back to using noncash."

One popular award that Mr. Peterman helps companies arrange is a "run through the warehouse," where employees get five minutes to race through Maritz's product warehouse in Missouri (or a substitute set up in a department store or hotel ballroom) and select plasma TV's and other goodies.

One factor driving the trend is financial. Companies "get more bang for their buck" with noncash awards, Mr. Farrell said, because the perceived value of many such awards is higher than their cash value.

Companies that award points redeemable for merchandise also may save money, he said, because those points are not always used. "With noncash awards, about 3 to 7 percent of what is issued never gets redeemed," he said. And in some cases, the company gets the points or other noncash awards at a discount from their face value, reducing the cost of the employee rewards.

Certainly, Mr. Stalbaum's company has benefited from the use of American Express points — the firm has accumulated more than half a million points through its own purchases, so the bonuses cost him virtually nothing. In the past he has also bartered with a client, a local bar, to give employees bar tabs as rewards.

Companies also have more flexibility with noncash incentives because they can discontinue their use at any time, said Bill Grassie, founder of Strategic Incentive Innovators, a compensation consulting firm in Overland Park, Kan.

Noncash incentives have advantages beyond the financial, Mr. Grassie said. "With noncash rewards, you are able to change people's behaviors," he said.

At Sprint, he said, executives have used noncash awards to motivate sales representatives to sell a new product or try a new sales approach.

Noncash awards can also be more motivating because they give employees bragging rights, Mr. Grassie said. "There's a certain trophy value you get when you earn a big-screen TV or a trip to Hawaii that you just can't get with cash," he said.

At Sprint, sales representatives are often eligible for "lifestyle awards." Through the program, a sales representative can submit receipts for personal expenses, and the company can elect to reimburse them. In the last two years, Mr. Grassie's team approved many such rewards, including several for cosmetic procedures like breast enhancements and Botox injections.

One item the company declined to pay for, he said, was a sales representative's lawyer fees for a recent divorce. "We didn't feel that that was in keeping with the spirit of our rewards program," he said.

Family members often favor noncash awards, because they are often the beneficiaries, Mr. Farrell said. "We know that a large percentage of these awards go to family members, so the spouses certainly help drive the individual to perform."

Another benefit of noncash incentives is that they can be more memorable than money. According to Mr. Imre, "Employees often receive items they really want but they would never purchase themselves."

Brian Remsberg, a senior account executive, once received an expensive fly rod that he had been eyeing for months. In addition, he is planning to use the extra vacation time after Christmas to travel to Hawaii with his wife.

"I've kept my eye on the numbers all year long to make sure I was going to be able to go on this trip," he said. "For me, winning this stuff has been better than getting more cash in my pocket."

While noncash incentives come in a wide variety, Mr. Farrell said, one type continues to be a favorite among employers: a pat on the back. "One of the best motivators is still public recognition," Mr. Farrell said. "If you get called up by the vice president of a company to a stage at an annual meeting and are congratulated in front of your peers, that's going to be a huge motivator. It's just human nature to want to be recognized in that way."

Posted 12/19/04

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