TheWhitePaper*

Who Says Cash Is King?The Importance of Non-Cash Recognition in

Building Motivation across a Global Organization

ISSUE 2 JUNE 2008

TheWhitePaper*

Business Is Global! In today’s global economy, world-leading organizations require

the global reach necessary to recognize and reward employees and sales channels

in some of the most rapidly growing economies in the world. As more and more

global corporations open and expand operations in worldwide locations, the need

to implement relevant multicultural programs continues to increase.

Previously, running global reward and recognition pro-

grams was expensive, disparate, and so administrative-

ly burdensome as to be almost impossible. Expensive

shipping costs, translation charges, culturally inappro-

priate rewards and various unaligned programs in dif-

ferent countries were the order of the day.

Today, Globoforce provides global corporations with

an online platform that enables them to issue, track

and manage their entire recognition program needs

from one system. Through this platform, we offer ap-

propriate and motivational rewards that get to their

winners quickly and efficiently. We are committed

to helping global corporations overcome geographic

barriers to recognize employees and channel part-

ners around the world in a personalized fashion.

As an expert in the recognition and reward industry,

we help today’s world-leading companies overcome

the global challenge to launch successful, non-cash

recognition programs that deliver optimal results.

Our clients may differ in size, industry, and location,

but they all faced the same set of questions when

setting goals and objectives for the launch of a new

reward and recognition program.

In our experience working across a wide variety of in-

dustries, we have noted five recurring questions com-

panies raise while launching a recognition program.

Q1. How important is recognition?

Q2. Should our recognition program be 100% cash based?

Q3. Is a non-cash recognition program as effective in motivating employees?

Q4. How will non cash recognition impact our bottom line?

Q5. What rewards should we use?

TheWhitePaper*

Q1. How important is recognition?

Tip 1: Retention, Reinforcement, Return on Investment!

Recognition is a valuable tool for recruiting and

retaining qualified employees as well as reinforcing

positive employee performance.

It should come as no surprise that employees who

receive regular recognition and praise are more en-

gaged. This engagement leads to demonstrable in-

creases in profits, sales, customer loyalty and above

average productivity.

Gallup studies have proven that increased employee

engagement results in:

27% higher profits *

50% higher sales *

50% higher customer loyalty *

38% above average productivity. *

Ultimately, your company’s success is influenced by

its ability to recognize and reinforce positive behavior

in your people.

According to motivation studies conducted by Fred-

erick Hertzberg, a renowned psychologist and re-

searcher of human motivation in the workplace,

salary, supervision and working conditions, at best,

prevent employees from being dissatisfied. It’s rec-

ognition that positively impacts morale and loyalty to

the organization. Recognition is a strong influencer of

job satisfaction in that it feeds Psychic Income™—a

person’s need for social acceptance, increased self-

esteem and self-realization.

“Companies that utilized an effective employee recognition program enjoyed a 109%

three-year median return to shareholders vs. a 52% return for the same period for

those companies that did not.”

- Watson Wyatt Study of 3 million employees, as quoted in Forbes magazine (2004).

Today, world leading enterprises are those that base

their recognition strategies on building a culture

of appreciation by acknowledging the efforts of all

deserving employees on a more personal level and

recognizing the behaviors that are most important to

their company as a whole. These organizations are

successful because they know recognition of their

employees directly impacts their companies’ bottom

line as it helps manage retention, increase employee

satisfaction and thus enhance overall performance.

Effect of Recognition on Company Status

Reward ProgramsAttract Talent

Reward ProgramsSupport Retention

Financial and Non-FinancialRecognition Programs

Line Managers CreatePositive Work Environment

Regularly Reinforce CompanyReward Philosophy

Fortune’s Most Admired Companies

- Hay Group Research, March 2008

82%

64%

41%

21%

28%

16%

48%

28%

45%

25%

0 20% 40% 60% 80% 100%

All Others

TheWhitePaper*

Q2. Should our recognition program be 100% cash based?

Tip 2: Cash Is Not king! Often, we hear from our clients that their employees

and sales partners would prefer cash. Traditionally,

their HR departments were happy to accept that re-

quest because:

Cash is flexible *

Cash allows everyone to get what they want *

Cash is easy and works in payroll *

Cash helps people meet their basic needs *

Cash just cuts it! *

Cash-only recognition programs may appear to be

the quick and easy solution but, based on our cli-

ents’ previous experiences with cash-only programs,

they neither maintain program consistency on a

global scale nor do they ensure local participants feel

motivated and involved in the organization.

By building a recognition program on cash alone,

companies not only lose out on establishing a cul-

ture of appreciation across their global organization,

but also on delivering an extra boost to their return

on investment.

Recognition is no longer a nice to have. It must be

part of your Total Rewards Strategy if you aim to:

1. Be competitive in the marketplace

2. Communicate to employees that they add value

and that you will acknowledge them

3. Create a great place to work

A Total Rewards Strategy is one that achieves the

highest return on investment for a company with the

optimal mix of cash and non-cash rewards. When

developing your total rewards strategy, you must first

consider your business objectives—certain objec-

tives may be better accomplished with a compensa-

tion approach (cash) while others would be met with

a recognition approach (non-cash).

Together, non-cash and cash awards provide the

maximum motivation.

“Recent research shows that what employees say they want and what they actually

work hardest to receive do not always match up… Those working for a cash incentive

boosted their performance by 14.6% over those who did not receive any incentive for

performance… Those who were working toward a non-cash incentive improved by

38.6% relative to the no-incentive condition… For the same amount of money, a non-

cash incentive created more than twice the performance improvement!”

(University of Chicago study, 2004)

TheWhitePaper*

Q3. Is a non-cash recognition program as effective in motivating employees?

Tip 3: Efficient and Effective Recognition!Keep trying to motivate your employees with cash

and you’ll soon become all too familiar with a phe-

nomenon that researchers call “reward inflation.”

People become “habituated” to cash no matter how

much you give them.

When the issue is performance, cash is often the

wrong answer because it’s viewed as an entitlement

without trophy value or corporate equity.

Cash rewards are “slippery” in that they are forget-

table or “slip” a recipient’s mind, often “slipping”

right into the paycheck unnoticed. As it’s not socially

acceptable to discuss cash or salaries—especially in

front of co-workers—you lose a recognition moment

by recognizing your workforce with cash rewards.

Non-cash rewards, on the other hand, are “sticky,”

ensuring that the personalized redemption options

are memorable or “stick” in the recipient’s mind. By

recognizing your program participants with “sticky”

rewards, you reinforce the relationship between the

reward earner and reward provider.

Non-cash rewards are ideal for improving perfor-

mance, creating promotional value and satisfying

the human ego. They appeal to the recipient’s need

for Psychic Income by providing your program par-

ticipants with a tangible symbol of achievement that

fulfills their needs.

In addition, they reinforce the recipient’s

commitment to the company, helping

to ensure long-term success.

Awards

Incentives& Contests

Variable Pay/Bonus

Base Pay/Salary/BenefitsCom

pens

atio

n

Reco

gniti

on

Total Rewards Strategy

Cash Is SlipperyCannot be discussed in front of co-workers *Is easily spent on necessities such as gas and groceries *Becomes an expected entitlement *A 1999 Wirthlin Worldwide survey showed how cash rewards were *spent:

Bills – 29% *Do not remember – 18% *Never received a cash reward – 15% *

A 2007 survey showed how cash rewards were spent: *$500 reward – 25% did not recall how it was spent *$1000 reward – 33% did not recall how it was spent *

Cash = Poor Return on Investment

Non-Cash Is StickyFulfills recipients’ needs and creates memorable value *Reinforces recipients’ commitment to the company *Provides trophy value and a tangible symbol of achievement *Offers opportunity for recognition moments *Enables other communications opportunities (newsletters, posters) *Provides something physical to “show off” *Are socially acceptable to brag about *Provides a lasting reminder of achievement *Provides guilt-free enjoyment of the reward *Delivers a higher perceived value *Participants may involve family in selecting reward *

Non-Cash = Next Big ROI Opportunity

TheWhitePaper*

Q4. How will non-cash recognition impact our bottom line?

Tip 4: Increase Productivity and Save Money!Engagement of your employees matters. It’s about

creating an organization that moves forward posi-

tively, by encouraging more discretionary effort from

its people.

According to the results of a worldwide survey con-

ducted by Gallup, employees typically fit into one of

these different groups:

1. Engaged employees work with passion and feel

a profound connection to their company. They drive

innovation and move the organization forward.

2. Not-engaged employees are essentially “checked

out.” They’re sleepwalking through their work day,

putting in time—but not energy or passion—into

their work.

3. Actively disengaged employees are unhappy at

work; they’re busy acting out their unhappiness.

Every day, these workers undermine what their en-

gaged coworkers accomplish.

Gallup estimates that 22 million workers in the US

alone are disengaged, having a significant impact on

the productivity and ultimate success rates of many

businesses today.

Engagement of your employees is the next big ROI

opportunity. Research has shown that companies

that implement a global recognition program can ex-

pect an ROI of 200-500%.

With non-cash recognition programs, you not only

save money by reducing manual intervention and

eliminating the paper chase, you also create this

positive, engaged environment where people see

best practices, strong ethics and exceptional perfor-

mance are recognized and rewarded consistently,

openly and fairly. Such an environment encourages

loyalty, commitment and honesty of effort, resulting

in significant ROI.

“Companies that recognize their people outperform those that don’t by 30% to 40%.”

- Kriegal PhD.Extract from Contented Cows Give Better Milk

TheWhitePaper*

Q5. What rewards should we use?

Tip 5: Locally Relevant, Personally Meaningful and Actually Motivating Rewards!An essential part of a non-cash recognition program

is making sure the rewards offered actually motivate

to your program participants. By offering them the

“gift of choice,” you ensure no one is disappointed.

Many of the companies we work with today first of-

fered cash only and then merchandise before finally

settling on our gift certificate model. We’ve heard

some real horror stories related to merchandise in

our experience in global rewards! Some of our favor-

ites are related to trying to ship merchandise world-

wide! For example, the grand-father clock shipped

from the US to Australia ended up costing five times

its value when shipping, customs and duties were

paid—in addition to the two months it took to arrive!

Needless to say this is where thinking local really be-

comes essential – knowing not to talk about “French

Dollars” or knowing that electronic merchandise is

a global rewards disaster. Think about the variety of

electric plugs the world!

Your participants are likely to be spread across the

country if not many countries. They come from dif-

ferent backgrounds, genders, and age groups— all

with varied cultural tastes and preferences.

To appeal to the wide variety of needs and interests

within your program participant pool, you must pro-

vide variety in your rewards selection.

By offering a worldwide “reward of choice” selection,

global organizations can ensure every one of their

program participants will have something to select

that is culturally relevant and personally meaningful

to them —no matter where in the world they reside.

Successful programs are those that deliver both con-

sistency and “meaning” on a global scale by ensur-

ing their program offers access to millions of different

shopping, dining, entertainment and travel options

across all six continents.

Globoforce (North America)Reservoir Corporate Center

144 Turnpike Road, Suite 310, Southborough, MA 01772 USA

Phone: +1 (888) 7-GFORCE (436723) Fax: +1 (508) 357 8964 Email: corporate@globoforce.com

Globoforce (Europe)6 Beckett Way, Park West Business Park, Dublin 12, Ireland.

Phone: +353 1 625 8800 Fax: +353 1 625 8880 Email: corporate@globoforce.com

© 2008, Globoforce Limited. All rights reserved.

About Globoforce

Globoforce is the leading worldwide provider of on-demand strategic reward and recognition solutions for Global 2000 companies. Globo-

force’s flexible and efficient recognition tool can scale from one user to millions of users with ease, offering global companies a powerful and

secure solution to implement and manage their companywide or divisional employee recognition programs. Through a dynamic, easy-to-use,

on-demand technology platform, Globoforce transforms the way companies engage, motivate and empower their workforces across the world.

Co-headquartered in Southborough, Mass., and Dublin, Ireland, Globoforce was recently selected by the Great Place to Work® Institute as one

of the “50 Best Companies to Work For.” Globoforce won a 2007 Process Innovation Award for the creative deployment of Dow Chemical’s

global, on-demand employee recognition program. Globoforce also won Human Resource Executive magazine’s coveted “Top HR Product of

the Year” award in 2004 for its revolutionary on-demand software solution. Some of Globoforce’s world-class customers utilizing this enterprise-

class solution include Amgen, Avnet, Dow Chemical, Intuit, Procter & Gamble and Reuters. www.globoforce.com.