As my father-in-law, “The Major” always says, “It’s good to have a couple Franklin’s in your wallet just in case.” Cash is still King as they say, but sometimes a little something special can go a long way when incentivising sales reps. Hey, it worked for Blake in the infamous sales movie Glengarry Glen Ross. And while maybe a Cadillac El Dorado isn’t in the cards, there’s plenty of ways to get creative when it comes to balancing your cash vs. non-cash incentives. We’ll get into the details and resources on how to add non-cash incentives into your incentive compensation plan.
As we all know, Sales reps work for money—but money isn’t the only way to motivate them.
Non-cash incentives offer an additional way to drive performance, but they work better for some sales activities than others. Understanding how to mix cash and non-cash incentives in your compensation plan can help you grow a highly motivated, high-performing sales organization.
Cash vs. non-cash incentives
Cash incentives include anything paid to an employee in the form of money, such as salary, commissions, and bonuses. Cash will usually be the primary means of payment for your sales reps, and you don’t want to use other incentives to replace something they’ll reasonably expect to be cash. But non-cash incentives can be a fantastic means of providing additional motivation.
Non-cash incentives are anything given to an employee in exchange for their labor that isn’t in the form of money. They can include a wide array of different rewards, from gift cards to meals to extra vacation time to new equipment. The sky is pretty much the limit when it comes to creative non-cash incentives organizations can use to motivate their sales teams.
Advantages of non-cash incentives
Non-cash incentives offer creative ways to motivate employees and encourage healthy competition, while mitigating against the danger of commissions outpacing revenue.
For example, if you wanted to increase call volume, you wouldn’t want to provide a cash incentive for every sales call placed—you’d end up seeing a high number of low-quality calls that don’t result in greater revenue. Instead, you could offer a small non-cash incentive to whichever sales rep places the most calls in a given time period. Just enough to encourage greater call volume, but not enough to have your reps jeopardize their cash commissions by making low-quality calls.
Additionally, some types of non-cash incentives have the advantage of not being taxed as income. For example, if you treat your team to lunch or reward a high-performing rep with a hot lead, neither of those incentives will increase their tax burden.
Finally, non-cash incentives can be a fun part of fostering an enjoyable workplace culture where sales reps love coming to work. Although reps wouldn’t want non-cash incentives to replace their salaries and commissions, winning a small reward on the side just hits differently and creates a positive psychological benefit.
Disadvantages and difficulties of non-cash incentives
Some non-cash incentives are subject to tax, and you may need to take a few additional steps to ensure you aren’t adding a tax burden to employees who receive them.
For example, if you award a new car to the top salesperson of the year, that reward could come with thousands of dollars worth of tax liability. Ideally, you should plan to cover the taxes as part of the incentive. If not, you at least need to be transparent from the start about what taxes will be owed by the winner. Otherwise you’ll risk turning tremendous incentives into frustrating burdens—alienating your top earners instead of securing their loyalty.
Additionally, non-cash incentives can be more difficult to track, calculate, and project. Because cash is just a number, you can generally create a straightforward formula for calculating monetary compensation and plug it into whatever system you’re using. With non-cash incentives, you may have to be a bit more creative with how you determine when a reward has been earned.
One way to mitigate these difficulties is to use an ICM solution that supports both cash and non-cash incentivization. Performio is built to handle complexity, including running non-cash incentive programs through our platform. But a lot of other Incentive Compensation Management (ICM) platforms aren’t flexible enough to manage it. The last thing you’d want is to go through the process of selecting a compelling incentive, only to have to scrap it at the last minute because it would break your system or create too much work.
When to use cash vs. non-cash incentives
Cash and non-cash incentives both have their place in incentive compensation management. It isn’t a question of if you should have both (you should) but of how to use each one appropriately.
The bottom line is that you should structure incentives around revenue generation.
Think of sales activities in terms of cause and effect. Certain activities are more directly tied to revenue than others. For example, when a rep closes a sale, that sale directly generates revenue. On the other hand, when a rep sends an outreach email, it may turn a prospect into a lead, but it doesn’t generate revenue in itself.
The closer a sales activity is to revenue generation, the more likely it should come with a cash incentive. As activities stray away from revenue, creative non-cash incentives become more acceptable. This aligns with employee expectations, and even more importantly, it mitigates against commissions outpacing revenue.
Going back to those same examples, a cash incentive for closing a sale won’t outpace revenue, because the commission comes out of the revenue generated from the sale. On the other hand, if you offered a cash incentive for sending emails, you could easily spend more in incentives than you earn back in revenue.
However, if you did want to incentivize your sales reps to send more emails, you could make it a competition and award a small non-cash incentive to the rep who sent the most emails. Or you could offer a group non-cash incentive to the whole team if they cross a certain threshold of emails sent within a given time period. Either way, the non-cash incentive would allow you to encourage a non-revenue-generating activity on a limited scale without the risks associated with a cash incentive.
Tips for managing non-cash incentives
In addition to knowing when to use them, there are a few things you can do to ensure your use of non-cash incentives goes smoothly.
Provide equal access to earning rewards
For any given non-cash incentive program, avoid structuring the incentives in a way that gives some roles a greater chance at earning rewards than others. This means applying incentive programs to teams that have comparable if not identical goals and behaviors, specifically around the sales activity you’re incentivizing.
Let’s say you have some account managers who handle existing business, and you have some account executives who handle new business. Their overall roles are fairly similar, so you decide to roll out an incentive program for all of them together. This could work well as long as you’re incentivizing an activity that they all perform similarly. But if, for example, your account managers tend to do a much higher volume of smaller deals, then you wouldn’t want to incentivize the creation of deals, as that would provide a distinct advantage based solely on the nature of their roles.
In this example, you’d want to treat the roles as distinct. You could:
- Offer the incentive program to only one of them.
- Offer two separate programs, each catered to the specifics of their roles.
- Find something else to incentivize that would be more equally applicable to both.
What you don’t want to do is place different roles in the same incentive structure for an activity where one role will automatically dominate the other. That will just lead to resentment and poor morale.
Provide inclusive non-cash incentives
The great thing about cash is that it can be used for whatever the recipient wants. When you start offering non-cash incentives, you run the risk of offering a reward that some people just don’t want—or possibly even find offensive. For example, what if you offered a bottle of wine as the incentive on a team that includes a recovering alcoholic?
The solution is twofold: First, try to make any reward you offer as widely applicable as possible. And second, add an element of choice to the rewards. For example, if you want to pay for a vacation as an incentive, instead of booking a specific location, you could give away Airbnb and airline credit to allow employees to choose a location for themselves.
Gift cards are generally helpful in this regard, as they allow people to choose what to buy, but it’s still best to offer a selection of gift cards to choose from. You wouldn’t want to only offer gift cards to a seafood restaurant, for example, as some of your employees may not care for seafood and others may be vegan. Instead, if you’re wanting to support local businesses with your selection, allow employees to choose their gift card from a selection of nearby restaurants.
You may find that using a gift-fulfillment platform streamlines this process, providing a wide variety of incentives for your employees to choose from. Examples include:
Provide transparency about incentives
Whatever incentive you offer, you need to be crystal clear about what it is, how an employee can earn it, and what they’ll be on the hook for if they receive it.
A reward that doesn’t live up to expectations—or that comes with hidden fees an employee didn’t anticipate—is a recipe for disappointment and frustration, resulting in the opposite of the effect it’s meant to have. So do your due diligence to ensure you understand everything the incentive will entail, and then communicate it clearly to your sales reps.
You also don’t want to make the process of earning the incentive overly complicated or confusing. Keep it as straightforward as you can, and if possible, provide a way for reps to track their progress toward any incentives you offer.
Incentivise sales activities with Performio
Whatever kinds of incentives you use, you’ll need an ICM platform to give your sales reps transparency into their earnings. With Performio, they can easily manage their sales activities, track their progress toward quotas and incentives, and see exactly what they can expect to earn.
Additionally, Performio can launch and manage Sales Performance Incentive Funds (SPIFFs), whereas many other platforms can’t—making it the ideal choice for cash and non-cash incentives alike.
Ready to see what Performio can do for your organization? Request a demo today.