It is widely accepted that both tangible and intangible rewards are important for motivation. Tangible rewards can be things like money, prizes, or awards. Intangible rewards can be things like recognition, praise, or increased responsibility.
There are pros and cons to both types of rewards. Tangible rewards are often more effective in the short-term, but they can also lead to problems like depreciation (when the value of the reward decreases over time) or becoming an asset (something that is worth money). Intangible rewards are often more effective in the long-term, but they can be harder to measure and may not have the same immediate impact.
The best approach is to use a mix of both tangible and intangible rewards. This way, you can Motivate employees in the short-term with tangible rewards and in the long-term with intangible rewards.
Though related, rewards and incentives are two different things. An incentive is something that encourages or drives individual or group action. A reward is given to an individual or group for a service, and can be either tangible or intangible. There are two primary reasons for giving rewards: (1) excellent completion of duties and tasks assigned, or (2) unique contributions to the organization in regards to job-related matters or those outside of work responsibilities
Intangible rewards are those that do not have a physical form. They are the recognition and respect of others, feelings of satisfaction and accomplishment, and increased self-esteem. Intangible rewards are usually more powerful motivators than tangible rewards because they satisfy higher-level needs such as the need for self-actualization (Tracey, 1999).
Tangible rewards are those that have a physical form. They can be either monetary or nonmonetary. Monetary rewards include such things as raises, bonuses, and profit sharing. Nonmonetary rewards include such things as awards, trophies, and vacations. Tangible rewards are often given in addition to intangible rewards. The most effective tangible rewards are those that are job-related (Tracey, 1999).
The key to using rewards effectively is to match the type of reward to the situation. The three most important factors to consider when selecting a reward are: (1) the difficulty of the task or behavior being rewarded, (2) the timing of the reward, and (3) the individual preferences of the person being rewarded (Tracey, 1999).
Task difficulty is inversely related to the type of reward that should be given. That is, easy tasks should be rewarded with tangible rewards and difficult tasks should be rewarded with intangible rewards. The reason for this is that it takes more effort to complete a difficult task and therefore an intangible reward is more motivating. On the other hand, since it is easier to complete an easy task, a tangible reward is more appropriate.
The timing of the reward is also important. The closer the reward is given to the time the task is completed, the more effective it will be. This is because it reinforces the desired behavior while it is still fresh in the person’s mind. For example, if an employee completes a project on time, he or she should be rewarded as soon as possible after the project is completed.
Finally, it is important to consider individual preferences when selecting a reward. Some people prefer tangible rewards while others prefer intangible rewards. It is important to find out what type of rewards Motivate an individual before selecting a reward. One way to do this is to ask the person directly. Another way to find out is to observe the person’s behavior.
If a person always seems to be working hard, he or she is probably motivated by intangible rewards such as recognition and respect. On the other hand, if a person seems to be working just hard enough to get by, he or she is probably motivated by tangible rewards such as money and vacations.
According to behavior modification specialist Tracey (1999), tangible rewards (e.g., money, treats, certificates) can be useful for external motivation of group work; however, they should be used selectively in order to also build a sense of internal motivation within the group. This is achieved by pair association — another behavior modification technique.
The problem with tangible rewards is that they can lose their value over time. The reward becomes less motivating as it becomes more familiar (a process called depreciation). When this happens, the tangible reward must be increased or changed to maintain its motivational value.
Intangible rewards are internal ways of Motivating group work and are usually more effective in the long run than tangible rewards. Intangible rewards include things like a sense of accomplishment, satisfaction, recognition, and responsibility (Tracey, 1999). These types of rewards are often more valuable to group members because they are not subject to the same depreciation process as tangible rewards.
Giving people tangible rewards after they complete a difficult task not only makes them feel good in the moment, but will eventually lead to the positive feeling of accomplishment. This is why it’s important to use external rewards sparingly and selectively.
External rewards also have a tendency to motivate people who would normally not be motivated by the work itself.
Intangible rewards are more difficult to assess but may be even more important in the long term. These are things like a sense of accomplishment, satisfaction, recognition, and a sense of belonging. They are the internal motivators that make us want to do our best.
The challenge for managers is to find the right mix of tangible and intangible rewards that will Motivate their team members to achieve results.
It is also important to keep in mind that all rewards have a shelf life. The effects of any reward will wear off over time as it becomes part of the normal expectations. This is why it is important to keep the rewards fresh and to vary them from time to time.
Finally, it is important to remember that not all rewards need to be financial. In fact, non-monetary rewards can often be more effective than cash. The key is to find something that is meaningful to the individual and that will Motivate them to do their best.