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How Much Employee
Motivation
Can You Buy for $10?
We've had a lot of conversations
about the differences in world view of those employees known
as "Generation X" and "Generation Y". I
had an amazing experience that convinced me that at least some
companies are actually changing their management approaches to
meet the differences in wants and needs of these vs. older
employees.
It's quite possible you'll believe, upon reading this, that
I've completely lost my mind. I'm still processing it myself,
based on that specific concern.
I had an extended conversation about employee recognition with
two Gen-X'ers and learned something that totally amazed me.
Both of these people have MBA's from prestigious schools and
work in large NYSE companies at great salaries. Both have
traveled and lived internationally.
And both were talking about their
respective companies' practice of handing out
small-denomination gift cards to employees as part of their
"spot" recognition programs. Now, here's the part
where I started to think I was losing it. In these cases,
"small" is REALLY small -- $5, $10 and $15 dollar
gift cards -- amounts that could get lost in the roundoff
error of their respective W-2's.
I apologized in advance, and asked "Would someone who
came in on a Saturday to get an important project done by
Monday actually be happy with a $10 bonus?" "You
mean they're not offended by such a trivial amount?"
 Well,
I learned, there's something wildly different between a $10 gift
card and a $10 bill. I still don't know exactly what. Perhaps
it's the "indulgence" element. The hottest gift
cards going are Starbucks and I-Tunes, plus, believe it or
not, Target. Somehow spending $5 apiece for two coffees feels great
if it's the shareholders who are buying. One of these people
had received a $50 gift card for something a bit more
meaningful, and used it at Target to buy Christmas decorations
-- something she might have been too frugal to spend
"real" money on. Car wash coupons are similarly
prized -- you get your car washed more often than you'd be
willing to pay "real" money for.
I also learned that these two companies have a well-developed
protocol and process for this. Clearly they've been paying
attention to what motivates and satisfies Gen-X and Gen-Y
employees. A couple of important things are:
- It's not just about the gift
card -- The acknowledgement of and recognition for the
accomplishment must be public, such as at the beginning of a
shift or a staff meeting. One of these companies starts
every meeting that way. Being recognized publicly is
important to every human, and particularly important to
Gen-X and Gen-Y. The card usually comes later, given
privately.
- It's not assumed that every
accomplishment or recognition includes a gift card --
recognize and praise people regularly & publicly, just
as you have been, and then the card is occasional
"icing" afterwards.
Now, you ask, isn't the gift card
ordinary income, subject to the same taxes as a $10 bonus?
Yes, indeed it is. In the one case of the $50
gift card, it was clearly stated that this was "$50 after
tax." I assume the employer tracks who receives a card, and
then grosses up their W-2 at the end of the year.
That gross-up is no small deal. Consider Federal taxes at
perhaps 28%, State at 7% and FICA at 8%. That takes a $37
gross-up -- to $87 to leave $50 net on the W-2.
I don't know how these companies handle the taxability of $5
gift cards and car washes, and neither did these two employees.
What I do know is that the tax code is unambiguous in stating
that ANY cash-equivalent amount given to an employee is taxable.
The specific ruling on this topic is found at: http://www.irs.gov/pub/irs-tege/p_4090_fed_0305_text.pdf
While not dated, the document was apparently published in 2005.
I didn't see any wiggle room in it at all. Perhaps you will.
One would need to control, under lock and key, such cards, just
like you would Petty Cash. Good idea -- it's just like cash. And
then to stay within the law, you'd need to keep meticulous track
of those to whom cards were awarded -- have the supervisor sign
a form or something, identifying the recipient. And then turn
over those tiny amounts to Payroll to be grossed up and included
in the W-2s at the end of the year..
Why would you go to all that trouble? Because it might work!
The two people who told me about this were smart, well-educated,
well-traveled and well-paid. And both were excited when someone
gave them a car wash coupon. Go figure. Do keep in mind that
this strategy plays best, I think, in the "instant"
world of Gen-X and Gen-Y. In the case of these two companies the
workgroups involved were mostly under 40.
Wow, if you can make 50 people
happy with $10 Starbucks cards or 10 people happy with $50
Target cards, isn't that a better outcome than giving a $500
bonus to one person on a pay stub? Think about it -- I'm still
processing the idea myself.
If you give this a try, be sure
to and let us know how it worked for you. I can't wait to hear
and share your experiences with other members.
As always, things you receive
from CEBI are ideas, not recommendations. Before acting, check
with your own trusted advisors to be sure an idea is right for
your own situation.
Thanks,
Terry Weaver
CEO
Chief Executive Boards International
TerryWeaver@ChiefExecutiveBoards.com
www.chiefexecutiveboards.com
www.chiefexecutiveblog.com
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