· Features

A non-cash award with a celebration of achievement is an enduring memory

The New Year is traditionally a time where we look back at the past 12 months in the hope of learning lessons for the future.

Well, this year I'd invite you to look back just to Christmas morning, where it is an unspoken truth that some gifts, although gratefully received, are far less memorable than others.

For example, those socks (again!) you received from a seldom-seen auntie have already achieved utilitarian anonymity; while the thoughtful present that brought a smile to your face will be cherished - and its sender warmly remembered - for some time to come.

And as you relive Yuletide emotions, give a thought to your organisation's approach to reward and recognition, because the psychological parallels with receiving Christmas gifts are strong - and, in a challenging economic climate, the need for fresh ideas is pressing.

In his recent book, A Guide to Non-Cash Reward (Kogan Page), Michael Rose uses the emotional impact of the gift of a well-chosen present as the starting point for an examination of how simple non-cash rewards can have a huge impact on engagement and retention.

Non-cash rewards have four strengths when compared to more expensive cash-based alternatives, Rose finds.

Like cherished Christmas gifts, well thought through non-cash rewards have 'memory value': recipients remember how and why they earned the award every time a non-cash item is used.

Their second strength - non-cash rewards are differentiated from pay - means the achievements you are recognising are seen as going beyond the standard job description, or taking an individual to the next level.

In The Carrot Principle (Pocket Books), Adrian Gostick and Chester Elton highlight research which shows that "one-third of the people you give a cash-based reward to will use that money to pay bills. And one in five won't have any clue where they spent the money - or even how much they received."

A non-cash reward with a celebration of achievement - a letter from the CEO, an awards ceremony or, as at McDonald's, stars on a name badge - is an enduring memory.

At a more functional level, the perceived value of non-cash rewards can be much higher than the cost. There's the psychological bonus of what Rose calls 'justifiability' - the recipient views the non-cash reward as a luxury they couldn't justify buying for themselves, but which, as a result, they particularly value receiving.

Finally, non-cash rewards can be more personal, tailored to the needs and interests of the recipient showing a greater amount of thought on the part of the organisation. And it is this observation which leads us to possibly the most potent, yet the least expensive, reward of all for your employees: the no-cost reward.

Research by McKinsey has found there are three no-cost rewards - praise from immediate managers; leadership attention (such as one-on-one conversations); and a chance to lead projects or task forces. The company says these are more effective drivers of engagement and retention than the three highest rated cash-based rewards (cash bonuses, increased base pay and stock options).

And, as well as being no-cost, the 'reward' of heading a project also creates significant opportunities for a business to identify future leaders, develop their capabilities and make them feel as if they are playing an active part in shaping the organisation's future.

In short, at a time when organisations need both to engage staff and manage their costs, HR can learn valuable lessons by reflecting on what makes rewards truly rewarding for individuals, and resolve to work even harder to gain deeper insights into what motivates their people.

Or, looked at another way, when your mum told you as a child that "it's the thought that counts" at Christmas, she was actually preparing you for life as a 21st century HR practitioner.