Noncash ways to compensate employees.

Here's how to select incentives that help performance and reward employees with things they really want.

Employees who are rewarded for excellent performance are more productive, more satisfied and more willing to go the extra mile. Achieving and maintaining that level of performance is

a constant challenge among HR professionals. Cash is still the most powerful performance motivator, but today's employees want more from their jobs. They want timely information, opportunities to solve problems and participate in decisions, and assurance that they will be recognized and rewarded for their contributions.

"Compensation cannot continue to rely on traditional job-based pay, job-evaluation systems and individual performance criteria," says Dick Dauphinais, founder of Strategic Compensation Partners and a veteran of 20 years with Fortune 200 companies. He is also a strong proponent of alternative compensation strategies. "We need new means of compensation that will support reengineered processes and that will allow more flexibility for management as well as employees."

Although formal research on alternative means of compensation is still relatively scarce, several key efforts have been made to help define and measure the use of nontraditional rewards systems, both cash-based and noncash-based. Each study presents its own goals and parameters and draws on different samples, but together they lay the groundwork for a workplace practice that is quickly becoming a billion-dollar industry.

In sales and distribution circles, behavior-based incentives are old hat, ranging from token gestures to large awards and prizes. The incentives are designed to "keep salespeople pumped up, fighting against the competition," says Jerry McAdams, vice president of performance improvement resources at Maritz Inc. in St. Louis. And the incentives work: Employees receive recognition for a job well done, and the company benefits from highly motivated and productive employees.

According to McAdams, who designs and evaluates corporate rewards systems, there's nothing unique about sales experience that can't translate to nonsales. Granted, he says, salespeople can more easily look their competition in the eye, but nonsales competition is becoming equally evident and increasingly measurable. It's not surprising that nonsales organizations are enthusiastically embracing noncash rewards systems as a way to inspire and rewards excellent performance.