Are Tangible or Experiential Rewards Better for Employee Engagement?

What would you prefer as an employee reward: a day off, or a gift card to your favorite store?

We ask questions similar to this a lot around here, usually to illustrate the value of monetary vs. non-monetary rewards. How each capitalizes on different types of motivation, how they can be personalized, and how often to deploy them.

Today, we’re diving into something a bit different. Take away the idea of money and focus solely on the length and intensity of its appeal. Can experiences outrank tangible goods in bumping up employee engagement?

Tangible vs. experiential rewards

Tangible goods are all of the cool employee appreciation gifts we buy to express gratitude or celebrate milestones. Company swag, gift cards, and even the latest addition to their potted succulent collection.

Experiential gifts cannot be held, but are definitely felt. Event tickets, job flexibility and perks, or a day spent volunteering. The emotional payoff, sentiment, and memories are said to be more impactful here.

Even with a huge variety of options in both categories, many HR and People Ops leaders struggle with choosing the “right” reward for the individual and occasion. Balancing impact and budget is the most pressing concern.

However, research reveals even more food for thought. We’ll get to that in a moment. First, let’s get an overview of the gifts many employee rewards programs offer.

Tangible rewards: Examples, pros, and pitfalls

Common examples of tangible appreciation gifts include, but aren’t limited to:

• Gift cards
• Custom or company swag
• Self-care products
• Care packages and snacks
• Office supplies and accessories
• Tech accessories and gadgets
• Extra tacos
• Coffee subscriptions

Experiential rewards: Examples, pros, and pitfalls

Creating core memories at work with experiential rewards often happens through:

• Team lunches and outings
• Days off
• Classes (cooking, fitness, etc.)
• Travel perks
• Mentorship
• Creative workshops
• Wellness retreats
• Team volunteering
• Taco-for-charity redemptions

Are experiential or tangible rewards better? What the research says

Material rewards satisfy short-term gratification and are easier to distribute. They also feel transactional at times. You give; they receive. There’s a period of curiosity, delight, or gratitude. For the most part, everyone moves on quickly.

Research shows that experiences have a more enduring impact on feelings of happiness and satisfaction. The recipient experiences higher levels of what’s known as retrospective enjoyment. They’re reliving and remembering the reward for much longer periods than the material alternative.

Those findings are part of a 20-year study conducted by researchers at Cornell University. Interestingly, experiential rewards also come with a greater sense of anticipation and excitement.

The benefits can start as soon as you present an experiential reward to an employee. The experience itself may be weeks away, but just knowing it’s coming might boost their happiness and engagement.

It sounds simple enough. Experiences are more satisfying, supplying endless streams of anticipatory delight and retrospective enjoyment. So we should choose them whenever we can, right? Not necessarily.

Researchers from The Ohio State University point out that this generalization assumes good outcomes. Their research reminds us that experiential prizes don’t always feel as positive as we want them to.

For instance, an employee is rewarded with concert tickets. The weather is disastrous, and the band doesn’t go on. They still derive a long-lasting, high-impact feeling from the experience, but now it’s negative. Their anticipation was wasted, too.

That’s a stark example, but the bottom line is that employers can’t totally control the psychological outcome of an experience. In some cases, you might have preferred to give them the “weaker,” shorter-term satisfaction of a material gift framed meaningfully.

Employee reward ideas and examples: What real-life companies are doing

Forthcoming research analyzes the results of reward-giving across 5,000+ teams using HeyTaco. It finds that meaningful rewards work best–whether they’re tangible, experiential, collaborative, or completely free.

Teams that enabled rewards weren’t just 481% more likely to stick with their peer recognition programs. They also boasted higher engagement rates and longer retention, sustaining a culture of recognition over time.

What do these rewards look like? Here are some strategies from HeyTaco users:

• Energy intensity platform Ndustrial’s reward system offers a $25 gift card for every 25 tacos earned. But these tacos are imbued with meaning, as they are symbols of recognition tied to the company’s core values.
• Fitness company Crossrope does the same. But their rewards menu is chock-full of experiential events and celebrations, with options to redeem tacos for tangible swag and gift cards as employees see fit.
• Cloud consulting firm BSC Analytics has mastered experiential rewards in a remote environment. Charitable giving is a cornerstone of their program, as well as an annual company retreat they call TacoCon.

Tangible, experiential, or both? An employee reward system that works

Conventional wisdom tells us that doling out material objects isn’t the most meaningful way to build bonds and fortify engagement.

Academic research confirms that experiences are far more resonant, but more complex to pull off.

Real-life examples show that companies find their own way. Rewards like appreciation gifts and milestone celebrations are built into programs that support their culture, people, budget, and aims.

1. Culture

Are you performance-driven or people-first? Depending on company values, tangibles can motivate everyday performance. Certain experiential rewards can promote the work-life balance or professional growth that employees want.

2. Team makeup

It’s easier to reward remote employees with gift cards. But sprinkling in experiences can make them feel more connected to others, especially if they’re part of a hybrid team that features real-life rapport and connections. It’s more straightforward to tailor rewards to the needs of in-person teams.

3. Budget

To be perceived as reliable and equitable, rewards must be sustainable. Before choosing which to stick with, collect a diverse list of tangible and experiential rewards.

4. Goals

Experiential rewards help create stronger, bonded teams. Tangibles are great for regular recognition and a little extra motivation. Both can serve engagement, morale, and retention well.

Our recommendation: Start with a hybrid approach

Small material gifts are a great foundation for consistent recognition and appreciation. Think coffee shop gift cards, app subscriptions, or a reusable water bottle.

From there, test experiential rewards for milestones like work anniversaries and team achievements. Volunteer days, game nights, spa days, and more.