What Are Intangible Benefits?

Just because a benefit is intangible, doesn't mean it isn't real. Tangible benefits from a project are easily quantifiable, such as a 30 percent increase in sales revenue. The intangible benefits definition is that they're gains you can't measure so easily. A project that boosts employee loyalty or customer satisfaction provides a benefit, but it may be difficult to measure the exact financial gain.

Who Benefits from Intangible Benefits?

Potentially anyone can be a winner with intangible benefits. Intangible benefits examples include benefits for employees, for customers and for the company itself. Consider, for instance, the intangible benefits of information systems and IT:

  • Customers benefit if a new IT project improves the user experience. That could be because the upgrade makes software or hardware easier to use, significantly faster or more secure against hacking.
  • Increased customer satisfaction and brand loyalty benefit the business.
  • A company that practices good IT security benefits both customers and the company by lowering the risk of a data breach.
  • Speeding up or automating IT operations may reduce employees' workloads.

Suppose, for example, a new project automates patching to fix security holes in the system. Automating the work reduces the demands on employees. It reduces the risk of a security vulnerability going unnoticed. Customers don't have to worry as much about some hacker getting hold of their key data.

Intangible Employee Benefits

From an employee perspective, the intangible benefits are those that reduce the drudgery of work and heighten the pleasure. Unlike paid time off or a health savings account, intangible employee benefits may be more about company culture than a clause in the employment contract. Some employee intangible benefit examples:

  • Autonomy means avoiding micromanagement and trusting employees to do their job, which frees employees up to be more productive and more creative. Creating autonomy may involve allowing workers to telecommute or tinkering with work conditions at the office.
  • Employee recognition programs show staff that the company has noticed their good performance and appreciates it.
  • Healthy work culture, such as wellness classes or an on-site fitness center allows employees to keep their physical and mental health up.
  • Opportunities to advance give employees the hope they've found a career, not just a job.
  • Work-life balance, where employees are able to get away from the office and enjoy their personal lives. 

Some intangible benefits may be as valuable as monetary gains when recruiting employees.

Quantifying Intangible Benefits

A company can quantify exactly how much money it's paying employees. It's a lot harder to measure intangibles; for example, how do you quantify autonomy or work-life balance? When setting goals or planning new initiatives, it's tempting to ignore intangible benefits for that reason, or attempt to convert them into dollars and cents to prove they have value.

Adding a dollar sign may make stakeholders more willing to take intangible benefits seriously. It doesn't always work though. You can use four tests to decide whether quantifying the benefits is practical:

  • Is there an acceptable formula for measuring the monetary worth of the benefit? If so, you can quantify it. For example, if you know what it costs the company to hire and train new workers, you can probably measure the value of retaining employees.
  • If there's no formula, is there a method for converting the benefit into something that is measurable? 
  • If there's a method, is it simple enough to be practical or will it take too many resources?
  • Can you describe the method to the stakeholders simply enough that they'll grasp it and buy in? If not, there's probably no point. 

Intangible Benefits in Capital Budgeting

One time it might be worth the effort to quantify intangible benefits is when you're making out your budget. New projects and initiatives cost money; measuring the intangible benefits can help decide if the money is worth spending.

First, calculate the costs and value of the project without considering intangible benefits. Next, make a conservative calculation of what the intangible benefits are worth and incorporate that. Buying new equipment to make a higher quality product may be justifiable when you factor in greater employee satisfaction, for instance.

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About the Author

Fraser Sherman has written about every aspect of business: how to start one, how to keep one in the black, the best business structure, the details of financial statements. He's also run a couple of small businesses of his own. He lives in Durham NC with his awesome wife and two wonderful dogs. His website is frasersherman.com