Theterm motivation is derived from the Latin word ‘movere’ which means to move(Baron, Henley, McGibbon and McCarthy, 2012). Certo (2016) describes motivationas giving people incentives that cause them to act in desired ways. Motivationhas also been described as the process of arousing and sustaining goal – directedbehaviour (Nelson, 2013).
It is commonly agreed that there are two types ofmotivation, namely extrinsic and intrinsic. Intrinsic motivation is that behaviourwhich an individual produce because of the pleasant experiences associated withthe behaviour itself (Mosley, Pietri and Mosley Jnr, 2012) Mosley, Pietri andMosley Jnr. (2012) describe extrinsic motivation as the behaviour performed,not for its own sake, but for the consequences associated with it. Examplesinclude salary, benefits and working conditions. Extrinsic rewards come fromthe organization as money, perquisites or promotions from supervisors and co -workers as recognition (Beer and Walton, 2014).
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Employees are motivated by acombination of both factors at any given point in time (Riggio, 2013). Motivating employees isa challenge and keeping employees motivated an even greater challenge (Levy,2013). Today, organizations are under intense pressure to identify andimplement programs that will prove effective in improving employee productivity(Deci, 2013). It is no longer enough to increase salaries and expect increasedperformance; it is more complex than that (George and Jones, 2013). Employeemotivation affects productivity and a poorly motivated labour force will becostly to the organization in terms of lower productivity and performance,excessive staff turnover, increased expenses, frequent absenteeism and anegative effect on the morale of colleagues (Jobber and Lee, 2014).
It is a well-knownfact that the success of an organization largely depends on the quality of itshuman resource, irrespective of the industry within which it operates (Deci,2013). It is with this in mind that leaders and managers must strive to ensurethat their workforce is motivated and therefore productive. Motivation is seenas one of the most important factors in issues related to human resourcesmanagement (HRM) and organizational behaviour management (Nelson, 2013). Introduction:Motivationis essential in workforce in order to achieve results. Incentives are basicconceptual components of motivation, improving employee encouragement foremployee productivity and job success (Sajuyigbe, Olaoye, & Adeyemi, 2013).These incentives can either be monetary and non-monetary. Although, it isviewed that monetary incentive is to encourage employees to excel in theirjobs, non-monetary rewards can also encourage employee productivity and thusperformance.
Here, we are investigating the effects of both monetary and non-monetaryincentives on employee performance and motivation. There is a strongbacking for money as a motivating factor. However, there are researchers whocompletely disagree with money being the only key motivator stating that moneydoes not significantly affect employee’s motivation. Non-monetary rewards ifused correctly are equally as important. Furthermore, there are researcherswhose findings show the significance of management style and the dialect usedby senior managers, directors and executives in the organisation in increasingtheir employee’s performance. These researchers suggest that job design andrecognition are important tools in motivating employees. Non-monetaryincentives provide a strong sense of security and stability of employment forthe workers or employees.
Non- monetary incentives are rewards other thanmoney, for instance recognition, training and development for employee’slearning needs, and flexibility of working hours. When employees come to knowthat their positions (or job) are secure and stable, they work hard to get morerecognition and respect. In this way, they are motivated and inspired entirelyby their inner self.
The organizational performance can be raised to thehighest level by offering non-monetary rewards to the workers/employees (Heymanand Ariely, 2004). So, workers who are intrinsically motivated naturally enjoytheir work or job. This research will mainly discuss the factors that boost employee’smotivation and performance and will describe which factors are essential toachieve it by making a contrast between the monetary and non-monetary factorsand proving which is more effective.AIM:Theaim of this research is to test the significant relationship between employee’sperformance and the incentives that are provided to him may they monetary ornon-monetary and to find out which kind of incentives tend to bring outmotivation leading to a better performance rate.
OBJECTIVES:Theobjective of carrying out this research is to learn whether an employee’s performanceincreases by monetary or non-monetary incentives.Theobjective is also to learn about the factor which is more effective inincreasing employee’s motivation and productivity. LITERATURE REVIEWBergerand Berger (2015) suggest that monetary rewards are the most preferred forms ofencouragement for employees. Also suggested that monetary incentives improveperformance, can increase productivity (Lemieux, MacLeod, and Parent, 2009) based on a goodperformance measure can increase qualitative productivity. Muralidharan andSundararaman (2009) claimed that the incentive payment is directly related tothe employees’ output, which accelerates their performances. Lawler (1985)claimed that rewards leads to increased employees’ satisfaction and will have adirect impact on employee’s performance.
Hong (1995) proposed that rewardsmight motivate employees only when they yield rewards due to their sincere andhard work. Lazear (1986) also positively suggests that by adding financialrewards to the compensation of employee for the sake of motivation can attractmore geared workers to the organization. By other point of view, Lazear (2000)also described that introduction of monetary rewards could gain extra effortsof the employee to that extent where the marginal value added is equal to themarginal cost paid for that additional work. This shows that financialincentives are some types of paid value to employees in return for their extraefforts. Lazear (2000) showed a positive relation between employee engagementand rewards and firm performance. Intrinsic rewards have gained significantimportance in recent years (Thomas, 2009). They mention managerial support andtheir contribution to raise the level of intrinsic motivation in employees bycontributing in intrinsic rewards, as building blocks. They state that,intrinsic rewards are based on the positive feelings that employees get fromtheir work engagement.
According to Thomas (2009), these intrinsic rewardsreinforce the self- management efforts and motivate employees to be engagedwith work. An Implementation of intrinsic reward creates positive feelings andexperiences among employees and management. In the last decades, manyorganizations have turned their focus on skill-based pay plans. By which thecompensation of employees is based on employee’s new skills and knowledge andmystery talent rather than for holding same position in organization. Byimplementation of skill-based plans, employees work more effectively and focuson their new skills and it creates the innovation performance system. Thissystem of skill- based pay focuses on continuous learning and creates culture, whereemployee’s hidden skills are highlighted (London and Smither, 1999). However,this system of skill-based pay plans is still based on financial compensationand economic exchange between the employee and employer. According to Osterlohand Frey, (2000), creative workers have two main reasons for beingintrinsically motivated.
And these reasons must be addressed by organizationsfor better performance. First reason, intrinsic motivation is needed forcreating and exchanging the knowledge and ideas. They found that, motivatedemployees are inherently interested towards engagement with their work. Also,these employees will share more information with colleagues, and by this fact,they generate or create more knowledge throughout the organization.
Second,intrinsic motivation is to enhance the time, which is owed to job-related tasksand to improve the productivity level of individuals in the organization. Bygiving this knowledge, employees have relative carefulness about the time forthese productive activities, their willingness to devote the time for theseproductive activities, is crucial for the success of organizations. Yahya andGoh (2002) state that incentives based on groups or teams could raise theknowledge creation, transfer of knowledge and knowledge acquisition.
Strumpel(1975), states that, the employees with stable positions in the organization,prefer the non-material aspects of the job. Mathios (1988) urges that non-monetary rewards are preferred by highly educated people. Shives and Scott(2003) suggested the gain sharing approach to discuss the impact of rewards onemployee motivation and engagement towards the organization. Through gainsharing approach, organizational effectiveness can be enhanced to great levels.Through gain sharing approach financial bonuses can enhance the productivity ofemployees and employees should be rewarded with financial incentives for extraefforts. This approach mainly focuses to decrease the costs for a portion ofthat reduction should be converted into bonuses to employees to motivate them.
On the other hand, profit sharing is different from daily basis productivitygain. Profit sharing bonuses are annually paid bonuses and most of theemployees often believe, managers will forget their promises and would not paythese bonuses (Burton Kelli, 2012). According to Van Zyl(2000) despite having lots of evidence of the motivational impact of intrinsicrewards on employee job performance, many managers still count money as themain motivational tool for employees and focus on money. Furthermore, VanZyl(2000), concluded that a bonus or 13th check is a great consideration among employeesand even it could remain as a great motivation for employees to be engaged withtheir jobs and remain with the firm. He argued that money is always a greatmotivational tool from the start of the job in any field. Al-Wathnani (1998)also discussed the incentive’s role on the efficiency of employees.
Al-Wathnani(1998) checked the impact of incentives on the job satisfaction of employees inthe security organization. Incentives are positively related to employee workengagement and job satisfaction, but the most important and valued incentivesare participation in decision making, financial allowances, promotions, leavesand allowances for medical treatment. Less demanded incentives and lessmotivational incentives are verbal appraisals, letter of thanks and financialallowances for work at distant and isolated areas. Jeffery (2002), in hisstudy, investigated non-monetary incentives and their ability to control thevarious psychological needs and that’s why non-monetary incentives have adeeper and long-term effect than monetary incentives on motivation. The studyexplained that non-monetary incentives are highly visible and have greatervalue as a trophy. Non-monetary incentives bring a higher utility level.
Jaffery (2002) also calculated the trophy value index of non-monetaryincentives to check argument. In his study, results showed that employeesenjoyed the gifts, pride, respect and recognition for long term period.Employees enjoy telling their family and friends about their respect and gifts.Results showed a significantly higher trophy value of non-monetary gift. Byanalyzing the motivational strategies, Jeffery (2002), states that cashincentives don’t match the level of satisfaction which is gained bynon-monetary incentives (Trophy value). By explaining in detail in his work, hedescribes that cash incentives’ benefit is short-term; while the non-monetaryincentives have long-term benefits. In his study, monetary rewards arementioned as compensation, while non-monetary rewards represent the respect andrecognition.
Kube et al. (2008) credited more output in non-monetary gift ascompared to monetary gifts. Non-monetary gifts contribute a great deal toemployee satisfaction and this satisfaction shows long-term results. Kube etal. (2008) also carries the social exchange phenomenon. In his study, resultsshow the higher impact of non- monetary incentives on social exchange theorycompared to monetary rewards. In another study Kube et al.
(2006) describe thatmonetary rewards are beneficial in short-term period and ineffective forlong-term period. He also states that non-monetary rewards have a significantand consistent effect on their satisfaction. Due to the increasing importanceof incentives in every field, Steen (1997) conducted the study in IT field; heobserved that the IT professionals are keen to gain the non-monetary incentivesas compared to higher level positions within firms or the increment in pay.They prefer the non-monetary incentives and which also include the flexibilityin working hours and take-home work.
Schaufeli et al. (2002) regarding employeeengagement described in detail the three dimensions of work engagement in hisstudy. Vigors described as the energetic behaviour of the employee and alsodevoted hard work to one’s work and job, even in any of problematic situations.And the second dimension of Schaufeli (2002) was dedication. Dedicationexhibits the employee experience about work, his pride about his work, andmeaningfulness of his work. According to this study, the contents of dedicationare much inspiring.
The third and last dimension of work engagement isabsorption. Absorption is, how employees get immersed in their work and alsofrom which factors employees are engaged in work and get pleasure andsatisfaction about the job. Absorption also showed that employee mustconcentrate on his work and must be awarded with rewards for their work donefor the betterment of the organization. Six areas of the work environment willlead to either the burnout or engagement to work. For example, control,workload, social support, community, perceived fairness and values, and thelast one is rewarded and recognitions.
They argued that those six factors arethe base of employee attitude or behaviour towards their work. By manipulatingthese factors in well-organized manner, the management could raise the level ofemployee engagement and control high turnover. Saks (2006) conducted a study toexamine the employee engagement role in service sector employees in eightdifferent European countries. They focused on four economic sectors, retailtrade, finance & banking, telecoms, and public hospitals. They observedcountry wise differences in the matter of employee engagement. The engagementof employees is based on job demands and job resources, for example jobautonomy and social support. Social support includes different types ofmotivational factors like job enrichments, job empowerment and monetary andnon-monetary rewards.
They also proposed that engagement of employees towardsorganization can be achieved by implementing and creating a socially supportiveenvironment. Whereas the job demand negatively relates to the work engagement.They represent the work engagement as the outcome of job demand and jobresources.
Advocating the engagement issues, Frank et al. (2004) showed astrong link between the employee engagement and the organizational performance.He mentioned employee engagement as a human resource practice which has astrong impact by engaging workers on the organizational productivity. Frank etal. (2004) demonstrated the positive relation between the engagement ofemployees and the satisfaction of employees.
In the results of his study, Franket al. (2004) explains that engaged employees are also very effective for thefinancial performance of the organization. HYPOTHESIS FRAMEWORKH1- It is hypothesised that monetary incentives increase employee productivity.H2– It is hypothesised that non-monetary incentive increase employeeproductivity. Research Methodology:This research isconducted to investigate the effects of monetary and non-monetary rewards on employees’performance and motivation to be more productive. A method which deals with statisticalanalysis & determining the relation between variables is defined as quantitativestudy (Larsson, 1993).
This researchwould be based on quantitative approaches and survey technique would be usedfor collection of responses.A well-designed questionnaire would be used to acquire responses. Thesample size would be of 100-150 people. The main people being targeted would bethe working class as they could clearly state on what motivates them more andhelps in increasing their productivity.Data: Cooperand Schindler (2011) state that data collection methods refer to the process ofgathering data after the researcher has identified the types of informationneeded which is; the investigative questions the re searcher must answer, andhas also identified the desired data type (nominal, ordinal, interval or ratio)for each of these questions and also ascertained the characteristics of thesample unit that is, whether a participant can articulate his or her ideas ,thoughts and experiences.
As the research is being carried out for the purposeof learning the effects of monetary and non-monetary on employee’s performance andmotivation and finding the exact information, the data attained can becategorized as primary data. Data interpretation:Validity:Reliability:Generalisability: Timescale:Theestimated time to carry out this research can vary from a period of 2-3 months.Mainly the time will be required to design a questionnaire and being able toreach out the targeted sample while making them aware of the reasons why theresearch is being carried out. Furthermore, it is expected that sometime willbe required to gain responses from the samples.
Moreover, the maximum amount oftime will be invested in analysing evaluating and concluding the final resultsthat will be acquired through the responses. Finally bringing everythingtogether in the form of a report would also require some decent amount of time. Budgetary Issues and source of funding: The budget would not bemuch of an issue with this research as the main research cost would be of the internetfollowed by few books and journals. Internet is easily accessible nowadays as it’sa part of our daily lives and the university is also proving this facility atthe same time so it’s not much of a problem. Furthermore, other importantmaterial needed for the research like journals and articles can be acquired bythe library as it has a wide range of books and journals one can benefit from. Furthermore,the university also provides students with laptop facilities in order to avoidany hindrance to work. Lastly the most important facility that is important tothis research is software like SPSS in order analyse the data statistically acquiredby the responses and that is also not a problem as Royal Holloway Universityprovides students the access of such software’s.