Essay: Pros And Cons Of Financial Rewards In Motivating Employees.

Money and other financial rewards are a fundamental part of the employment relationship and can be used effectively in motivating employees. Discuss pros and cons of this argument.

The Importance of Motivating Employees

The competitive work environment has made many firms take a stand to strengthen their operational effectiveness by deploying technological resources and strategic initiatives based on motivation and quality of workforces. Motivation is a complex, challenging and interesting area in the study of organisational behaviour concept that is seen changing in terms of functions, nature, understanding and purpose along with its application in an organisational setting (Dobre, 2013). It can however be agreed that managers need to employ people and when they do not show effectiveness in work, it becomes significant to motivate them for performing their duty precisely.

According to Kaifi & Noori (2011), Motivation is a driving force that leads people urge more for work, perform and act without manipulation or pressure. It can also be agreed that ultimate responsibility of managers is to motivate employees. Eshun & Duah (2011) however argues “while rewards may serve as incentives and those who bestow rewards may seek to use them as motivators; the real motivation to act comes from within the individual”. This statement can be agreed because managers can influence workers with combination of incentives and rewards for performing well but cannot force them to do so. Thus, the centre of motivational factor lies on individuals to choose whether to perform or not. To this reasoning, it is essential that both employees and managers act critically in the process of motivation so that financial and other rewards acts positively in employment relationship and employee motivation (Osabiya, 2015).

Organisations can utilize monetary rewards to support motivational factor in its human resource strategy. Tangible rewards, also known as non-monetary rewards are provided and controlled by organisations that do not inevitably benefits employees financially. Contemporary organisation’s people require much more than financial reward for their effort and seek something extra than money for their efforts ( Harunavamwe & Kanengoni, 2013). On the other hand, non-financial rewards are equally used by organisations to motivate employees and increase work performance metrics. Rewards can further be classified into two categories; intrinsic and extrinsic rewards that are also called non-financial rewards and financial rewards. Extrinsic rewards are further classified into cash related rewards and formal recognition, pay and promotion. Intrinsic rewards on the other hand are those rewards that does not involves cash like accomplishments, growth, job-satisfaction and recognition ( Ibrar & Khan, 2015). Balancing between employee’s assurance and motivation for organisational success is critical and rewards play as a significant tool for organisations ( Shahzadi , et al., 2014).

According to Ibrar & Khan (2015), pros is that rewards consist of those benefits that are received by employees in exchange of work performed by them. In many organisations rewards play many roles in creating sustainable development and motivation among employees to perform in effective manner that also leads to job satisfaction. Job satisfaction is achieved when employees achieve desired results from their performance ( Kaifi & Noori , 2011). Employees want to receive reasonable salary since money is recognised as most significant incentive while speaking about influential values. Financial rewards have those capacities that can maintain employment relationship and motivate towards enhanced performance while employees use money to satisfy their domestic needs ( Markos & Sridevi , 2010). Pay has crucial impact in establishing employment relationship and commitment being prime motivator for employees. Nevertheless, there are other factors also as mentioned above in the essay that improves performances critically. Majority of companies use pay, bonus and promotions to motivate employees while leaders looks after getting things done in right order.

Types of Rewards: Monetary and Non-Monetary

In literature there are many theories and models that explains about motivational factors among employees. Abraham Maslow’s believed that people get motivated to fulfil their domestic needs. According to his Hierarchy of needs triangle design, person starts from bottom line of triangle while working more to reach the next level. If one is not ale to attain first level, the goal of reaching the next until top becomes less possible (Eshun & Duah, 2011). In his triangle, first level is to achieve physiological needs that are also basic human needs like food, shelter, clothing, etc. Next comes self-actualisation that means person is not threatened by society. Here security can also be interpreted as financial security that can be achieved by obtaining retirement packages including insurance. Third in the row comes affiliations which means the person is treated as a team member and is accepted by surrounding. Fourth level is self-esteem or self-respect for one self that can also be termed as giving value to feeling and respect from the others. Self-actualization is the last stage in the hierarchy of needs model which is attained only after realising all the above stages. Although Maslow’s theory helps organisation understand about basic needs and how to improve employee motivation, it fails to consider individual and cultural differences between employee within organisation (Nooraie, 2012).

It can be noted that Maslow gave utmost importance to financial incentives and money in his model. Herzberg’s Two-Factor theory is also similar to Maslow’s theory as far as motivation is concerned. He believed that employees mental health is more important for performing work properly and job satisfaction cannot be received through financial rewards. However, his theory also had drawback since this theory can change individual’s perception during lifetime and according to changing needs. For example, a young employee will rely more on security and hygiene factor as compared to older employees who are more depended upon their job (Vandenburg & LAance, 2011). On the other hand, Incentive Theory establishes financial reward system that reinforces motivation and employment relationships to inspire improved organisational behaviour. This theory focuses more on organisational success and environment which enhances work performance by financial rewards. However, this theory also lacks few elements and is heavily reliant on financial rewards ( Bonner & Sprinkle, 2002).

Speaking about financial motivators, employers spends lot of money for rewards. Financial rewards greatest con is that they act as a short-term motivator and are forgotten with time. Financial models may not take much time to be implemented by firms but they do not have lasting impact on employees. Most common financial incentive are in the form of extra payment or cash bonus on the top of salary that encourages and motivates employee to work more. These even benefit employers while fulfilling organisational goals and objectives. Other than pay raise and bonus, commission is also used by many firms to ensure that the sales are completed in expected ratio (Ghanta, 2014).

Financial rewards mean to retain and recruit valuable staff, however, Harunavamva & Kanengoni (2013) argued that job satisfaction and better job performance cannot be recognised solely with monetary rewards and financial initiatives. Furthermore, the authors added about employee’s behaviour. Financial rewards, although motivates employees, but they tend to lose interest in knowing about how they have to get rewards. Here, the authors gave stress upon organisations ethical stance as more employees cry for money, they even use their power and position unethically to achieve desired reward. Therefore, theorists pinpoint the value of challenges in jobs, cohesive work and feedback from team members other than non-financial rewards to stimulate motivation and employment relationship without harnessing unethical stances.  

Motivational Theories: Maslow's Hierarchy of Needs, Herzberg's Two-Factor Theory, Incentive Theory

Many researchers acknowledge that money is not the sole factor for which employees are concerned about, noting that at certain point if time a raise in salary always makes employees happier, but it does not promote healthy competition and motivation to perform effectively. Others believe that employers who implements less-value raises can discourage employees as they may feel discontented even after they worked hard for the firm. Thus, there is a mixed sense of feeling among scholars about whether there is a positive or a negative impact on employee’s motivational factors ( Carpenter, et al., 2012).

According to Ghanta (2014), there are many rewards that are focussed upon by employees other than financial incentives like opportunity to take part in projects as team leader and getting recognised position in the company. These rewards also add motivation among employees along with increasing task performance and organisations turnover. Trust, job security, company’s policies and opportunities also enhance employee performances and organisational behaviour. Managers do not only recognise employees but employees even recognise them. It has been proved that one cannot motivate the other directly but can provide with tools that can be adopted to get motivated. However, money and financial incentives remains the primary objective of employees behind joining any firm as it satisfies basic societal and human needs (Ritson, 2011).

Motivation is a complex theme that can help or hamper organisations, depending on the manner it is utilised in a business setting. There are many authors who have tried to understand employee motivational factors, but all of them have different concept and theory does not define all people of organisations. On concluding note it can be said that rewards play an important role in organisations that determines organisational behaviour and job performance through motivation and employment relationship. There are other factors also that motivates employees, but the primary focus remains on financial incentives.  Rewards can portray the nature of organisation and its culture along with the style it motivates employees for job performance. Although there are few drawbacks of financial incentives like observation of unethical stances and discontentment among employees due to unsatisfactory raise, but financial incentives cannot be overseen by organisations completely as they satisfy basic societal needs. Therefore, it can be said that money and other financial rewards are fundamental part of employment relationship that can increase work performance by motivating employees.

References

Bonner, S. E. & Sprinkle, G. . B., 2002. The effects of monetary incentives on effort and task performance: theories, evidence, and a framework for research. Accounting, Organizations and Society, Volume 27, pp. 303-345.

Carpenter, M., Bauer, T. & Erdogan, B., 2012. Management Principles. s.l.:Creative Commons.

Harunavamwe , M. & Kanengoni, . H., 2013. The Impact of Monetary and Non-Monetary Rewards on Motivation among Lower Level Employees in Selected Retail Shops. African Journal of Business Management, 07(38), pp. 3929-3935.

Ibrar, M. & Khan, O., 2015. THE IMPACT OF REWARD ON EMPLOYEE PERFORMANCE. International Letters of Social and Humanistic Sciences, Volume 52, pp. 95-103.

Kaifi , B. A. & Noori , S. A., 2011. Organizational Behavior: A Study on Managers, Employees, and Teams. Journal of Management Policy and Practice, 12(01), pp. 88-97.

Markos , S. & Sridevi , M. S., 2010. Employee Engagement: The Key to Improving Performance. International Journal of Business and Management, 05(12), pp. 89-96.

Shahzadi , I. et al., 2014. Impact of Employee Motivation on Employee Performance. European Journal of Business and Management , 06(23), pp. 159-167.

Dobre, O.-I., 2013. Employee motivation and organizational performance. Review of Applied Socio- Economic Research, 05(01), pp. 53-60.

Eshun, C. & Duah, F. K., 2011. Rewards as a Motivational Tool for Employees. [Online]
Available at: https://www.diva-portal.org/smash/get/diva2:832968/FULLTEXT01.pdf
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Ghanta, V. C., 2014. MOTIVATION IN THE WORKPLACE TO IMPROVE THE EMPLOYEE PERFORMANCE. International Journal of Engineering Technology, Management and Applied Sciences, 02(06), pp. 221-230.

Nooraie, M., 2012. Factors Influencing Strategic Decision-Making Processes. International Journal of Academic Research in Business and Social Sciences, 02(07), pp. 405-429.

Osabiya, B. J., 2015. The effect of employees’ motivation on organizational performance. Journal of Public Administration and Policy Research, 07(04), pp. 62-75.

Ritson, N., 2011. Strategic Management. s.l.:Ventus Publishing.

Vandenburg, R. . J. & Lance, C. E., 2011. A Review and Synthesis of the Measurement Invariance Literature: Suggestions, Practices, and Recommendations for Organizational Research. Organizational Research Method, 03(01), pp. 4-70