Impact Of Financial Rewards On Employee Motivation - Essay.

Management Theories of Motivation

Discuss about the Organizational Behavior Management and Practice.

The competitiveness among the business organization is increasing day by day and; therefore, the businesses are focusing on increasing their productivity and long-term performance. The employees or the human resource play a critical role in driving the performance of the business and improving organization effectiveness. Therefore, business organizations irrespective of their size try to retain their best employees in the organization. The business organizations also try to build relationships with their employees and motivate them to become more productive in their day to day life. They also develop strategies to increase the performance of the employees because if they are not able to manage their workforce properly they will not be able to achieve organization goals and retain their employees. Today, a large number of business organizations are acknowledging the importance of the human resource and realize that the employee not satisfied or not motivated to with their jobs will break their association with the organization and it will not be able to attain success (Podmoroff, 2016).

In order to motivate the employees, the business organizations implements various financial and non-financial reward strategies.The financial rewards refer to the monetary gains which entice the employees to perform better. Money is fundamental to the employer-employee relationship. In a business organization, the employees work towards the aims of the organization and in its exchange get monetary benefits. Therefore, a business firm can use money to motivate the employees. However, the efficacy of money in motivating the employees to achieve targets more than their regular targets in unidentified.  In this regard, in this essay, the impact of financial rewards in motivating the employees is explored. The thesis statement of the essay is, “whether financial rewards, which are fundamental of employment relationship, can be effectively used in motivating the employees.”

In the twenty first century, the organizations are striving to achieve their targets and increase employee productivity. Several management theories have stated that the employee motivation is a critical factor in the organization development and productivity. Therefore, the organizations are focusing on enhancing the employee productivity by increasing their motivation level. The motivation can be defined as the psychological process which directs the behavior and gives a purpose to an individual. It is the predisposition of a person wherein a person behaves in a specific manner to accomplish the targets and the organization goals (Daft and Marcic, 2010).

Impact of Monetary Remuneration

There are several management theories that centers motivation and state that there is a driving force in each employee which needs to be identified and triggered. The attribution theory of motivation states that the people put large efforts if their efforts will result in enjoyable outcomes. Moreover, if the outcomes of their efforts will result in high esteem then also the individuals will put strong efforts in their work. The cognitive and the self-efficacy theory state that the efforts of the employees are dependent upon their expectations with themselves and self-efficacy. The expectancy theory states that an individual works harder in expectation of some rewards for their efforts. The behavior of the employees can be both positive and negative dependent upon the outcomes of their performance. If the outcomes of the task are not motivating then it is highly unlikely that the individual will perform better. The cognitive theory states that the organization culture plays a critical role in the motivation and engagement of the employees. The individual employees are motivate in the organization is dependent upon the perception of the employees and if they assume that the incentives are worthy of their efforts. The employees will also be positive in the workplace if they presume that the targets are achievable to the (Javid and Chapa, 2014).

The motivational needs of the employees can also be understood by Maslow’s pyramid of hierarchical needs wherein the levels are physiological needs, safety and security needs, social needs, esteem needs and the self-actualization. According to this postulation, the people desire to move to another level once they have achieved the previous level. Accordingly, once the people start earning money to satisfy their basic needs and security needs, they desire social status, reputation and recognition.  Along with it, the employee motivation can be categorized into intrinsic and extrinsic needs. The extrinsic motivation factor are the external factors such as job security, remuneration amount, working conditions, status of the employees and  flexibility and the employee friendly policies. However, these external factors can be categorized as the minimal requirements that keep the client satisfied. It means that if these extrinsic factors such are acceptable then they prevent the employees from getting dissatisfied. If the organization maintains the satisfactory level of these factors, the employees are not motivated to exceed their expected demands or requirements.

However, in contrast to it, there are some factors which are crucial which develop the performance of employees. These are termed as intrinsic motivation factors. These factors include recognition, achievement, responsibility, growth opportunity and responsibility. The relationship between the employee payment and the job satisfaction is also very low and it becomes increasingly irrelevant in uninteresting tasks. In the task, where the employees are not motivated by the work itself, the financial remuneration is negatively correlated with the intrinsic motivation of the employees. Moreover, the employees motivated by the financial factors are less likely to perform better than those employees who are motivated by the work itself. Though money is a kind of motivation and satisfies the basic needs of the employees, it cannot motivate the employees to increase their productivity. A positive working environment can be established by enhancing the job-security and transparency in the work environment (Kulchmanov and Kaliannan, 2014).

The relationship between the employer and the employees is characterized by the financial and the monetary rewards and their exchange. The employees work to achieve the aims and of the organization and in return get monetary rewards. The financial rewards are also correlated with the growth needs and the value of the employee. They are a major motivating factor in the motivation of the employees; however, there are several other factors which are associated with keeping the employee motivated such as the organization culture and the growth prospects of the person in that particular organization.

The impact of the remuneration or the financial rewards is also different as it generates different emotions in different employees. In some culture, the people identify and relate their worth in accordance to their wealth. Generally, the business organizations reward their employees in terms of their seniority and association with the organization, job status, competency and the performance in the organization. The different kind of financial rewards are associated with different returns such as rewards associated with seniority are aimed to reduce the turnover, and the rewards based on the job status are aimed to motivate the employees to compete and become productive. However, the seniority based rewards also reduce the turnover of the employees with lowest productivity. Along with it, the rewards associated with the job status encourage the employees to internally compete which create organization politics (Wilton, 2016).

Nowadays, the organizations are also starting to provide competency based rewards to motivate the employees to increase their performance. It includes increasing workplace flexibility to keeps the employees motivated. However, the competency based rewards increases overall cost of the company as the assessment was totally subjective and the employees spend time in the acquisition of new skills. The financial rewards are crucial in motivating the employees early in their career. In the financial rewards, the money spent directly by the company in motivating the employees is higher than other non-financial rewards. The financial rewards given by the company can be categorized into cash bonus and the salary hikes. The overall salary and the compensation offered to the employees are major factor in keeping the employees motivated. The incentives or the cash bonus is additional payment or cash paid on top of the regular salary to encourage the employees to achieve the company’s goals (Stephens, 2005).

The bonuses are beneficial for the employees as well as the employer as the employees get additional money whereas the employer gets the best performance. The salary hike is done once or twice a year to retain the talented and senior employees within the organization. The percentage of the annual raise is specific to an organization and is dependent upon the performance, sales and loyalty of the employees. Usually, the raises are a percentage of the annual income and also associated with the promotion of the employees. Another monetary reward is commission which is directly associated with the performance of the employees. The commission is usually given to the people in sales and amounts to the amount of sales completed. The commission assists the employees to makes as much sales as possible to increase their commission. The employees get out of their way to increase the sales and so to increase their income. The companies also recruit the employees with high benefits package. The benefits package of the organization wherein the direct compensation to the employees is low; however, the benefit package is higher makes the organization more appealing to the potential candidates. There are other types of financial rewards also such as profit sharing and piece work motivation (Latif and Saddiqui, 2014).

In the recent years, the organizations are also shifting towards providing team-based awards and commissions according to the performance and the rank of the employees. Although these group based rewards are weakly linked with the motivation level of the employees, they impart a sense of ownership to the employees. These organization rewards include stock options and organization’s share (Tech-Hong and Waheed, 2011).

However, the monetary rewards are only successful in motivating the employees at a lower level. In senior positions, the employees are more concerned about position and prestige. The correlation between compensation, motivation and performance is complex. There is no specific relation between monetary compensation and performance at work at higher level. Even with the abundant resources, it difficult for the organizations in deciding the ideal salary to motivate the employees to perform better (Mills et al., 2006).

Although money is a significant motivational factor in employee performance, it is sufficient in itself. The motivational value of money can be determined as its ability to make the job enjoyable and engage and satisfy the employees. The correlation between remuneration and the employee satisfaction is weak. Other factors such as organization culture and flexibility are crucial in increasing the employee satisfaction. Moreover, the employees who are motivated intrinsically have tendency to perform better which are extrinsically motivated. It means that the employees who enjoy work and are motivated by it performs better than the employees who are engaged by the money involved in it (Tech-Hong and Waheed, 2011).

In regard to the high performing employees, the companies assume that since these employees are high performing, they are internally driven and do not require external motivation. The high performing employees perform their best as they receive market level compensation. However, money or the financial remuneration singularly cannot motivate employees. The expectation of receiving money in near future is highly motivational; however, the motivation diminishes, once the employee receives the money (Armstrong, 2007).

Therefore, it can be posited that although money is important, the employees need more motivating factors. At the senior stages of career, the employees want to be recognized and acknowledged for their contribution to the organization. The employees want their organization to state that they have contributed to the success of the organization (Griffin, and Moorhead, 2013).

The business enterprises can also not use money to change the behaviour and outlook towards. Although money is an essential motivating factor, and it motivates the every employee to some extent, it directs the work of the employee rather than motivating them. The impact of compensation in motivating the employees is also dependent upon the compensation design and the incentives structure. The failure in the compensation design can be due to the failure of linking the business objectives with the performance measures, providing performance feedback to the employees and design variance in incentives from the base salary which is motivating to the employees (Armstrong, 2002). The incentives system of the organization should be effectively designed so that the employees are willing to work harder and achieve targets. It means that the targets designed by the company should be achievable as well as the incentives should be lucrative enough to motivate the employees (Yousaf et al., 2014).

As discussed above, the fundamental to the employee-employer relationship is money; it means that the employees work to obtain their remuneration. However, it is important that the organization do not underestimate the power of money in motivating the employees. Money is crucial in attracting talent and recruiting employees. However, once the employee is hired or within the organization it is important to provide the employees with other factors to keep motivating them. It can be argued that the flexibility in the workplace is other factor which motivates the employees to work harder according to their comfort. The employees expect they will be paid fairly according to their efforts; however, over-paying the employees provided little motivation to work harder (Kaufmann, Schulze and Veit, 2011). Therefore, along with money the companies should focus on other factors that encourage the employees to work harder. Moreover, money does not become a motivating factor after the employees have obtained the basic amenities in life. The employees are also motivated by money when they presume that their compensation is directly correlated to the performance of the employees. Therefore, it is important to introduce flexibility and positive organization culture to motivate the employees to achieve the organization goals. The driving force of each individual is also different. Money works for most of the individuals; however, the motivational factors for each employee are different. Some employee strive for money whereas, some employees strive for recognition and appreciation (Taylor and Taylor, 2011).

Conclusion

It can be concluded that the employee motivation is significant aspect in increasing the productivity of an organization. Many companies realize that employees are crucial resource of an organization to achieve their targets. Employee motivation is crucial in driving the employees to achieve their targets. In this regard, the business organizations implement several strategies to motivate the employees to achieve their targets. The companies implement both financial and non-financial reward system to encourage their employees to achieve more than their targets. The financial targets of an organization include incentive system, annual hikes and the cash bonuses. Although cash is an essential component of the employee motivation, it does not always yield desired results. It is due to the fact that different people get motivated by different driving force. At the senior positions, the impact of money in increasing the performance of the employees gets reduced and the people get motivated by recognition and the social value. Therefore, it is important to introduce social value components such as recognition, and appraisal to enhance the performance of the employees. Moreover, the organization culture and the employee flexibility are also essential in the motivation of the employees. It has been identified in the essay that the people motivated by the work are more likely to deliver results than the employees who are motivated by the money. The thesis statement of the essay can be restated as, “Although financial rewards are essential to employee motivation, they cannot be implemented singularly in motivating the employees.”

References

Armstrong, M. (2002). Employee Reward. CIPD Publishing.

Armstrong, M. (2007). A Handbook of Employee Reward Management and Practice. Kogan Page Publishers.

Daft, R.L. and Marcic, D. (2010). Understanding Management. Boston: Cengage Learning.

Griffin, R.W. and Moorhead, G. (2013). Organizational Behavior: Managing People and Organizations. Boston: Cengage Learning.

Javid, S. and Chapa, A. (2014). When Money is not a Motivating Force in the Work Place. Global Journal of HUMAN-SOCIAL SCIENCE: Arts & Humanities – Psychology 14(3).

Kaufmann, N., Schulze, T. and Veit, D. (2011). More than fun and money. Worker Motivation in Crowdsourcing – A Study on Mechanical Turk. Proceedings of the Seventeenth Americas Conference on Information Systems, Detroit, Michigan August 4^th  -7^th  2011.

Kulchmanov, A. and Kaiannan, M. (2014). Does Money Motivate Employees? Empirical Study of Private and Public Financial Sector in Kazakhstan. International Journal of Business and Management 9(11), 214-124.

Mills, A.J., Bratton, J. and Mills, J.C.H. and Forshaw, C. (2006). Organizational Behaviour in a Global Context. University of Toronto Press.

Podmoroff, D. (2016). 365 Ways to Motivate and Reward Your Employees Every Day: With Little Or No Money. Atlantic Publishing Company.

Stephens, T. (2005). Employee Reward. CIPD Publishing.

Taylor, J. and Taylor, R. (2011). Working Hard for More Money or Working Hard to Make a Difference? Efficiency Wages, Public Service Motivation, and Effort. Review of Public Personnel Administration 31(1), 67–86.

Tech-Hong, T. and Waheed, A. (2011). Herzberg’s Motivation-Hygiene and Job Satisfaction in the Malaysian Retail Sector: Mediating Effect of Love of Money. Asian Academy of Management Journal 16(1), 73-94.

Wilton, N. (2016). An Introduction to Human Resource Management. London: SAGE.

Yousaf, S., Latif, M., Aslam, S. and Saddiqui, A. (2014). Impact of Financial and non-Financial Rewards on Employee Motivation. Middle-East Journal of Scientific Research 21(10), 1776-1786.