The Mosley Jnr. (2012) describe extrinsic motivation as the

The
term motivation is derived from the Latin word ‘movere’ which means to move
(Baron, Henley, McGibbon and McCarthy, 2012). Certo (2016) describes motivation
as giving people incentives that cause them to act in desired ways. Motivation
has also been described as the process of arousing and sustaining goal – directed
behaviour (Nelson, 2013). It is commonly agreed that there are two types of
motivation, namely extrinsic and intrinsic. Intrinsic motivation is that behaviour
which an individual produce because of the pleasant experiences associated with
the behaviour itself (Mosley, Pietri and Mosley Jnr, 2012) Mosley, Pietri and
Mosley Jnr. (2012) describe extrinsic motivation as the behaviour performed,
not for its own sake, but for the consequences associated with it. Examples
include salary, benefits and working conditions. Extrinsic rewards come from
the organization as money, perquisites or promotions from supervisors and co –
workers as recognition (Beer and Walton, 2014). Employees are motivated by a
combination of both factors at any given point in time (Riggio, 2013). Motivating employees is
a challenge and keeping employees motivated an even greater challenge (Levy,
2013). Today, organizations are under intense pressure to identify and
implement programs that will prove effective in improving employee productivity
(Deci, 2013). It is no longer enough to increase salaries and expect increased
performance; it is more complex than that (George and Jones, 2013). Employee
motivation affects productivity and a poorly motivated labour force will be
costly to the organization in terms of lower productivity and performance,
excessive staff turnover, increased expenses, frequent absenteeism and a
negative effect on the morale of colleagues (Jobber and Lee, 2014). It is a well-known
fact that the success of an organization largely depends on the quality of its
human resource, irrespective of the industry within which it operates (Deci,
2013). It is with this in mind that leaders and managers must strive to ensure
that their workforce is motivated and therefore productive. Motivation is seen
as one of the most important factors in issues related to human resources
management (HRM) and organizational behaviour management (Nelson, 2013).

 

 

Introduction:

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Motivation
is essential in workforce in order to achieve results. Incentives are basic
conceptual components of motivation, improving employee encouragement for
employee productivity and job success (Sajuyigbe, Olaoye, & Adeyemi, 2013).
These incentives can either be monetary and non-monetary. Although, it is
viewed that monetary incentive is to encourage employees to excel in their
jobs, non-monetary rewards can also encourage employee productivity and thus
performance. Here, we are investigating the effects of both monetary and non-monetary
incentives on employee performance and motivation. There is a strong
backing for money as a motivating factor. However, there are researchers who
completely disagree with money being the only key motivator stating that money
does not significantly affect employee’s motivation. Non-monetary rewards if
used correctly are equally as important. Furthermore, there are researchers
whose findings show the significance of management style and the dialect used
by senior managers, directors and executives in the organisation in increasing
their employee’s performance. These researchers suggest that job design and
recognition are important tools in motivating employees. Non-monetary
incentives provide a strong sense of security and stability of employment for
the workers or employees. Non- monetary incentives are rewards other than
money, for instance recognition, training and development for employee’s
learning needs, and flexibility of working hours. When employees come to know
that their positions (or job) are secure and stable, they work hard to get more
recognition and respect. In this way, they are motivated and inspired entirely
by their inner self. The organizational performance can be raised to the
highest level by offering non-monetary rewards to the workers/employees (Heyman
and Ariely, 2004). So, workers who are intrinsically motivated naturally enjoy
their work or job. This research will mainly discuss the factors that boost employee’s
motivation and performance and will describe which factors are essential to
achieve it by making a contrast between the monetary and non-monetary factors
and proving which is more effective.

AIM:

The
aim of this research is to test the significant relationship between employee’s
performance and the incentives that are provided to him may they monetary or
non-monetary and to find out which kind of incentives tend to bring out
motivation leading to a better performance rate.

 

OBJECTIVES:

The
objective of carrying out this research is to learn whether an employee’s performance
increases by monetary or non-monetary incentives.

The
objective is also to learn about the factor which is more effective in
increasing employee’s motivation and productivity.

 

LITERATURE REVIEW

Berger
and Berger (2015) suggest that monetary rewards are the most preferred forms of
encouragement for employees. Also suggested that monetary incentives improve
performance, can increase productivity (Lemieux, MacLeod, and Parent, 2009) based on a good
performance measure can increase qualitative productivity. Muralidharan and
Sundararaman (2009) claimed that the incentive payment is directly related to
the employees’ output, which accelerates their performances. Lawler (1985)
claimed that rewards leads to increased employees’ satisfaction and will have a
direct impact on employee’s performance. Hong (1995) proposed that rewards
might motivate employees only when they yield rewards due to their sincere and
hard work. Lazear (1986) also positively suggests that by adding financial
rewards to the compensation of employee for the sake of motivation can attract
more geared workers to the organization. By other point of view, Lazear (2000)
also described that introduction of monetary rewards could gain extra efforts
of the employee to that extent where the marginal value added is equal to the
marginal cost paid for that additional work. This shows that financial
incentives are some types of paid value to employees in return for their extra
efforts. Lazear (2000) showed a positive relation between employee engagement
and rewards and firm performance. Intrinsic rewards have gained significant
importance in recent years (Thomas, 2009). They mention managerial support and
their contribution to raise the level of intrinsic motivation in employees by
contributing in intrinsic rewards, as building blocks. They state that,
intrinsic rewards are based on the positive feelings that employees get from
their work engagement. According to Thomas (2009), these intrinsic rewards
reinforce the self- management efforts and motivate employees to be engaged
with work. An Implementation of intrinsic reward creates positive feelings and
experiences among employees and management. In the last decades, many
organizations have turned their focus on skill-based pay plans. By which the
compensation of employees is based on employee’s new skills and knowledge and
mystery talent rather than for holding same position in organization. By
implementation of skill-based plans, employees work more effectively and focus
on their new skills and it creates the innovation performance system. This
system of skill- based pay focuses on continuous learning and creates culture, where
employee’s hidden skills are highlighted (London and Smither, 1999). However,
this system of skill-based pay plans is still based on financial compensation
and economic exchange between the employee and employer. According to Osterloh
and Frey, (2000), creative workers have two main reasons for being
intrinsically motivated. And these reasons must be addressed by organizations
for better performance. First reason, intrinsic motivation is needed for
creating and exchanging the knowledge and ideas. They found that, motivated
employees 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 tasks
and to improve the productivity level of individuals in the organization. By
giving this knowledge, employees have relative carefulness about the time for
these productive activities, their willingness to devote the time for these
productive activities, is crucial for the success of organizations. Yahya and
Goh (2002) state that incentives based on groups or teams could raise the
knowledge 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 on
employee motivation and engagement towards the organization. Through gain
sharing approach, organizational effectiveness can be enhanced to great levels.
Through gain sharing approach financial bonuses can enhance the productivity of
employees and employees should be rewarded with financial incentives for extra
efforts. This approach mainly focuses to decrease the costs for a portion of
that reduction should be converted into bonuses to employees to motivate them.
On the other hand, profit sharing is different from daily basis productivity
gain. Profit sharing bonuses are annually paid bonuses and most of the
employees often believe, managers will forget their promises and would not pay
these bonuses (Burton Kelli, 2012).

According to Van Zyl
(2000) despite having lots of evidence of the motivational impact of intrinsic
rewards on employee job performance, many managers still count money as the
main motivational tool for employees and focus on money. Furthermore, VanZyl
(2000), concluded that a bonus or 13th check is a great consideration among employees
and even it could remain as a great motivation for employees to be engaged with
their jobs and remain with the firm. He argued that money is always a great
motivational 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 in
the security organization. Incentives are positively related to employee work
engagement and job satisfaction, but the most important and valued incentives
are participation in decision making, financial allowances, promotions, leaves
and allowances for medical treatment. Less demanded incentives and less
motivational incentives are verbal appraisals, letter of thanks and financial
allowances for work at distant and isolated areas. Jeffery (2002), in his
study, investigated non-monetary incentives and their ability to control the
various psychological needs and that’s why non-monetary incentives have a
deeper and long-term effect than monetary incentives on motivation. The study
explained that non-monetary incentives are highly visible and have greater
value as a trophy. Non-monetary incentives bring a higher utility level.
Jaffery (2002) also calculated the trophy value index of non-monetary
incentives to check argument. In his study, results showed that employees
enjoyed 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. By
analyzing the motivational strategies, Jeffery (2002), states that cash
incentives don’t match the level of satisfaction which is gained by
non-monetary incentives (Trophy value). By explaining in detail in his work, he
describes that cash incentives’ benefit is short-term; while the non-monetary
incentives have long-term benefits. In his study, monetary rewards are
mentioned as compensation, while non-monetary rewards represent the respect and
recognition. Kube et al. (2008) credited more output in non-monetary gift as
compared to monetary gifts. Non-monetary gifts contribute a great deal to
employee satisfaction and this satisfaction shows long-term results. Kube et
al. (2008) also carries the social exchange phenomenon. In his study, results
show the higher impact of non- monetary incentives on social exchange theory
compared to monetary rewards. In another study Kube et al. (2006) describe that
monetary rewards are beneficial in short-term period and ineffective for
long-term period. He also states that non-monetary rewards have a significant
and consistent effect on their satisfaction. Due to the increasing importance
of incentives in every field, Steen (1997) conducted the study in IT field; he
observed that the IT professionals are keen to gain the non-monetary incentives
as compared to higher level positions within firms or the increment in pay.
They prefer the non-monetary incentives and which also include the flexibility
in working hours and take-home work. Schaufeli et al. (2002) regarding employee
engagement described in detail the three dimensions of work engagement in his
study. Vigors described as the energetic behaviour of the employee and also
devoted hard work to one’s work and job, even in any of problematic situations.
And the second dimension of Schaufeli (2002) was dedication. Dedication
exhibits the employee experience about work, his pride about his work, and
meaningfulness of his work. According to this study, the contents of dedication
are much inspiring. The third and last dimension of work engagement is
absorption. Absorption is, how employees get immersed in their work and also
from which factors employees are engaged in work and get pleasure and
satisfaction about the job. Absorption also showed that employee must
concentrate on his work and must be awarded with rewards for their work done
for the betterment of the organization. Six areas of the work environment will
lead to either the burnout or engagement to work. For example, control,
workload, social support, community, perceived fairness and values, and the
last one is rewarded and recognitions. They argued that those six factors are
the base of employee attitude or behaviour towards their work. By manipulating
these factors in well-organized manner, the management could raise the level of
employee engagement and control high turnover. Saks (2006) conducted a study to
examine the employee engagement role in service sector employees in eight
different European countries. They focused on four economic sectors, retail
trade, finance & banking, telecoms, and public hospitals. They observed
country wise differences in the matter of employee engagement. The engagement
of employees is based on job demands and job resources, for example job
autonomy and social support. Social support includes different types of
motivational factors like job enrichments, job empowerment and monetary and
non-monetary rewards. They also proposed that engagement of employees towards
organization can be achieved by implementing and creating a socially supportive
environment. Whereas the job demand negatively relates to the work engagement.
They represent the work engagement as the outcome of job demand and job
resources. Advocating the engagement issues, Frank et al. (2004) showed a
strong link between the employee engagement and the organizational performance.
He mentioned employee engagement as a human resource practice which has a
strong impact by engaging workers on the organizational productivity. Frank et
al. (2004) demonstrated the positive relation between the engagement of
employees and the satisfaction of employees. In the results of his study, Frank
et al. (2004) explains that engaged employees are also very effective for the
financial performance of the organization.

 

HYPOTHESIS FRAMEWORK

H1
– It is hypothesised that monetary incentives increase employee productivity.

H2
– It is hypothesised that non-monetary incentive increase employee
productivity.

 

Research Methodology:

This research is
conducted to investigate the effects of monetary and non-monetary rewards on employees’
performance and motivation to be more productive. A method which deals with statistical
analysis & determining the relation between variables is defined as quantitative
study (Larsson, 1993).This research
would be based on quantitative approaches and survey technique would be used
for collection of responses.
A well-designed questionnaire would be used to acquire responses. The
sample size would be of 100-150 people. The main people being targeted would be
the working class as they could clearly state on what motivates them more and
helps in increasing their productivity.

Data:

Cooper
and Schindler (2011) state that data collection methods refer to the process of
gathering data after the researcher has identified the types of information
needed which is; the investigative questions the re searcher must answer, and
has also identified the desired data type (nominal, ordinal, interval or ratio)
for each of these questions and also ascertained the characteristics of the
sample unit that is, whether a participant can articulate his or her ideas ,
thoughts and experiences. As the research is being carried out for the purpose
of learning the effects of monetary and non-monetary on employee’s performance and
motivation and finding the exact information, the data attained can be
categorized as primary data.

 

 

Data interpretation:

Validity:

Reliability:

Generalisability:

 

Timescale:

The
estimated 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 to
reach out the targeted sample while making them aware of the reasons why the
research is being carried out. Furthermore, it is expected that sometime will
be required to gain responses from the samples. Moreover, the maximum amount of
time will be invested in analysing evaluating and concluding the final results
that will be acquired through the responses. Finally bringing everything
together in the form of a report would also require some decent amount of time.

 

 

Budgetary Issues and source of funding:

 

The budget would not be
much of an issue with this research as the main research cost would be of the internet
followed by few books and journals. Internet is easily accessible nowadays as it’s
a part of our daily lives and the university is also proving this facility at
the same time so it’s not much of a problem. Furthermore, other important
material needed for the research like journals and articles can be acquired by
the 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 avoid
any hindrance to work. Lastly the most important facility that is important to
this research is software like SPSS in order analyse the data statistically acquired
by the responses and that is also not a problem as Royal Holloway University
provides students the access of such software’s.

 

 

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