Impact of Financial and Non-financial Rewards on Employee Motivation and Satisfaction - Literature review Example

? Impact of Financial and Non-financial Rewards on Employee Motivation and Satisfaction of Saudi Nationals in Saudi Aramco 5 May Chapter 1: Introduction Motivation and Performance To achieve and sustain competitive advantage, scholars asserted the role of motivation in boosting performance among employees and unifying their efforts toward the attainment of organisational vision, mission, and goals (Boxall and Purcell, 2003; Larkin, Pierce and Gino, 2012; Zani et al., 2011). Joo, Jeung and Yoon (2010) assert that intrinsic motivation and improved core self-evaluations affect job performance, while Griffin (2012) mention several case studies, wherein companies effectively used reward systems to influence employee motivation and performance. Malhotra, Budhwar and Prowse (2007) assert the connection between commitment and performance, as mediated by incentives. Devaro and Brookshire (2007) stress that incentives can improve performance more among for-profit than non-profit organisations, although Ebert (2010) and Stone et al. (2010) criticise the effectiveness of financial incentives in motivating long-term performance gains. Motivation influences work performance. Shields (2007) exhibit through the use of several studies that “motivation is the most critical direct attitudinal determinant of work effort or task behaviour” (87). The concept of motivation refers to “internal factors that impel action and to external factors that can act as inducements to action” (Locke and Latham, 2004: 387). Extrinsic and intrinsic motivational factors can impact work motivation across the organisation in different ways and degrees. The three components of action that motivation can shape are “direction (choice), intensity (effort), and duration (persistence)” (Locke and Latham, 2004: 387). Not all incentives, for instance, can affect intensity and duration in the long run. Different motivation theories are used in diverse studies, depending on the beliefs of scholars on what drives motivation and what its results are. Several motivation theories are expectation theory and reinforcement theory. Incentives, Motivation, and Performance A predominant means for accomplishing human-resource-based competitive advantages is the use of incentives (Chiang and Birtch, 2008). Performance-related pay (PRP) and benefits are some common incentives in the financial sector, as well as other industries (Lewis, 1998; Stiglitz, 2010). Lewis (1998) offers a process-cycle theory, where the stages of PRP must be properly managed in order to deliver optimal performance results. These stages are: 1) establishing objectives; 2) measuring performance; 3) providing performance feedback; and 4) translating performance into rewards (Lewis, 1998: 74). His study shows that incentives can greatly affect performance, when these stages are aptly managed in relation to employees’ performance levels and issues. Ferreira, Marques and Azevedo (2011) show from their study of Portuguese banks that incentive systems shape organisational competitiveness, although other factors are also important, such as management and leadership approaches. PRP per se is not the magic bullet of performance, especially when it has design and implementation flaws (Boachie-Mensah and Dogbe, 2011). Financial incentives and performance Financial incentives alone are not enough to drive motivation and performance because employees consider other factors too (Siders, George and Dharwadkar, 2011). In the study of 139 Slovenian bank managers, Hartmann and Slapnicar (2012) explored the effect of distributive justice properties and procedural justice properties of managerial pay on manager’s intrinsic motivation. They discovered that procedural justice is a greater predictor of intrinsic motivation when low pay transparency exists, while distributive justice is a greater predictor of motivation when high pay transparency is present. Hartmann and Slapnicar (2012) concluded that pay transparency is important in analysing and designing just managerial pay systems. Their study shows that employees are not singularly motivated by financial incentives, because they think that they must also know something about the way they are designed and applied. Boachie-Mensah and Dogbe (2011) noted from their study that when performance appraisals are perceived as biased, financial incentives cannot significantly influence performance. These studies emphasise that financial incentives must be integrated into an efficient and just performance-management system, so that it can have real performance gains. Non-financial incentives and performance Aside from financial incentives, non-financial incentives are important to people too, although in varying degrees. Zani et al. (2011) examined the impact of two types of incentives, financial and non-financial incentives, on employee motivation. They learned that most of the researches stressed that financial incentives or money motivate employees, but only in the short run. Zani et al. (2011) concluded that non-financial incentives have higher intrinsic value and can have lasting effects on motivation and performance. Stiglbauer and Batinic (2012) affirmed the same findings in their longitudinal study. They studied the function of Jahoda's latent theory in motivation. Jahoda (1982) argued that latent benefits are based on basic psychological needs, and their satisfaction or lack thereof can impact people’s well-being (cited in Stiglbauer and Batinic, 2012: 261). They learned that latent benefits positively affect employee work involvement, while financial incentives have a slight, but not large, negative effect on work involvement. Problem Statement Majority of the studies on the links between reward, motivation, and performance, however, are conducted in Western organisational context (Erez, 2008), and so additional studies in Middle Eastern settings are needed to determine differences and similarities across cultures. Banque Saudi Fransi (BSF) This paper focuses on the Saudi Fransi Bank, also called Banque Saudi Fransi (BSF). BSF is a Saudi Arabian Joint Stock Company that the Royal Decree No. M/23 created on June 4, 1977. It is affiliated with Credit Agricole Corporate and Investment Bank, which has an equity interest of 31.1%. Credit Agricole CIB is a member of the Credit Agricole Group, the second largest bank in France, and the seventh largest in Euroland in terms of total equity. Banque Saudi Fransi provides retail and corporate banking services, as well as Islamic Banking. It also offers automobile, home renovation, trade finance, structured finance, and syndicated loans. BSF is the fifth largest Saudi Arabian lending bank. By March 2012, the Bank has “capital strength of 9,040,178,750 SR” (BSF, 2013). Its Head office is in Riyadh and it has three (3) Regional Offices in Jeddah, Al-Riyadh and Al-Khobar. It has 2465 employees, as of December 2012 (BSF, 2013). JPMorgan Chase & Co. (JPM) reported that BSF went beyond its fourth-quarter profit estimates, which will increase expectations for other Arab banks (Mathew, 2013). Saudi Arabian lenders are taking advantage of lending to government projects, as the Kingdom of Saudi Arabia pursues $500 billion worth of investments that aim to improve infrastructure and to generate new jobs (Mathew, 2013). After the Saudisation policy, the company’s workforce represents a mix of old generation and young professionals. The diversity of employees creates a tremendous challenge in motivating them. Research questions, aims, and objectives Since no research exists that analyse these relationships and there is dearth of literature on the motivation of Saudi nationals, this dissertation has the purpose of filling this vital knowledge gap. The main research questions are: Do financial and non-financial incentives drive motivation and performance? Are there differences in incentive effects across ages, social status and gender? The following are the aims and objectives of the study: 1-Aim: To identify the drivers of motivation for old and fresh Saudi national employees of BSF Objective 1: To identify the different factors that affects the preference for financial or non-financial rewards Objective 2: To determine the differences in the reward preferences according to age, gender, and social status 2- Aim: To assess the impacts of various financial and non-financial rewards in sustaining high motivational levels within varied categories of employees such as workers, supervisors and managers Objective 3: To understand the effect of financial rewards on motivation Objective 4: To identify the effect of non-financial rewards on motivation 3- Aim: To understand the contribution of employees’ motivational levels on overall organisational culture and performance. Objective 5: To determine if employee motivation affects performance Objective 6: To understand the differences/similarities in the effects of financial and non-financial rewards on performance This chapter shows that motivation is an important aspect of performance. Financial and non-financial incentives can boost motivation in improving performance. Gains in individual performances can result to organisational performance enhancement and even to long-term competitiveness. Studies showed, nevertheless, that financial incentives are not magic bullets, and non-financial incentives can complement its impact on performance. The next chapter reviews literature on financial and non-financial incentives. Chapter 2: Review of the literature Introduction Chapter 2 explores the debates on motivation and performance. Several theories are presented in relation according to how scholars used and tested their validity. These theories indicate different effects and ways in how motivation in terms of financial and non-financial incentives impact performance or not. Llewellyn, Eden and Lay (1999) define financial incentives as direct monetary gain, for example, personal income and other sources of additional income. Mathauer and Imhoff (2006) explain that financial rewards include allowances, salary increases and bonuses. Non-financial incentives do not directly transfer monetary values or equivalents, and they include holidays, token awards or recreational activities and recognition from their bosses (Mathauer and Imhoff, 2006). Llewellyn et al. (1999) add that non-financial rewards include status, friendliness at work, and potential for career progress. Manolopoulos (2008) describes two kinds of motivators that impact work motivation: extrinsic and intrinsic. Non-financial incentives belong to intrinsic motivators. These studies reveal the existing scope of motivation studies in organisation science. This chapter discusses the strengths and limitations of their research methods and findings. HRM, Compensation-Reward System, and Motivation HRM designs and implements a performance management system that integrates rewards, pay and other benefits that can engage employees and ensure their commitment to the organisation. Hendry et al. (2006) analysed some of the problems and errors in performance management conception and design. They seek to create a model for planning and understanding performance and rewards (Hendry et al., 2006: 47). They conducted a review of literature on these HR topics. Findings showed that performance management should have been a solid way for HR to establish its strategic function in the company, but it is not systematically done in many organisations, and so many HR departments are not able to contribute to real company value. They recommended a performance management diagnostic tool, where it: “(a) puts performance measurement in a stricter context of corporate business strategy, and (b) tries to put some constraint on the tendency to jump at incentive and bonus schemes as a necessary part of performance management” (Hendry et al., 2006: 58). Hendry et al. (2006) cautioned against attaching financial incentives to all corporate objectives, when they can be attained through intrinsic motivators. This article is useful in introducing performance-related pay (PRP) systems in HRM literature and emphasising the importance of understanding the connection between incentives and performance. HRM should be flexible in managing, measuring, and improving employee performance, so that their performance systems are regularly monitored for efficiency and effectiveness (Locke and Latham, 2004; Nohria et al., 2008). Incentive-Motivation Theories Significant debate surrounds on the question of which rewards, financial and/or non-financial, affect employee motivation and behaviour (Shields, 2007; Young, Beckman, and Baker, 2012). The utility and motivation values of rewards can be explained through different theories. The agency perspective asserts that financial rewards, like variations in pay, can be employed to align organisational and employee interests (Eisenhardt, 1989). Expectancy theory underscores that employee behaviours can be influenced through tangible connections between reward and performance (Lawler and Jenkins, 1992). Rewards can have more complex interactions with other factors, when individual and team/group levels are considered. Individual incentives can inspire flexibility and commitment (Kessler and Purcell, 1992), but may lead to harmful hypercompetitiveness and unethical behaviours. Team-based rewards can improve team spirit and cooperation, as well as flexibility (Bartol and Srivastava, 2002), but may sacrifice individual motivation differences. Organisations can also use different non-financial incentives. They can consist of training and development that can result to continuous learning, innovation and productivity. Recognition and praise can improve intrinsic motivation too, if related to feelings of self-worth and dignity (Zani et al., 2011). Financial Incentives and Impacts on Performance Financial incentives have long been studied and shown to impact performance. These rewards, however, do not always have a straightforward connection to motivation or performance, especially for highly educated and highly skilled employees, including managers. Young, Beckman, and Baker (2012) explored the relationship between financial incentives and performance using the professional control perspective and agency theory. The professional control perspective suggests that financial incentives have motivational effects depending on the recipients’ attitudes regarding the incentives, as they relate it to their professional values (Young et al., 2012, p.964). Their study included a sampling of physicians, where a financial incentive program was implemented to boost physician performance with regards to managing diabetic patients. Agency theory is proven when performance improved after the incentives were applied, while professional control perspective is also demonstrated through the attitudes of the physicians regarding the impact of the program on their autonomy and the importance they placed on these incentives (Young et al., 2012: 964). Young et al. (2012) concluded that professional control perspective and agency theory complement one another in explaining the effect of financial incentives on performance. They recommended that organisations must consider professional values and goals, when applying financial incentives. Their work is limited to physicians specifically, or professionals, where a code of ethics is present. Their educational level and social status can also moderate how they see and respond to performance-related financial incentives. Larkin, Pierce and Gino (2012) examined the link between pay and strategy using agency theory economics. They learn that agency theory does not account for various psychological costs of comparing and overconfidence. They note that these factors decrease the effectiveness of individual performance-based compensation. They proposed a framework that promotes team-based and flat-system compensation. They concluded that compensation serves strategic purposes of affecting peers and related organisational activities. This article provides new light on the psychological and economic aspects of individual rewards. It needs further empirical testing, however, for the model it proposes. Magnan and St-Onge (2005) explored the link between profit-sharing-plans (PSPs) and performance for financial services corporations. They used a cross-sectional/longitudinal control research design to compare PSP-adopter and non-PSP-adopter corporations. They collected objective and perceptual performance data too. Their sampling included 294 Canadian financial organisations. Findings showed that PSP adopters have higher profitability than those who did not have this scheme; PSP adoption increases profit in the short-run; profit drivers that employees control affect profit enhancement values of PSP; and external profit motivators have long-term effects when PSPs are implemented (Magnan and St-Onge, 2005: 783-784). Manager affirmed that PSP adoption impacts employee attitudes and behaviours, as they concentrate on profit drivers (Magnan and St-Onge, 2005: 784). The strength of this research lies on its mixed method design that supports the validity of its findings. It confirms agency and expectation theories, where PSPs support the alignment between individual and organisational interests. The limitations of the research are its sampling, which may reduce application across industries and cultures, as well as lack of understanding of how PSP operates to affect motivation and performance. Criticisms against Financial Incentives Validity of PSP-performance link Oyer (2004) questioned the validity of PSP-performance thesis. He formed a model that aligns agency theory and his analysis that employees are rewarded or penalised for things that are beyond their control. He showed through his model that “variability in an employee’s reservation utility may lead the firm to want to transfer risk to the worker as a means of insuring participation during various states of the economy” (p.1647). His model shows that PSPs are not always effective, if economies are not doing well and turnover costs are low. This article provides econometric analysis of the failures of PSP in some settings. Nevertheless, it does not address contextual factors and other elements that lead to successful PSPs as Magnan and St-Onge (2005) showed. Cultural differences Chiang and Birtch (2012) noted cultural differences in the effects of financial and non-financial rewards. They empirically tested the function of cultural factors in how employees see and respond to different kinds of incentives. Their sampling included employees from Finland and Hong Kong banks. Findings showed that cultural factors from Hofstede’s cultural dimensions theory affect reward-performance relations. For instance, in Finland, female employees prefer financial rewards, while male ones are inclined to non-financial incentives, whereas older employees want recognition and promotion more than younger employees (Chiang and Birtch, 2012: 554). These demographic differences were not strong in the HK sample, except that female employees prefer alternative work arrangements more and younger employees want more T&D (Chiang and Birtch, 2012: 555). There were similarities in the importance of financial rewards in affecting performance, although Finns placed higher value on non-financial rewards and team-based incentives than HK employees (Chiang and Birtch, 2012: 555). Nevertheless, Chiang and Birtch (2012) realised that other contextual factors impact reward–performance values, inclinations, and behaviours, including organisational and macro-environmental ones. The research design of this article is robust with contributions to motivation theories and practices. It does not include a wider sampling of countries, where more cultural differences are pronounced, and it fails to consider other confounding factors. Short-term effects of financial incentives Several studies showed that financial incentives do not have long-term effects on performance. Zani et al. (2011) agree with Young et al. (2012) that money per se is not a strong motivator of performance all the time. They illustrate the nature of financial and non-financial rewards and their effects on employee’s motivation. They used a secondary resource research design in comparing the effects of financial and non-financial rewards. They learned that money can stimulate performance gains in the short run only, while non-financial incentives can have greater impact, especially recognition and praise, because of their effect on intrinsic motivation (Zani et al., 2011: 332). They concluded that managers must be sensitive to the feelings and other motivational antecedents of employees. This article reviews several seminal researches on motivation-performance literature. It summarises existing research, but it does not provide future research directions. There are concerns for internal consistency too because the research design weaknesses of the studies are not thoroughly discussed. Poor perception of financial incentives Cordero, Walsh and Kirchhoff (2005) examined 105 innovative plants, with the hypothesis that these plants employ financial incentive plans to motivate traditional elements of manufacturing performance (i.e., productivity, quality, and short lead-time) and intrinsically motivating jobs to stimulate manufacturing performance in its innovative features (i.e., customised and innovative products). Findings showed that when financial incentive plans are primarily applied, intrinsically motivating jobs do not encourage manufacturing performance’s innovative features (Cordero et al., 2005: 96). Jobs that intrinsically motivate employees result to manufacturing flexibility gains, but not effectiveness (Cordero et al., 2005: 96). Cordero et al. (2005) concluded that financial incentives may be seen as control mechanisms by employees, thereby reducing the stimulating effect on performance. Thus, financial and non-financial rewards can have different performance and motivation effects depending on industries and their composition. The strengths of the article are its examination of the links among motivation, performance, and innovation and the consideration for the role of improvement of perceptions of financial incentive plans. Cordero et al. (2005) showed that incentives may have different effects on performance and innovation and perceptions of the real purpose of incentive plans can affect their effectiveness. The limitations of the study are weak validity of treating incentives as causative elements and reliance on one manager for feedback. Incentives may not cause strong or weak performance and other factors must be considered. Furthermore, a single manager source reduces the internal and external validity of the results. Hence, intrinsic motivation is a construct that is hard to measure and understand using quantitative data collection methods. Financial incentives and weak ethical performance The negative effects of incentives on ethical performance have not gone unnoticed to some scholars. Webinger (2011) investigated the mixed effects of incentives on social performance and financial performance. She hypothesised that stock incentives for bank managers and employees may have resulted to high-risk choices, which culminated with the 2008 credit crisis. Webinger (2011) explained that contracting theory indicates that stock incentives can improve stock performance, while moral hazard theory states that these incentives can promote risky behaviours. She studied CEO options and performance from 2005 to 2007 and learned that the contracting and moral hazard theories are both correct. Stock ownership enhanced stock performance, but it also resulted to risky management activities. This article presents the difference between social performance and financial performance and the significance of measuring both, when assessing the effectiveness of financial incentives. Its weaknesses are limited sampling and lack of analysis for non-executive employees. Stiglitz (2010), in a short article in Harvard Business Review, criticised the banking sector for using their political affiliations in opposing additional regulations. He emphasised the weaknesses of performance-based-pay and other incentives because of their reliance on short-term performance and the absence of accountability for financial mistakes (Stiglitz, 2010: 36). The organisational results are “short-sighted behaviour and excessive risk taking,” wherein “average housing prices in the U.S. have fallen from their historic peak, in 2006, by more than 30%” (Stiglitz, 2010: 36). Incentives improved performance, but only in the short-run, and with negative effects on ethical behaviours. Furthermore, Stiglitz (2010) lamented that relating pay to stock prices made matters worse. He explained that because of this performance-reward relationship, financial organisations have distorted their balance sheets and income statements, while managers became involved in fraudulent activities (Stiglitz, 2010: 36). Stockholders and the public do not truly know if performance is based on increasing risks or outperforming the market (Stiglitz, 2010: 36). Nonetheless, Stiglitz (2010) does not argue that incentive programs per se are harmful. He believes that efficient incentive programs can drive motivation and individual/organisational performance, if they are based on the basics of financial management: “managing risk, allocating capital, and keeping transaction costs low” (Stiglitz, 2010: 36). Unless incentives support these basics, they can only distort ethical behaviours. This article underlines an important consideration: the relation between incentive and ethical performance. Sometimes, financial companies forget how their incentives breed unethical activities. They should be aware of how their incentive programs affect ethical practices. Stiglitz (2010) can enhance his article, nonetheless, by providing a conceptual framework of incentives can be designed to both motivate organisational performance and individual ethical behaviour. Their conflict is challenging and deserves further study. Demographic Factors that Mediate Motivation HR should explore differences in reward preference that age and other factors can affect. Von Bonsdorff (2011) investigated the reward preferences of 628 Finnish nurses of different ages. Findings showed that nurses determine and appreciate the importance of financial and non-financial rewards to their motivation and performance. Age-related differences affected financial reward preferences, nevertheless. Older and more experienced nurses chose financial rewards more often than younger nurses (Von Bonsdorff, 2011: 1271). Von Bonsdorff (2011) explained that the social status ascribed to higher pay and financial needs of older nurses may partially explain this preference for financial rewards. Younger nurses, on the contrary, desire more work-life balance because some of them are beginning families of their own (Von Bonsdorff, 2011: 1272). The limited sampling of the study cannot be generalised for other sectors, though high-skilled employees may behave the same way. Cultural differences are also present that differentiate between European and American management models. Nevertheless, this study showed that even if employees belonged to the same profession, age differences can result to motivation variations. It directs HR managers to produce a different motivation plan for ageing employees, whom organisations may want to preserve for knowledge-sharing purposes. Non-financial Incentives and Impacts on Performance Non-financial incentives can have lasting effects on intrinsic motivation, according to some scholars. Ciorbagiu-Naon (2010) highlighted the complexities of implementing non-financial rewards. He interviewed specialists and consultants to provide evidence in establishing his main points. He believed in the power of non-financial rewards in motivating people: “[Non-financial reward] is connected to the special efficiency of the methods of non-financial employee motivation because it ensures the employees’ long term loyalty and performance” (Ciorbagiu-Naon, 2010: 51). Specialists assert that non-financial rewards are particularly effective when there is a need to increase productivity and involvement (Ciorbagiu-Naon, 2010: 51). Despite the strong effect of non-financial incentives on performance, Ciorbagiu-Naon (2010) stressed that the connection between non-financial motivation and performance is hard to establish when other reward systems are in place. This article is significant in explaining the different ways of motivating people through non-financial incentives and how they work, but it lacks empirical substantiation. The range of resources used is limited and are not all scholarly too. Still, it points future research direction on non-financial incentives per se, because it is less studied when compared to financial incentives. Khan, Farooq and Ullah (2010) studied the relationship between different rewards and motivation on employees of Pakistan commercial banks. From the 200 questionnaires provided, 167 were completed. Findings showed that payment is a significant influence on performance, while promotion and play are important to employee motivation too (Khan et al., 2010:45). Females were less motivated by existing reward structure than men, and the same applied for married people (Khan et al., 2010:46). Employees in the age group of 31-35 were less motivated, while the oldest employees were more motivated (Khan et al., 2010:47). Highly-educated employees were more motivated than low-educated employees (Khan et al., 2010:49). Khan et al. (2010) concluded that financial and non-financial rewards impact motivation at varying degrees depending on demographic factors. This article provides empirical evidence in the correlations between rewards and motivation. Nevertheless, its results may be applicable to Pakistani employees only, and they have not correlated motivation with performance too. These studies indicate the lack of empirical studies on non-financial incentives and performance. Financial and non-financial incentive mix Mixing financial and non-financial rewards can effectively boost performance, according to several sources. Malhotra, Budhwar and Prowse (2007) studied the connection between different kinds of extrinsic and intrinsic rewards and the three dimensions of commitment (from Allen and Meyer’s 1990 theory) for the UK call centre industry. These dimensions are affective, continuance, and normative commitment. Affective commitment “is the employee’s emotional attachment to, identification with, and involvement in the organization,” continuance commitment pertains to “Becker’s side-bet theory (1960) and is defined as commitment based on the costs that employees associate with leaving the organization,” and normative commitment refers to “employees’ feelings of obligation to stay with the organization. It develops due to the internalization of normative pressures prior to entry or following entry into an organization” (Malhotra et al., 2007: 2098-2099). Malhotra et al. (2007) used non-probability sampling to choose 640 respondents, though only 298 responses were acceptable. Findings showed that affective commitment and normative commitment are related, and for extrinsic rewards, only “promotional opportunities” greatly predicted affective commitment; for intrinsic rewards, “role clarity,” “autonomy” and “participation in decision making” positively influenced affective commitment (Malhotra et al., 2007: 2114). For normative commitment, the significant predictors are intrinsic rewards, especially “autonomy, feedback and training,” while for continuance commitment, only extrinsic organisational rewards affected it (Malhotra et al., 2007: 2115-2116). This study supports the exchange theory, where both extrinsic and intrinsic rewards shape affective, continuance, and normative commitment. This article is important because it proves that intrinsic rewards are strong indicators of affective and normative commitment compared to extrinsic rewards, which means that extrinsic-motivation based reward systems are ineffective in UK call centres. The findings may be limited to UK call centres, and may not be applied to other cultures, while the research design may be biased because self-report measures of employees are used only, instead of adding the views of managers. Criticisms against Non-financial Incentives Measurement difficulties Chiang and Birtch (2008) confirmed the difficulty in measuring the performance effects of non-financial rewards. They studied the perceived motivating values of various financial and non-financial rewards. They wanted to know which rewards affect specific task and extra-task performance elements. They also examined gender and position differences in perceived performance effects of different rewards using qualitative and quantitative data collection methods. Sampling included 284 responses from the hotel industry. Findings showed that basic salary increase and individual bonus/tips were predictors of performance for financial incentives, while for non-financial rewards, promotion was the most predictive, and then recognition and job interest (Chiang and Birtch, 2008: 496). Financial incentives impact task behaviours more, while non-financial invectives affect extra-task behaviours more (Chiang and Birtch, 2008: 499). Female workers were more drawn to financial incentives, although the strength of these incentives was also strong for men (Chiang and Birtch, 2008: 497). Promotion and recognition specifically affected innovation, problem solving, honesty, and acting independently (Chiang and Birtch, 2008: 499). Chiang and Birtch (2008) concluded that non-financial rewards have a decisive function in the overall reward system of organisations. This study is important because it uses a mixed-method approach to answering its research question. It maximises the strengths of these methods in providing rich quantitative and qualitative data. Nevertheless, like other studies, sampling is limited and cultural and contextual factors may delimit the external validity of the research. These studies showed that demographics can moderate the effect of different kinds of rewards on performance and motivation. Working smarter versus working more effects Several researchers underscore that incentives must also be analysed according to the difference between working smarter and working more. Bracha and Fershtman (2013) assert that performance is composed of cognitive and labour efforts. They studied how competitive incentive schemes affect these efforts. Through an experimental research, they learned that competitive incentives compel people to work hard, but not always smarter. Bracha and Fershtman (2013) showed that this effect is more pronounced for women, but the reasons behind it are not included in the scope of their study. Their study has a limited sampling too, which impacts generalisation of results. This experimental research presents a compelling insight on the components and nature of performance. It shows that organisations must also be concerned of the quality of performance gains, not just quantity. Conclusion Chapter 2 shows mixed results on reward-performance relations. Some studies show a strong correlation between financial rewards and performance, while others state that this connection is temporary and can lead to unethical behaviours. Other studies emphasised that non-financial rewards are more effective for intrinsic motivation, while others call for mixed rewards that respond to demographic, cultural, and contextual factors. These scholars underline the risks of not studying the proper design and effects of reward systems. They assert the role of HR and the management in ensuring that performance is holistic and does not focus on short-term gains alone. 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