Monetary or Non-Monetary Incentives - Essay Example

It is sometimes hard to determine what incentives drive employees and impact their productivity in a much narrower context. In this regard, any business manager must identify the appropriate incentives that will motivate its employees to work towards achieving the set goals of the firm without the employees having to think of moving out of the firm. However, this, in most cases, may include a combination of both monetary and non-monetary incentives. In incentive in simplistic terms may refer to the stimulus for greater actions.

This is so because naturally, no one would act without a purpose behind it. In this case, it would be appropriate for the business managers to consider using monetary or not incentives to motivate employees. Ever since the times of economists such as Marx and Smith, the productivity of labour has been a major concern for firms which are always seen as inventing new ways by which they can have their employees’ productivity improved. This challenge to firms has seen many corporate managers design monetary and non-monetary incentives that can be given to employees to motivate them and, thus, improve productivity.

According to Marx, in one of his fundamental principles, the extraction of labour productivity and harnessing the same to ensure improved organizational productivity is one of the basic management problems. Various studies have been conducted that have sought to determine the most effective schemes that can be used to motivate employees in an organization. According to Guest (1997), examining the potential contributions that good human resource management can have on the performance of an organization is the most rampant topic under study by researchers.

Most of these studies are cross-sectional and quantitative in nature and are contained in differing theoretical frameworks. Motivating employees to a business remains one of the essential objectives that a firm can achieve, and in that context, the firm must apply the best scheme. This can either be monetary or non-monetary. The monetary incentives in this relation have or are assessed based on monetary terms or values such as gifts. In contrast, the non-monetary incentives have no measurable value, such as saying ‘Thank you or ‘Good work, keep it up to an employee.

Expressing the impacts of such strategies on the performance of the business can enable the management to define and implement only the best strategies or incentives that will meet the business's goals. A good example of a monetary incentive can be the mutual funds provided to the employees in company pension plans or insurance programs. The main reason for using monetary incentives is to reward employees for excellent job performances through money in most cases.

According to a study that was conducted by Martires (2004), they recognize that the various monetary incentives, which can be used as motivational schemes for employees, are stock options and warrants, project bonuses, scheduled bonuses like Christmas gifts, sharing of the firm’s profit and additional paid vacation time. Traditionally, when applied by firms in various situations, these options have succeeded in helping motivate the employees towards aiming for better and improved growth and maintaining a constructive atmosphere for the employees (Kepner, 2001).