Financial Rewards - the Best Way to Increase Work Motivation - Literature review Example

MANAGEMENT The one best way to increase work motivation for an organisation is through financial rewards ,discuss ……………………… College………………………………. Date of submission …………………. Introduction One of the major critical issues that management deals within the organization is related to making human capital highly productive and high performers. Since human capital and their skills, abilities and talents are considered as most vital and productive assets in the organization, Human Resource Management is giving greater emphasis to all those strategies and techniques that can foster people’s productivity and enhance high perform work system. Motivation is one of such strategies. Though there are monetary and non-monetary methods of motivations, financial reward seems to be more powerful and most organizations, even though some literatures and expert talk the other way, implement various monetary reward systems to boost up the results. This research paper argues that financial reward system is the best way to increase motivation. This paper compares and contrasts for and against opinions of financial as well as non-financial rewards to explain why financial reward is still the best. Intrinsic and Extrinsic Rewards An organization’s reward system mostly comprise of both intrinsic and extrinsic rewards. Intrinsic rewards are considered as internal to the people within the organization and they are derived from being involved in certain activities or specific tasks. Job satisfaction and feeling of accomplishments are illuminating examples for intrinsic rewards. In contrast, extrinsic rewards are directly managed and distributed by the organization or management. They are more likely to be tangible than that of intrinsic rewards. Pay, hospitalization benefits etc are examples of extrinsic rewards (Byars and Rue, 2004, p. 272). People in an organization can be motivated through a number of various factors such as salary increment, bonus, education for children, health benefits, better working condition, flexible timing, teamwork, collaboration, transportation facilities and so on. Out of all these benefits that motivate people towards working hard and thus improve the productivity, pay seems to be the best strategy to motivate them, because pay is the most effective extrinsic reward as it helps organizations attract and retain highly capable employees and this has been found to be a powerful tool to achieve high performance (Schermerhorn. Hunt and Osborn, 2005, p. 178). Money and Motivation Money is a strong motivator. Money is one of the most important factors that satisfy human needs and wants. People become highly satisfied when they are able to meet their wants or needs and for this purpose they need money. As Armstrong (2011, p. 199) argued, money is critically important to people because it is very instrumental in satisfying a number of their most pressing needs and wants. Money is significantly important not only as a tool that people can buy things, but also as a tangible method of recognizing their worth and thus improving their self-esteem. Quite specifically, people who have got sufficient wealth and money for meeting their needs and wants are also looking for an increment in their salary or bonus since money is part of their standards, self esteem and individual or family value etc. The idea that money is the best motivator was based on the concept of rational-economic motivation, explained by F.W Taylor. According to him, factory workers were showing highest motivation and performance when they gained highest possible salary (Bandt, 2011, p. 10). But in recent years, this theory has been criticized by many. Herzberg’s theory of motivation is one of them. According to Herzberg’s theory of motivation, money or salary is hygienic factor, and he considered money or financial factors as limited and short term oriented. In order to illustrate whether money is the strongest motivator, it is highly important to define what is motivation. As Islam and Ismail (2008) stressed, motivation is what moves people from boredom to interest. Though there are several different definitions to motivation, this definition explains one important aspect of motivation, that is related to making people more interested and enthusiastic towards working hard. Zani, Rahim and Junos (2001, p. 329) are of the opinion that money is the most powerful and influential incentive in the society and this has almost always been used as a tool to motivate employees within organizations. Financial Reward as prime motivator A large numbers of literatures disagree with the idea that money is the prime motivator. Maddock and Fulton (1996, p. 69) argued that money is never a prime motivator. Behavioral psychologists are also arguing the same, but they agree that money is reinforcer and a reinforcer is a secondary motivator. Even though most literatures put forth almost same view point, Lewis, Goodman and Fandt (2006, p. 389) has given a very logic explanation of how money becomes a prime motivator. According to them, as a medium of exchange, money should motivate people to the degree that perceive it as a means to acquire things they want to buy or achieve. It is because money represents a symbolic meaning as it is a measure of achievement, it can bring recognition, it can satisfy people’s needs and wants. Even when managers think about providing better opportunities or arranging better working conditions, they do believe that money is an important reason for working. They very often observe that some people are less working or are under achievers since they get less pay as compared to that of some others. Following factors explains why financial reward is still the best way to motivate people in an organization. 1- Money satisfies human wants and needs People have various needs and wants, though it may vary from person to person. What can make people satisfy their wants and needs are powerful motivators. Newstorm and Davis (2004, p. 104) explained that one of the most powerful motivators is an incentive that can satisfy one’s needs. When an employee is, for instance, very productive, the organization may take note of it and will provide some rewards such as money or salary increment. If this reward is appropriate in nature and timing, the employee will be more satisfied and as he becomes highly satisfied he will be promoted to work harder. When the management designs and develops a reward system, it is important that they should understand employee needs. There are several driving factors that management needs to consider while evaluating the drives and needs of employees. Money generally can satisfy human wants and needs, but not always. But in most cases, people in the organizations are found to work harder when they are paid more since an additional amounts of pay or salary can help them meet their increasing needs. In some other cases, employees are found to work well when they get extrinsic rewards such as health or education benefits. These types of rewards, though not financial in closer look, should be considered as financial rewards since money is a medium of exchange and health or education benefits can be converted to monetary benefits or financial figures. 2- Money’s function is to avoid pain and discomfort Money’s main function is basically to help people avoid pain and discomfort and this is the main reason why money seems to be a powerful motivator (McConnell, 2011, p. 185). Apart from helping people in meeting their needs and wants, money’s another major function is its power to avoid one’s pain and discomfort. As employees get higher pay, they may use the same for their enjoyment, events, parties, tour or leisure time, which in turn can be considered as similar to that the management provides them with advanced facilities in their own workplace or flexible work setting etc. 3- Money performs as a ‘score card’ Aswathappa (nd, p. 383) observed that money performs a function of score card by which people in an organization assess the value that the organizations place and find on their services. Money is therefore the channel by which employees can compare their services and values too. From the marketing point of view, each product or service that the customer purchases from the market has a utility and that is the benefits he exchanges for the money he pays. Similarly, an organization is a customer that buys an employee and pays money to him for the services he gives to the organizations. An employee is able to assess the values of his work from the money the organization is ready to pay to him. If his service or job task is more valuable than the money he currently receives from the organization, he will be looking for an increase in his pay. If he is not getting a pay that he feels he is rightful for the services he gives to the firm, he will be dissatisfied and he will be less motivated. If he is getting an amount that he feels appropriate for the service he delivers, he will be more satisfied and he will be motivated as well. 4- Money is power and more powerful motivator too Promotion, status, managerial role etc also have been found to motivate people. All these factors motivate people since they contribute to the power that each individual holds in the organization. Similarly, money motivates since it assures power to them. Money is power as it gives people more power and control among the society. Money is one of the best way to motivate people since money provides them with power that they can hold greater role in the society. 5- Money rewards performance Furnham (2005, p. 280) emphasized that money is more likely to be a powerful motivator when it is seen to be rewarding performance. It is because, when people see simple and rather direct relationship between input and output, they feel that they are able to control and predict their income. 6- Money as measure of success Money is a measure of success and this is one of the main reasons why money is a powerful motivator. Agarwal (1993, p. 200) argued that money is a powerful motivator since is fulfills the ability of a person to satisfy his psychological needs. Moreover, it provides people with the ability to satisfy higher levels of needs such as need for status, power, recognition, achievement and so on. Conclusion This piece of research paper discussed in detail various concepts and theoretical underpinning of two different types of reward systems and analyzed why monetary incentive seems to be more powerful motivator. This paper highlighted that money seems to be a best way to motivate people to work harder because money satisfies human wants and needs and functions to avoid pain and discomfort. Moreover, money performs as a score card and seems to be a measure of power, recognition and achievement. Though most literatures illustrated that money is not the prime motivator, most management and business experts very often motivate their employees by various pay or financial incentive systems. References Agarwal, R.D, 1993, Organization and management, Tata McGraw-Hill Education Armstrong, M. 2011, How to Be an Even Better Manager: A Complete A-Z of Proven Techniques and Essential Skills, Eight edition, Kogan Page Publishers Aswathappa, K (nd), Human Resource And Personnel Management, Tata McGraw-Hill Education Bandt, T, 2011, EVA-based Bonus Systems and the Influence on Motivation of Employees in Companies with Branch- Or Profit-Centre Structure, GRIN Verlag Byars, L.L and Rue, L.W, 2004, Human Resource Management, Seventh Edition, McGraw Hill Companies Furnham , A, 2005, The psychology of behaviour at work: the individual in the organization, Psychology Press Islam, R. and Ismail, A.Z. (2008). Employee motivation: a Malaysian perspective. International Journal of Commerce and Management, Vol. 18, pp. 344-362 Lewis, P.S, Goodman, S.H and Fandt, P.M, 2006, Management: challenges for tomorrows leaders, Fifth edition, Cengage Learning Maddock, R.C and Fulton, R.L, 1996, Marketing to the mind: right brain strategies for advertising and marketing, Illustrated edition, Greenwood Publishing Group McConnell, C.R, 2011, The Effective Health Care Supervisor, Seventh edition, Jones & Bartlett Publishers Schermerhorn, J.R, Hunt, J.G and Osborn, R.N, 2005, Organizational Behavior, Ninth Edition, John Wiley and Sons Read More