Are Bonus Schemes an Effective Way of Motivating Employees - Research Paper Example

? Are Bonus Schemes an Effective Way of Motivating Employees Introduction and Background According to Atkinson 1964, p the study of motivation has to do with analysis of the various factors that incite and direct an individual’s actions”. This description of the study of motivation lays employee behaviour at the heart of the study of motivation and motivation extends to all spheres of human activity due to its involvement with human behaviour and the responses of individual to various stimuli to promote action in a particular desired direction (Atkinson, 1964). It is no surprise then that the study of motivation has been of interest in many fields that include economics, decision making, sociology and psychology, as in some way or the other human nature and behaviour are integral to these fields. In essence an understanding of what drives and describes actions involved in human behaviour is critical to the efficiency of interventions in any of these fields (Steel & Konig, 2006). The definite development of interest in employee motivation can be traced back by about a hundred years to the beginning of the twentieth century, when in essence behavioural scientists studied the behaviour and the response to stimuli, with particular emphasis on material benefits derived from work, for the initial studies had led to the belief that workers increased their effort, based on the monetary benefits received. This led to material benefits and its impact on employee motivation becoming the focus of studies and the basis of motivational action within business environments during approximately fifty years of the history of employee motivation (Latham, 2006). 2. Literature Review Several content and process theories on work motivation have emerged from the efforts put in by work motivational theorists, leading to the requirement of further classification in any study of work motivational studies. This classification is based on human behaviour and that which underlies human motivation in the form of needs, reinforcement, cognition, job characteristics and feelings or emotions (Ramlall, 2004). In 1954, the behavioural scientist Maslow published his theory in motivation called Maslow’s need hierarchy theory or the hierarchy of needs theory. In this theory Maslow postulates that the main driver in human behaviour is the satisfaction of an individual’s needs and he categorised these needs consisting of physiological needs, safety needs, social needs, esteem needs and self-actualization needs and put them into five levels (Halepota, 2005). Incentive schemes in business organizations are set up with the purpose of enhancing performance through meeting the needs of the employees. The success of incentive schemes would be high or low depending on the personal context of the employee. In the case of employees at the lower levels of Maslow’s need hierarchy cash rewards by itself act as a means to meeting these basic needs, Those at the higher levels of Maslow’s need hierarchy may require in addition to cash rewards other rewards, which we could term as ‘satisfaction income’ in terms appreciation, interesting work, freedom at the work and empowerment for satisfaction at the work place. Such rewards have to be fair and irrespective of the various other aspects of motivation at the workplace cash rewards still remain a key incentive for employee performance (Rai, 2004). Kauhanen and Piekkola, 2006, evaluating the motivational effects of performance-related pay schemes and bonus schemes on upper white collar employees in Finland found several important features. Among these features was the finding that for performance-related pay schemes and bonus schemes, the levels of these schemes should be high and frequent enough for positive motivational effects. Lower levels of performance-related pay schemes and bonus schemes do not bring about the desired increase in motivational levels for higher performance behaviour (Kauhanen & Piekkola, 2006) Human relations practices are important to organizational performance and the use of human relations practices targeting innovation in organizations are very useful in predicting organizational performance and improving organizational practices. Evaluation of 22 manufacturing companies in the United Kingdom has shown that contingent reward practices help in bringing about an innovation orientation in organizations that improve the performance of employees and the performance of the organization as a whole (Shipton et al, 2006). Armstrong 2010, p.188, describes bonus schemes as “cash payments to employees that are related to the performance of the organization, their teams or themselves, or a combination of two or more of these”. Other names for bonus schemes include variable pay or pay-at-risk. There objective of bonus schemes is manifold and the elements in this manifold expression are commitment to organizational success through the sharing of its success; enhancing the motivation of employees towards higher performance; recognition of past performances to encourage future performance; a direct mode of incentive for commitment and the retention of good quality work-force. Bonus schemes act as a financial reward for high levels of performance. Such lump-some payments have a stronger effect on employees than salary increments that are spread thin over each year. Consequently they act towards the creation of a high-performance culture in the organization with positive impact on the performance and profit of business organizations (Armstrong, 2010) Bonus scheme payments are applicable at all levels of an organization including directors as a general reward to encourage identification with the business. Such payments can be in addition in to any contingent pay schemes. Bonus schemes for individual performance may be made applicable to all levels in an organization or restricted to certain categories of employees in an organization, based on the bonus schemes policy that the organization decides is appropriate for it (Armstrong & Murlis, 2007). Fringe benefits are used by some organizations as a means to recruiting and retaining employees. An alternative to this is the use of bonus schemes with the objective of retaining productive employees (Boella & Goss-Turner, 2005). 3. Research Design In the opinion of Kumar 2005, p.84, “a research design is a procedural plan that is adopted by the researcher to answer questions validly, objectively, accurately and economically”. Such a definition of the design of a research means that there are two critically important aspects to the design of a research. The first of these critically important aspects relate to the procedures that will be chosen for use in the research and the logistics that are involved in the research. The second critically important factor relates to the quality standards that will be maintained in the study, so that no aspersions are cast on the validity, reliability, objectivity and the accuracy of the study and the study is accepted as contributing to the body of knowledge on the topic of the study (Kumar, 2005). This study uses an inductive and deductive framework to find answers to the questions that the study explores. The reason for the combination of inductive and deductive frameworks lies in making use of the advantages of both. Many of the problems that management research explores are done more effectively through the combination of inductive and deductive methods. The inductive method is better suited for the use and interpretation of qualitative data, while the deductive method has more emphasis on measurement and therefore is better suited for use in quantitative data and the interpretation of quantitative data (Lancaster, 2005). According to Lancaster 2005, p.26, “we may begin a research project using inductive methods and approaches, by say, first observing and measuring a phenomenon or problem that we wish to explore. This in turn can lead us to develop theories that we can then test using deductive methods and approach”. This study follows this advice in making use of the literature review to understand the issue of whether bonus schemes are an effective means of motivating employees. It is from the data that is collected that solutions to the research problems are found. It is this aspect that makes data and the data collection methods so important to any study. When insufficient attention is paid to the data and data collection methods, inaccurate and inadequate data is the result that has an impact on the analysis of the data. Statistics is involved in the analysis of data and according to Gibson, 1997, p. 163. “Statistics is a subject which stands on two legs: one is data collection and analysis, and the other is probability”. Quantitative data can be obtained through four methods. Interviews, tests/measures, observations and questionnaires constitute these methods. In this study the questionnaire method has been employed. The choice of the questionnaire method is based on it offering a very efficient means of collecting quantitative data and for this reason is immensely popular in the research studies. Other benefits derived through the use of questionnaires for collecting include the minimal restrictions it places on the research team and the usefulness of the data obtained through it (Easterby-Smith, Thorpe & Lowe, 2004). Questionnaires can be developed in two varieties. In the first type the respondent need only provide yes or no answers. Such a questionnaire is called a closed questionnaire. The advantage with closed questionnaires is that it is very simple to apply. However, the drawback with closed questionnaires is that it can generate superficial data, which reduces the usefulness of the data generated for the study. In addition, closed questionnaires can give rise to unexpected results, causing complexity in the data obtained (Easterby-Smith, Thorpe & Lowe, 2004). The second variety of questionnaires is the open questionnaire. The structure of the open questionnaire makes it possible for deeper probing in the search of answers to the research question. The Likert scale is a popular and effective way to create an open questionnaire. In the Likert scale there are five options of agree strongly, agree, neutral, disagree and disagree strongly for every question posed to the participant. The participant needs only tick or ring the option that is closest to the belief of the participant. The consequence of such probing with an open questionnaire is that it is possible for the researcher to obtain a more realistic opinion of the participant (Easterby-Smith, Thorpe & Lowe, 2004). The benefits that accrue through the use of an open questionnaire using the Likert scale make this the choice of the means for quantitative data collection. The study has chosen to use ten business organizations in the leisure, tourism and event management in the United Kingdom as the sites of the investigation. Ten employees randomly chosen from each of these business organizations will make up the participants of the study. The sample size is thus 100. The chief objective in using random selection is to avoid bias, which tends to provide a misleading picture of the targeted population (Nichols, 2002). There is a limitation to the study in that the sample size is a convenience sample size. The reason for this decision lies in the factors of study purpose, level of enquiry, design, type of analysis and time frame available for the study (Riordan, 2005). The study uses simple inclusion criteria. Employees for inclusion in the study should have a minimum of three years work experience in the business organization. Employees having less than three years experience in the business organization will be excluded. Given the limited knowledge and skills in the use of statistical software, the analysis of data will be done with the statistical application software of MS Excel to generate the results of the study. 4. Discussion The study of motivation of human beings led to an initial uncovering of monetary benefits being a key factor in influencing the behaviour of employees towards desired objectives. Over years several motivational frameworks have been developed that incorporate many other elements that are capable of influencing employee behaviour at the workplace. However, all these frameworks add other influencing factors without any deduction in monetary rewards being a key motivational factor. Bonus schemes are part of the constituents of several ways of providing monetary rewards to employees. Bonus schemes are meant to reward excellent employee performance and act as a stimulant to other employees to enhance performance in the future, while retaining food performing employees. This study attempts to find out how effective bonus schemes are in motivating employee performance to contribute to the body of knowledge on employee motivational strategies. Literary References Armstrong, M. 2010, Armstrong’s Handbook of Reward Management Practice: Improving Performance through Reward, Third Edition, Kogan Page Ltd., London. Armstrong, M. & Murlis, H. 2007, Reward Management: A Handbook of Remuneration Strategy & Practice, Fifth Edition Kogan Page, Ltd., London. Atkinson, J. W. 1964, An Introduction to Motivation, Van Nostrand Publishers, New York. Boella, M. & Goss-Turner, S. 2005, Human Resource Management in the Hospitality Industry: An Introductory Guide, Elsevier Butterworth-Heinemann. Easterby-Smith, M., Thorpe, R. & Lowe, A. 2004, Management Research: An Introduction, Sage, California. Gibson, W. 1997, Commercial and Industrial Statistics, Hodder Headline Plc, London. Halepota, H. A. 2005, ‘Motivational Theories and Their Application in Construction’, Cost Engineering, vol.47, no.3, pp 14-18. Kauhanen, A. & Piekkola, H. 2006, ‘What makes Performance-related Pay Schemes Work? Finnish Evidence. Journal of Management and Governance, vol.10, no.2, pp.149-177. Kumar, R. 2005, Research Methodology: A Step-by-Step Guide for Beginners, Sage, California. Latham, G. P. 2006, ‘Introduction: Thirteen Critical Incidents in the Life of a Scientist/Practitioner’, in Work Motivation: History, Theory, Research, and Practice, ed. Gary P. Latham, SAGE, California, pp. xiii-xxii. Nichols, P. 2002, Social Survey Methods; A Field Guide for Development Workers, Oxfam, London. Rai, S. 2004, ‘Motivational Theories and Incentive Approaches’, IIMB Management Review, vol.16, no.4, pp.43-50. Ramlall, S. 2004, ‘A Review of Employee Motivation Theories and their Implications for Employee Retention within Organizations’, The Journal of American Academy of Business, vol.5, no.1/2, pp. 52-64. Riordan, J. 2005, Breastfeeding and Human Lactation, Third Edition, Jones and Bartlett, Massachusetts. Shipton, H., West, M. A., Dawson, J., Birdi, K. & Patterson, M. 2006, ‘HRM as a predictor of innovation’, Human Resource Management Journal, vol.16, no.1, pp.3-27. Steel, P. & Konig, C. J. 2006, ‘Integrating Theories of Motivation’, Academy of Management Review, vol.31, no.1, 889-913. Appendix Research Question: Are Bonus Schemes an Effective Way of Motivating Employees? Information Needs: The information needs include an understanding of motivation, theoretical frameworks and models of motivation, monetary reward as a crucial factor in motivating employees towards improved performance for better organizational performance, the variety of bonus schemes used in business organizations for motivating and retaining employees and the impact of these bonus schemes on the motivation of employees for improved performance. Research Approach: The study aims to use a literature review to get an understanding of motivation, theoretical frameworks and models of motivation, monetary reward as a crucial factor in motivating employees towards improved performance for better organizational performance, the variety of bonus schemes used in business organizations for motivating and retaining employees. For evaluating the impact of these bonus schemes in motivating employs the study aims to use an open questionnaire based on the Likert scale and applied on 100 employees in the tourism, event management and leisure business organizations in the United Kingdom, with a minimum of three years experience in their respective organizations. The responses to the questionnaire will constitute the quantitative data. MS Excel will be used to analyze the data to provide the findings of the study. Read More