Perception or Motivation - Case Study Example

Running Head: THE DOMINANCE OF NON-MONETARY MOTIVATION IN EMPLOYEE RETENTION Name Institution Tutor Date Introduction The need to retain employees in organizations may override any other human resource priority if the firms are to remain competitive. With the exit of a member or members of its critical workforce, a company counts considerable financial and intellectual losses (Ramlall, 2012). It has been approximated that firms incur financial losses twice the pay for the vacant position (Deems, 1998). The costs cover the efficiency and production losses, recruitment and hiring expenses and related human resource training costs invested in the vacated position (Rader, 2012). Hinkin and Tracey (2000), for instance, peg the cost of terminating a salaried staff in food industry at $ 3000 and that for an hourly employee at half that cost. Loss of a critical staff may also force a firm to incur nonfinancial losses with serious financial implications. The exited firm suffers credibility and gets a public image dent at the expense of the receiving firm. These concerns emphasize the centrality of work force retention for many a business enterprise. Firms consider both financial and non-financial motivation for workforce retention but not in equal measure. Opinion is sharply divided on the role of monetary and non-monetary motivation on staff retention in firms. Research evidence shows that both financial and non-financial motivation plays a key role in staff retention (Chhabra, 2008, Struyk, 2008). This paper seeks to clarify the dominant role played by non-cash benefits over the cash-benefits in employee retention. This argument is backed by both theoretical and empirical evidence. This is preceded by a brief discussion of the causes of staff attrition. The presentation of the theoretical underpinnings of staff retention is followed by discussions on monetary and non-monetary employee retention strategies. In the summary and analysis of the empirical evidence from research and place of motivation in it established. Premises for building effective staff-retention policies are recommended in the last section. Employee retention accrues benefit for both the employer and the employee. It has been defined as process that encourages the staff of an organization to work for the firm for the maximum duration or to the completion of the contract ( Chhabra, 2008) . Before examining retention strategies, it is important to have an overview of the factors that contribute to high staff welfare. These according to Chhabra (2008) include lack of opportunities for upward mobility, lack of staff appreciation, lack of trust and support, burn out from overwork, unsatisfactory compensation, better job offers and lack of job satisfaction. Corresponding retentive strategies would therefore include staff empowerment, recognition, consultative engagement, negotiated work schedules, expansion potential and equity. From the aforementioned staff attrition and retention factors, non-financial factors outnumber the financial ones. This indicates that the staff looks into more than monetary compensation for staying in a firm. A theoretical explanation for such tendencies needs to be explored to put this question into perspective. The section that follows considers the psychological principles which underpin workers motivation for staying or exiting an organization. Retention of human capital can be motivated by among other reasons, Maslow’s hierarchy of needs namely physiological, security, affiliation, esteem and self-actualization (Maslow, 1943). Maslow maintains that these human wants are perpetual and the satisfaction of one tends to lead to another want. This implies that the human resource think tanks must constantly design packages aimed at meeting present and emergent needs of its members. In the labour context, some strategies for meeting these needs have been outlined by Champagne and McAfee (1989). The physiological needs can be met by subsidizing cafeteria services whilst safety needs are met economically, psychologically and physically. These include wages/salaries, fringe benefits, retirement and medical schemes; explicit job description, praise/awards and solutions to workers’ concerns; and sound working conditions respectively. Affiliation practices encourage team and interactive working environment. Delegating challenging tasks, training, consultation, praise and recognition boost esteem while self-actualization is realized by building human capital for greater opportunities and autonomy. Steers and Porter (1983) warn managers that failure to create conducive environment that addresses these needs would frustrate the employees and lead to massive labour capital turnover. Other theoretical constructs relevant to the course of employee retention are the need theory which emphasizes the workers’ desire to excel, to be in control, and operate in a friendly interpersonal environment (McClelland, 1961) and the equity theory in which workers are motivated by balancing input and output (Adams, 1965). Interrogating these psycho-social principles in the context of staff motivation implies that workers needs go beyond survival. Several intrinsic and extrinsic motivators are at work in defining and influencing workers’ behavior. An employee’s basic drive to gain employment could be motivated by the need to satisfy physiological needs. His/her performance and stay in the particular job is the subject of other internal and external forces that the incumbent employment must seek to deal with. Monetary gains for instance should enable one to afford a decent life that guarantees good physiology, safety and esteem. Money may not necessarily buy affiliation and self-actualization. In the same way, nonfinancial incentives, as discussed later herein, may come in form of subsidies for physiological needs. On-the job training and autonomy may indicate job security while the senses of affiliation, esteem and actualization can be satisfied through staff appraisal, involvement and other non-cash initiatives. Human capital retention, in view of these principles, largely depends on how well an employer meets their needs and/or provides equitable returns for their work. On the basis of these theoretical propositions, monetary benefits have been viewed as the main motivator for staff retention. The monetary benefits include variable pay, stock options, bonuses and cash awards (Gorschek, 2010). Variable pay could be based on job type, skill/competence, seniority, time or output. These payment schedules have been employed over time to accelerate efficiency and maximize productivity with considerable success. Studies reveal that financial motivation is responsible for increasing production rate by 40% while at the same time boosting confidence and staff loyalty and commitment to an organization (Stolovitch, Clark & Conldly, 2002) It is astounding though not uncommon that the most vulnerable staff to quit a firm position are the best remunerated. Good financial perks do not necessarily retain the staff that they attract. Employee retention principles thus lie outside the monetary bracket and non-financial motivation could be one such principle. In defining non-financial recognition, Silverman (2004) emphasizes that whatever the employee receive may have monetary value but it should not be money. He for instance includes vouchers in this category of motivators. Other non-monetary benefits with financial implications include paid-up tuition, staff entertainment and waivers. The benefits of nonfinancial rewards discussed by Silverman include cost effectiveness, immediacy of impact, firm credibility and staff retention. The last benefit is the subject of this paper and, according to Silverman; these non-cash incentives move the attachment of a worker to a firm from the pay to more long-lasting affective bonds. Howard (2008) presents a fourfold categorization of the non-monetary benefits: staff treatment, development, rewarding and work schedule. Strategies for treating employees include getting to know them, open and clear communication and fair treatment. Staff development involves training, appraisal and inclusion in decision-making mechanisms. Howard recommends non-cash appreciation and fixing flexible work schedules for the workers as effective for employee retention. Non-cash appreciation begins with simple “thank you” gestures and includes verbal/written praise, commendations and expanded access, for instance, to the firm’s existing facilities like a bigger and better equipped office . Silverman (2004) discusses nomination-based schemes in form of plaques, certificates or trophies to staff nominated for special recognition by fellow members . Lamek (2011) also lists autonomy in one’s job as an effective nonfinancial incentive. Staff retention is the overall goal of the intermediate outcomes of non-monetary incentives. Clear and open communication with the employees gives them a sense co-ownership among other benefits that eventually translate to retention. Maier(2009) found that open communication creates an enabling working environment. When the short and long term goals of an enterprise are shared with employees, their commitment and loyalty to the firm is cemented (Brown, Yoshioka & Munoz, 2004). On the contrary, employees feel like unimportant outsiders whenever crucial information is withheld from them (Branham, 2005). Personnel training specializes staff and increase future prospects the firm hence lengthening stay. It has been noted that training on the job may not be recognized competitors since no degrees or certificates are awarded (Preene, De Peter, Vianen & Keijzer, 2011). The incumbent firm enjoys both short term and long term gains from such endeavours. Motivating through autonomy and worker’s greater say in the work signify recognition and boost morale. Kaliprsad (2006) observes that greater responsibility empowers and inspires as the worker feels trusted. This, in turn, may to shared goals which often translates to longer stays on the job. Employee praise and acknowledgement by the employer, though financially costless, brings about priceless results. The feeling of being appreciated often achieves Maslow’s security, affiliation, self-esteem and actualization needs cited earlier on. Having demonstrated how these incentives work, let us scrutinize relevant studies in the area of staff motivation in bridging the gap between theory and practice of staff motivation. The immense human and financial resource invested in critical staff recruitment and training warrants a corresponding effort in staff retention. Towards this end, several staff surveys and studies have been conducted in the domain of staff retention. Gorschek (2010) cites a 2009 McKinsey global survey, of 1047 employees at the executive, management and other levels, it was reported that the most frequently used cash and non-cash motivating strategies by employers were performance based cash bonuses and praise/commendation from the immediate manager. However, it was established that on the whole, nonfinancial incentives reported higher effectiveness (64%) than the financial rewards (49%). Lamek (2011) reported from a study on the non-cash motivation for police force in Tanzania that the non-financial schemes are effective even in the absence of the financial ones. He suggests that they can substitute or complement monetary incentives for staff motivation. These findings reflect those reported by McCartney and Holbeche (2003) that showed that non-monetary motivators like job satisfaction, self-drive and challenge and recognition were the topmost at above 65% with monetary rewards being a lower motivator attracting only 31 percent of the managers. Conversely, they found that lack of nonfinancial recognition as the greatest demoralizer cited by 54%. Howard in the study cited earlier clearly suggests that the non-monetary rewards may be more effective than other alternatives since they may lead to workers loyalty and unswerving commitment to the firm. These studies put a heavy premium on nonfinancial strategies as far as staff motivation is concerned. It is not enough, however, to categorically assume that financial strategies play a diminutive role in staff motivation. In any case, it is common knowledge that human resource more often than not enlists the financial benefits as part of the strategies for attracting the best people for a job. Nevertheless, nonfinancial motivation’s dominance over monetary motivation cannot be overstated. Conclusion It is time the policy makers in the human resource industry acknowledge the primary function in the labor capital motivation for increased productivity, efficiency and retention. Among the courses advanced in this paper for consideration are workforce recognition, fair treatment, development, reward, autonomy and involvement. It has also been demonstrated that these non-cash strategies tangible or otherwise, are more efficient though less costly than the monetary incentives. The permanency of the motivational effects of the non-monetary benefits is shielded from the market forces that mainly affect the financial aspects of labour. It can also be demonstrated that non-monetary motivators are the only ones that satisfy the five human needs stated in Maslow’s hierarchy. Monetary benefits may for instance, not easily meet the affiliation or the psychological security needs of a worker. One major flaw with monetary rewards is the possibility of the workers perceiving it as an entitlement and the norm in job market practice hence not as an incentive . It is in this sense that it can be concluded that when nonfinancial incentives are personalized, their likelihood of being appreciated cannot compare to the formula-based remunerations. It may be the case that entrenching non-monetary schemes on the way of staff recruitment, hiring, development, performance and reward would significantly minimize the rising cost of staff turnover. References Adams, J. S. (1965). Inequity in social exchange. Advances in experimential social psychology, 2, 267-299. Brostek, M. (2000). 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When there’s no money for raises, employees might be wiling to stay if you reward their efforts in other meaningful ways. Medical economics, 82(23),56-59. . Read More