Effect of Incentives on Employees - Essay Example

The concepts of recognition and reward have been found to have close link with incentives. The main purpose of incentives is to increase the motivation of the employees in any organization towards attainment of their specific organizational and performance goals. It also leads to increased motivation to work as a team towards the attainment of a common goal of the members in an organization. In simple words, incentives are rewards and recognition given to an employee beyond their expected salary.

(Incentives Get Employees Working) The most common form of incentive is any kind of monetary reward to the employee. Several other kinds of incentives include a free trip, promotion on trail basis, a free holiday, gifts, discount coupons and vouchers. However, these are not the only form of incentives and there are many more, which differ according to the demand of the situation. (Incentives Get Employees Working) Incentives are given to increase the motivation of the employees. Since money has a considerable effect on the increase in the levels of motivation, money is considered to be a great incentive in most, if not all the organizations.

There have been a number of studies that have proven that incentives in the form of cash prize have been successful in obtaining the desired outcome from the employees. Not only money, but several other incentives have also proven to be effective. However, it's not in all the cases that incentives such as money, will defiantly lead to the desired outcome or attainment of organizational goals. Not all the incentives lead to satisfaction in the employees. There are several reasons for this, the first being disappearance of intrinsic or intangible incentives, followed by hierarchy of needs and saturation level.

Absence of Intrinsic/Extrinsic Incentive When behaviour is followed with the greed in mind solely for extrinsic rewards, then the performance decreases. For instance, a doctor who did his job because he liked helping people, now does it with only one purpose of gaining more money, would charge more and work less. This reduces his performance; however his extrinsic incentive has risen. This equally applies to employees as well. In some cases, also if the employee gains more satisfaction by intrinsic rewards, then extrinsic incentives will not lead to increased motivation and vice versa.

(Management Implications of the Interaction between Intrinsic Motivation and Extrinsic Rewards)Hierarchy of Needs According to Abraham Maslow's theory of motivation, every individual has needs that are set in levels of hierarchy. When the first level is achieved, the individual moves on to the second level of his needs. However, while he is struggling to achieve his second level of need, if the individual is given the first level of need, it doesn't motivate the individual at all. When applying this to any organization, incentives could at times cause dissatisfaction in the employee leading to decrease in performance.

For instance, if an individual's current need is to buy a car and he puts all his efforts to attain the goals of the organization