Motivation and Non-financial Incentives

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  • Topic: Motivation, Victor Vroom, Incentive
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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS COMPARING THE IMPACT OF FINANCIAL AND NON-FINANCIAL REWARDS TOWARDS ORGANIZATIONAL MOTIVATION

AUGUST 2011
VOL 3, NO 4

Rosliza Md Zani1, Nazahah Abd Rahim1, Sutina Junos1, Shuhaimi Samanol2, Sarah Sabir Ahmad1, Farah Merican Isahak Merican1, Shakirah Mohd Saad1, Intan Nazrenee Ahmad1 1

Faculty of Business Management, Universiti Teknologi MARA Kedah, P.O. Box 187, Sg. Petani, Kedah, Malaysia

2

Faculty of Mechanical Engineering, Politeknik Seberang Perai, Penang, Malaysia

ABSTRACT The main aim of this paper is to investigate the relationship of the two types of rewards namely financial rewards and non-financial rewards towards employees’ motivation. Based on past literature, it is found that financial rewards or money has become the main motivator for employees’ performance in organizations. Traditionally, little thought has been given to the impact of non-financial rewards as it does not hold any immediate monetary value to the employees. However, in the context of heightened awareness among employers and employees, there has been greater emphasis on non-financial rewards such as praise and recognition as it holds a deep and greater impact to the employees especially in the long run. This paper defines the nature of financial and non-financial rewards and discusses the impact on employee’s motivation. By undertaking a comparison between the financial and non-financial rewards, this paper identifies the differential nature of the rewards and discusses some of their consequences. The outcome of this paper provides vital information for organizations to structure a better rewards plan for their employees. Keywords: Rewards, Motivation, Organization, Employee 1. Introduction Motivation is a central element in a learning process of a human. In the organizational context, motivation plays an important role in ensuring organizational success as humans are the heart of an organization. Humans or employees without motivation are not able to carry out the job perfectly. If the organization is not able to motivate its employees, the knowledge within the organization is not efficiently used. Therefore, it becomes the aim of every organization to search for the clues to motivate employees; otherwise the organization will face difficulty to maintain its workforce thus achieving the goal. How to motivate employees? This is the question most organizations are asking themselves. Is money the best way to motivate these people? If employees are asked to choose between money and enjoyment of work, what would be their choice? Currently, many organizations are implementing reward programmes. Large amount of money are being spent in these programmes. Reason being, these types of incentives or rewards will increase employees’ motivation, will also make them stay longer in the organizations. However, will money really make things work? Motivating employees using pay-for-performance is a long-established management practice. It is expected to boost employees’ effort as well as performance. Expectancy theory by Victor Vroom in 1964 clearly stated that employees’ effort is increased when rewards are offered. On the other hand, there were also literatures that did not support what Vroom had found. The first evidence that employees are not motivated by money was found by Elton Mayo in his research known as the Hawthorne studies. The result found that human relations and understanding attitudes were more

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VOL 3, NO 4 motivating than money. Employees seek attention from managers and this will make them becoming loyal employees. This paper seeks to understand the nature of financial and non-financial rewards and comparison is made on the effect of these rewards in relation to employees’ motivation in an organization. By understanding the nature of these two types...
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