Employee Motivation and Rewards

Abstract

The subject of motivation and rewards for employees is concerned with identifying the most effective ways of encouraging workers to do their jobs thoroughly, effectively, and efficiently. Because each employee is different and has different needs and expectations from his or her job, there is wide variation from one person to the next as to the type and amount of encouragement necessary. Motivation can also be positive, such as an offer of a monetary bonus or time off from work, or negative, such as threats of punishment or termination.

Overview

Most people need to work to earn money to survive. This primary requirement is widely believed to motivate employees to do well, in order to keep their jobs. While this makes sense from a purely rational standpoint, the reality of the modern workplace is often more complex. Employees are pulled in many different directions by the demands of work, family, and other connections, and many find themselves working in jobs that they are indifferent to. To help these workers perform better, managers look for ways to inspire them. This is because a workplace tends to function much better when employees have higher levels of motivation. Employees in highly motivated environments tend to communicate with one another more effectively, do a better job of collaborating on team projects, and have lower rates of turnover, meaning that they and the organizational knowledge they possess stay within the company (Taufek, Zulkifle, & Sharif, 2016).

A central concept in any discussion involving employee motivation and rewards is the difference between intrinsic motivation and extrinsic motivation. Intrinsic motivation refers to a motivating factor that is an inherent part of a person’s job—it does not need to be added on to make the performance of the job’s duties more attractive. For example, social workers tend to be altruistic and have a high level of intrinsic motivation because the essential nature of the job is to help others in distress.

A job requiring one to work in a dangerous environment, on the other hand, would more than likely be lacking in intrinsic motivation, and attracting and retaining skilled personnel may require some form of extrinsic motivation. Rewards or benefits not expressly part of the job would have to be offered to compensate for potential risk.

Compensation may take a number of forms. One mistake that is often made when considering employee motivation is to assume that the only thing that effectively motivates workers is money. On the contrary, many workers place a higher value on other forms of compensation, such as flexible scheduling, health benefits, vacation time, or even the opportunity to take time off from work to volunteer in their communities (Lazaric & Raybaut, 2014).

Financial Remuneration. The form of motivation that first springs to mind for most people is that of monetary remuneration. This can take many different forms in addition to base wages or salary. Retirement plan contributions or pensions, commissions, and profit sharing are common types of financial remuneration. Some organizations offer employees cash bonuses throughout the year. Often such bonuses are tied to the performance of the company, so their size and frequency can vary significantly from year to year. When the company performs well, more employees are likely to receive sizable bonuses, whereas in a year when the company struggles or loses money, bonuses may be smaller or withheld entirely.

A different type of monetary reward is that of stock in the company, assuming that one works for a publicly traded enterprise (Jovanovic & Matejevic, 2014). Company stock is equivalent to a percentage of ownership in a company; those who own shares, or stocks, are said to hold shares in the company and are therefore known as shareholders. Shareholders determine what direction a corporation will take, with those owning more shares having greater influence than those who possess fewer shares.

Most people who own shares in a corporation have purchased them on the stock market, but some companies use their own stock as a way of rewarding their employees. These companies may make an outright gift of shares to an employee or offer something called stock options. Stock options are basically a promise by the company to allow the employee to purchase a set amount of shares in the company, on or before a specified date, and sometimes at a discounted rate. In companies that perform well and whose shares tend to increase in value quickly, stock options can be a very lucrative method of motivating and rewarding employees, because the employee who receives the shares can later sell them on the stock market, potentially for a sizable profit (Yoon, Sung, & Choi, 2015).

Benefits and Flex Time. Other forms of motivation and reward are less tangible but still effective. These can include benefits, such as paid vacation time, sick days, paid family leave, health insurance, and disability insurance, or perquisites, such as having a company car at one’s disposal.

Flexible scheduling is a type of motivating factor that has become increasingly popular. Having a flexible schedule usually does not mean that one comes and goes whenever one feels like it. In most cases, it means that the employee still has a set schedule that he or she follows, but that there is considerable flexibility in how this schedule is configured, compared with most jobs. While the average employee may be expected to work from 9 a.m. to 5 p.m. Monday through Friday, an employee with the option of having a flexible schedule might choose to work only four days a week, but in ten-hour shifts. The total number of hours worked in a week would be the same, but the employee with the flexible schedule would have three days off instead of two, and for some people this is an important benefit.

Other scheduling configurations are also possible. A company that does not hire part-time workers might allow two people who prefer working half-time to split their shifts so that one of them works the morning and the other works the afternoon. Still other firms have employees who only work certain months out of the year (Amin, Hossein Rezaei, & Saeed, 2013). These types of flexible schedules can often be a win-win situation, where the employee receives something (flexibility) of great personal value, while the company does not really lose anything, since the person’s work still gets done on time.

Even employees who do not choose to take advantage of flexible scheduling often feel a sense of reassurance in knowing that they could do so if their circumstances changed and it became necessary. This reassurance acts as a powerful motivator for employees to stay with the company and perform at their very best (Bullock, Stritch, & Rainey, 2015).

Professional development. For an increasing number of employees, professional or career development have become important motivators. Successful companies may provide relevant skills training or offer one-on-one mentorships (Martindale, 2015; Birch, 2018).

Further Insights

Much has been written describing what managers can do to motivate their direct reports, but just as important for understanding employee motivation and rewards is an understanding of what does not work well. Most people have encountered at least one manager or coworker who, for one reason or another, seems to have a backward understanding of motivation. One of the foremost errors that managers tend to fall into is that of trying to use fear as a motivator.

Negative motivation can take many different forms, depending on the personalities involved. Some managers do not mince words and instead make it clear to employees that if they do not meet their supervisors’ expectations, they will be terminated. Other managers may not use the overarching threat of being fired, but instead threaten to withhold something that employees need or desire, such as having certain days off for vacation or being given on office with a window or an impressive view.

Negative motivation may involve embarrassing or ridiculing employees in the belief that humiliated employees will seek to avoid being treated in a similar fashion in the future. Humiliation may also be perceived to have a deterrent effect on workers who observe the punishment. The reason that these fear-based tactics are so widely used is that in the short term, they appear to be very effective (Lau & Roopnarain, 2014). In a workplace full of fear, employees may scramble to finish their assignments in time to meet their deadlines, skipping lunch or even taking their work home with them at the end of the day.

Some managers take it as a sign that they are doing their jobs well when people are stressed out to the point of breaking down. Over the longer term, however, fear is an extremely poor motivational tool. Fear wears people down to the point where they are not invested in the quality of their labor and may become indifferent to what happens to them.

Numerous studies conducted by industrial psychologists have determined that when people are compelled to work under threats—the nature of the threat, from termination to humiliation, does not appear to make a significant difference—they first seek to avoid the negative consequence, then eventually tire, and their performance declines (Danish, Khan, Shahid, Raza, & Humayon, 2015). Employees subjected to fear-based motivation gradually stop caring about the work they do, largely because the work, instead of being a source of personal satisfaction and accomplishment, turns into a source of pain and suffering.

Where negative motivation is a constant and positive motivation unusual or absent, people learn that even if they do a good job, they will still be subject to the threats of their superiors. The incentive to do one’s best does not exist. Fear and threats create a hostile working environment that people do not want to be in, and when these strategies are used, turnover rates increase as people seek work elsewhere in the hope that they will find a more personally rewarding situation.

Issues

A motivational tool that is sometimes forgotten in discussions of the best ways to inspire people is that of recognition of employees’ efforts. Managers tend to think in practical, concrete terms about what people want and then find ways to use work as a means for people to get what they want through some type of reward system. What they may forget is that some people simply are not driven to achieve by being offered more money or permitted to use a special parking spot. Employees may instead find high levels of satisfaction in having their employer and coworkers acknowledge their hard work.

Performance recognition can take various forms, from a staff lunch where an employee’s performance is celebrated to a plaque declaring the person to be employee of the month. Recognition should be genuine, informed, include the "how" of the accomplishment, and acknowledge the hurdles surmounted along the way (Carucci, 2018). Another important part of meaningful recognition is that it provides people with a means of knowing that what they do makes a positive difference for the organization and for one’s coworkers, and perhaps even for the world outside the organization, depending on the type of work being done. This is the concept of meaningful work, suggested by some as the most powerful form of motivation (van Loon, Vandenabeele, & Leisink, 2015).

Psychologists have long believed that having meaningful work to do is one of the most basic human needs and is ranked alongside the need for food, shelter, and community. Managers have begun to seize upon this notion, realizing that recognition can often be a more effective motivator as well as a more affordable one. When money is used to motivate employees, there is obviously a monetary cost to the organization, and as time goes on and more employees compete for the rewards, doling out bonuses and raises becomes more and more expensive. In contrast, using recognition as a reward costs very little but it can mean a great deal to employees.

According to many researchers, the secret to motivating employees lies in an understanding of human nature, and a willingness to take the time to get to know the people one works with. If both of these are present, then a manager will intuitively understand, almost without conscious effort, what a particular person needs in order to perform at their highest level. If either is lacking, then it is unlikely that the manager will be able to motivate anyone in a productive and sustainable way (Bhuvanaiah & Raya, 2015).

Terms & Concepts

Corporate Culture: Corporate culture is the overall tone of an organization—the feeling one gets after working there for a while. Some cultures are competitive and cutthroat, while others are collaborative and empowering. Employees almost always prefer a corporate culture that is supportive and nurturing, and this can motivate them to give back to the organization by way of their exemplary performance.

Extrinsic Motivation: Extrinsic motivation is something external to the task that motivates a worker to perform, such as the hope of receiving a reward or the threat of punishment for nonperformance or poor performance.

Intrinsic Motivation: Intrinsic motivation is present when a task is by its own nature rewarding to the person performing it; it is work that makes one feel good.

Perquisites: Often shortened to “perks,” these are employee benefits often reserved for those in positions of higher authority. Perks may include such things as personal expense accounts, company credit cards, and company cars.

Reward System: Any type of formally articulated program through which employees may earn defined benefits by meeting specific goals or milestones.

Turnover: The rate at which employees resign from an organization, regardless of their reasons. Problems with motivation within an organization can cause the turnover rate to increase.

Bibliography

Amin, K., Hossein Rezaei, D., & Saeed, R. (2013). Analyzing the effectiveness of reward management system on employee performance through the mediating role of employee motivation case study: Isfahan regional electric company. International Journal of Academic Research in Business and Social Sciences, (09), 327.

Bhuvanaiah, T., & Raya, R. P. (2015). Mechanism of improved performance: Intrinsic motivation and employee engagement. SCMS Journal of Indian Management, 12(4), 92–97.

Birch, L. (2018). 10 ways to reward your staff without giving them a pay rise: The best things in life are free. Which is just as well really… Management Today, 1. Retrieved October 19, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=131519992&site=bsi-live

Bullock, J. B., Stritch, J. M., & Rainey, H. G. (2015). International comparison of public and private employees’ work motives, attitudes, and perceived rewards. Public Administration Review, 75(3), 479–489. Retrieved October 23, 2016, from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=102275805&site=ehost-live

Carucci, R. (2018). What not to do when you’re trying to motivate your team. Harvard Business Review Digital Articles, 2–4. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=130975159&site=bsi-live

Danish, R. Q., Khan, M. K., Shahid, A. U., Raza, I., & Humayon, A. A. (2015). Effect of intrinsic rewards on task performance of employees: Mediating role of motivation. International Journal of Organizational Leadership, 4(1), 33. Retrieved October 23, 2016, from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=116326064&site=ehost-live

Jovanovic, D., & Matejevic, M. (2014). Relationship between rewards and intrinsic motivation for learning – Researches review. Procedia—Social and Behavioral Sciences, 149, 456–460.

Lazaric, N., & Raybaut, A. (2014). Do incentive systems spur work motivation of inventors in high tech firms? A group-based perspective. Journal of Evolutionary Economics, 24(1), 135–157. Retrieved October 23, 2016, from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=95064278&site=ehost-live

Lau, C. M., & Roopnarain, K. (2014). The effects of nonfinancial and financial measures on employee motivation to participate in target setting. The British Accounting Review, 46, 228–247. Retrieved October 23, 2016, from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=98547837&site=ehost-live

Martindale, Nick. (2015). Draw up a battle plan. Employee Benefits. Retrieved October 19, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=103306160&site=bsi-live

Taufek, F. M., Zulkifle, Z. B., & Sharif, M. M. (2016). Sustainability in employment: Reward system and work engagement. Procedia Economics and Finance, 35, 699–704.

van Loon, N. M., Vandenabeele, W., & Leisink, P. (2015). On the bright and dark side of public service motivation: The relationship between PSM and employee well-being. Public Money & Management, 35(5), 349-356. Retrieved October 23, 2016, from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=103639381&site=ehost-live

Yoon, H. J., Sung, S. Y., & Choi, J. N. (2015). Mechanisms underlying creative performance: employee perceptions of intrinsic and extrinsic rewards for creativity. Social Behavior and Personality: An International Journal, (7), 1161.

Suggested Reading

Day, J. W., Holladay, C. L., Johnson, S. K., & Barron, L. G. (2014). Organizational rewards: Considering employee need in allocation. Personnel Review, 43(1), 74–95. Retrieved October 23, 2016, from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=94622465&site=ehost-live

Fernet, C., Trépanier, S., Austin, S., Gagné, M., & Forest, J. (2015). Transformational leadership and optimal functioning at work: On the mediating role of employees’ perceived job characteristics and motivation. Work & Stress, 29(1), 11–31. Retrieved October 23, 2016, from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=101347941&site=ehost-live

Jilani, E. M. (2015). Contingent rewards as a strategy for influencing employee engagement in manufacturing companies: case study of Williamson Tea Kenya Limited. International Journal of Business and Commerce, (5), 20.

Sharot, T. (2017). What motivates employees more: rewards or punishments? Harvard Business Review Digital Articles, 2–5. Retrieved October 19, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=125666200&site=bsi-live

Zámečník, R. (2014). The measurement of employee motivation by using multi-factor statistical analysis. Procedia—Social and Behavioral Sciences, 109, 851–857.