Motivation refers to the psychological aspect that stimulates a being to action towards a desired goal; it is the activation of a purpose-orientated conduct. There are two kinds of motivation namely: intrinsic – which is driven by an enjoyment in the task itself, and lies within the individual, and extrinsic – which is derived from the external sources outside of the individual. An incentive program is a prescribed method used to promote or exhort specific measures or conduct by a specific group of people within a specified span of time.
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According to Evans (2007), “rewards usually relate to the achievement of certain laid down goals, either personal, team or organizational, or a combination of all of these.” The benefits accrued are very important to the employee as well as the company. Primarily, benefits to the organization or company include retention of the existing staff, fostering teamwork, boosting productivity, increasing employee motivation and loyalty, and linking the employee and business performance (Evans, 2007).
Many people wonder whether incentives really have any impact on the performance of an organization. However, many studies reveal clearly that there is a strong relationship between incentives and increased employee performance (McShane et al, 2009). In addition, there is a strong agreement that incentives and rewards are a credible and powerful tool for performance improvement. While other articles tend to refute this fact, one would wonder then, why do most of the well performing companies include both the short term and long-term incentives in their programs?
In support of this, the ‘Total reward theory’ states that employees will show increased performance if they feel valued by the organization they are working for (Ericson, 2010). Every organization is therefore encouraged to create an environment that employs incentives and rewards as a strategic way of improving employees’ performance.
Arguments for use of employee incentives and rewards
There are various forms of employee incentives and rewards, which help to boost the performance of employees. Incentives are meant to benefit both the organization as well as the employees; some of the benefits that can be accrued include improved business performance, reduction in extravagance from staff turnover and recruiting costs, more committed and enthusiastic workforce, better staff behaviors, etc (McShane, et al.,2009).
Firstly, financial incentives help employee focus on meeting a certain target. As a result, the company benefits from achieving its goal while the employees gain value in monetary form for achievement. The extra pay or benefit received by an individual leads to extra output. Secondly, non-monetary or non-financial forms of incentives normally encourage more attachment to the organization or business. The employee’s priorities and lifestyles are recognized in this case, thus boosting his/her productivity. Moreover, when incentives and rewards are given to groups or teams, they encourage team playing thus ideas and knowledge is shared. Consequently, an individual’s under-performance can be corrected through interacting with others (Ericson, 2010).
Arguments against use of employee incentives and rewards
There are certain limitations of Employee incentive programs, which as discussed below. Firstly, the effectiveness of incentives and rewards over time is short-lived. Most Incentive programs are commonly known to last for only a short period, and as time elapses, the connection between incentives and the employee performance loses its meaning.
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Mostly, the incentives employed today to yield positive returns become obsolete with time and the next time such a return is needed, the reward will look like an ‘expected’ rather than an’ incentive’. It is true that there are benefits in the short run but it is people’s nature to quickly forget the favor accorded to them in the past (Lee and Seda, 2009). Moreover, when the program is not well planned and implemented, the workforce tends to be unhappy while other employees become distrustful.
Sometimes, these incentives lead to poor communication especially when the employees feel that the criterion used for rating best performance was unjustified (Dessler and Varkkey, 2008). Additionally, some employers fail to provide effective information to their employees; for instance, a manager who does not open up and discuss candidly with his employees, makes the employees also to be reserved. Additionally, hidden information can result to problems especially if the manager assumes that the employees already know what is expected of them (Lee and Seda, 2009). Moreover, poor communication can result from overloading of information. When a lot of information is given in excess of what the receiver can decode, the information may end up being distorted or omitted (McShane and Glinow, 2007).
Other findings from researchers reveal that retention of good employees for a long time by enticing them with incentives is deleterious. This holds true to some extent especially when the employee is neither challenged nor stimulated and there is no room for growth and development career-wise. In addition, it is wrong for both the employee and the company to retain employees when there is no growth, since the employee is no longer enthusiastic and innovative when there is no learning.
He is unable to keep up-to-date with the ever advancing business environment and thus the flow of new prospects, new insights and views is hindered (Rynes et al, 2004). It is therefore advisable to check for value-adding aspects in the long serving employees to see if they are just a liability to the company or an asset. In addition, it is very important for managers to release and give room for the unchallenged employees to exploit other environments rather than hold them with rewards and benefits. Moreover, it is very true that ‘achieving what you are expected to achieve for the sake of achieving is no source for motivation’ but rather, a person’s quality of life must gain too (Jeffrey and Shaffer, 2007).
Additionally, some incentives impose pressure on those leading a team especially when the motivation must come from them; and more often, team leaders find themselves spending a lot of their time and energy coercing their team members to perform better in order to receive their reward. This is at the expense of focusing on leading the employees, as well as enabling them to realize and attain their full potential. This is instead demotivating to the team leader (McShane and Glinow, 2007).
Moreover, incentives and rewards, which are given in monetary forms, are known to be sometimes non-effective. For instance, when the expectations of the employees exceed the reward they receive, a disparity tends to arise between the party members (Rynes et al, 2004).
Firms usually establish HR systems or programs that have the capacity to motivate employees; and if implemented correctly, these incentive programs and rewards are a very effective tool for performance improvement. A good incentive system can boost even secondary performers to success (Evans, 2007). However, the use of a well-planned and designed model for rewarding employees cannot be underestimated by an organization.
The kind of incentive must be reasonably priced, transparent and appropriate to the firm and the task they link to (McShane and Glinow, 2007). Apart from just rewarding for achieving the targeted goals, employers should steer towards assisting people enrich their work, which is true motivation. To be a true leader, one should be concerned about the plight or welfare of his/her employees, which should be consolidated with the interests of the organization at all times (Evans, 2007). It is wise to consult the staff before deciding on what form of incentive to introduce for best results. Nevertheless, incentives and rewards are effective when the working environment, compensation and management practices are at par with the expectation of the employees (Bray, 2009).
Bray, I. N., 2009. Healthy Employees, Healthy Business: Easy, Affordable Ways to Promote Workplace Wellness. Nolo Publishers. Web.
Dessler, D.G. and Varkkey, P.K., 2008. Human Resource Management. New York, Pearson Education Publishers.
Ericson, R. N., 2010. The New Standards: Methods for Linking Business Performance and Executive Incentive Pay. NY, John Wiley and Sons Publishers. Web.
Evans, J. R., 2007. Quality and performance excellence: management, organization, and strategy. New York, Cengage Learning Press. Web.
Jeffrey, S.A. and Shaffer, V.T. (2007). ‘The Motivational Properties of Tangible Incentives.’ Compensation Benefits Review, vol. 39. New York, Pearson Education Publishers. Web.
Lee, K.L. and Seda, C.D., 2009. Search Engine Advertising: Buying Your Way to the Top to Increase Sales. CA, New Riders Publishers.
McShane, S. et al. 2009. Organizational Behaviour on the Pacific Rim. Edition 3. London, McGraw-Hill Press.
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McShane, S. L. and Glinow, M. Y., 2007. Organizational behavior: essentials. PA, McGraw-Hill Publishers. Web.
Rynes, S. et al. 2004. ‘The Importance of Pay in Employee Motivation: Discrepancies Between What People Say and What They Do’, Human Resource Management, vol. 43, no. 4. New York, Pearson Education Publishers (Online). Web.