The Limitations Of Financial Rewards: Impact On Employee Motivation, Ethics And Incentive Structure

Theoretical Underpinning: Achievement Motivation Theory

“Monetary benefits” is a debatable topic which according to a few scholars is beneficial while disadvantageous according to the few others. As opined by Härtel and O’Connor (2014), a monetary benefit is like a “hidden cost of reward” which can affect the employees’ intrinsic motivation. It can do so by undermining their self-confidence in their own capabilities. According to Nyberg, Pieper and Trevor (2016), despite having an impact on employees’ performance, “monetary benefits” is an undeniable issue. It continues as if an issue due to the shortage of sufficient academic studies on identifying the disadvantages of implementing the financial rewards. These facts just propose an argument that limitations of pay-for-performance have not yet been studied extensively. The study is, therefore, aimed at providing evidence on the proposed argument.

Thesis statement: “The limitations of financial rewards have not yet been explored”

The proposed argument can also be understood through a few relevant theories such as the “Achievement Motivation Theory”. As stated by Shin et al. (2017), the achievement motivation theory states that people have varying capabilities with respect to negative and positive feelings for certain things which happen around them. They learn to relate to those things as they grow in their maturity level. This is the moment of life when they are into the ‘achievement situation’ where the feeling to fear from challenging task get converted into feelings of pleasure. These are situations when people can take risks and personal responsibilities in dealing with unpleasing situations. It happens only when they are intrinsically satisfied.

 In the opinion of Härtel and O’Connor (2014), the essence of organizational behavior is to identify and implement the best practices to produce results. It means that relevant practices can be applied to an organization set to influence the employees’ commitment to work. Such practices include but not limited to, like an integrated work relationship between the human resource professionals and the management. HR professionals can contribute to it by closely monitoring employees for their performance, hidden skills and potential qualities. In this way, Human professionals can have sufficient data which they can share with the management and help to understand the employees’ behavior. Managers can then use a different motivating factor variably meeting the distinguished data set. It also implies that a motivating factor designed this way can expectedly have a bigger impact on employees’ performance.

As argued by Strauss, Parker and O’Shea (2017), motivation to work is composed of three pillars such as concentration, direction and determination. It is important for managers to learn organizational behaviors to apply settings to drive the employee motivation. However, contemporary managers have misunderstood it and have found ‘pay-for-performance’ as their only motivating weapon. It does make a difference and proves worthy in a few cases as well. However, it can potentially harm the intrinsic motivation of most other employees. It can happen because it misses on a motivational talk which is much more a motivating factor to many. On the other hand, it can also affect the creativity in employees those who seem like being motivated by financial rewards. It causes them to feel with limited capabilities when they are asked to think beyond they constantly do. Monetary incentives did work in the 20^th century when workers had required doing a lot of physical works. The 21^st century is more about intangible abilities and creative thinking which is not possible through monetary benefits.

Organizational Behavior and HR Practices

As argued by Guerci et al. (2015), monetary benefits can affect the socio-cultural environment in the workplace and can also encourage an adherence to unethical practices. It is indeed important that different cultures are integrated to attain one shared vision. It is also important that employees are helpful to each other and are involved in social activities. There should not be any obstacles like racism, workplace bullying, cyber-bullying and others. According to Guerci et al. (2015), few people will desperately look to earn the incentives whereas others will not be willing to go the extra mile. They are rather happy with what they have been doing so far. Additionally, there will be unwanted competition between employees and they can also try to out-do others. Such practices can never be good from the socio-cultural perspective. Employees may lose their willingness to support the others and will always look to compete with them. Probably, they may also find some other ways of doing better than the most. They will be into the practices which are unethical as per the organizational policies of ethical conduct. Hence, monetary benefits can create a platform where there is less respect for others work. Work environment will be less friendly. They may not be able to work as a team. Employees will become less creative. Ethical practices to leverage the incentive structure will also be there.  

 According to Yousaf, Yang and Sanders (2015), a strong incentive structure can encourage unethical practices and employees at the end of delivering the work will feel as if they did no wrong and the outcome is justifiable. They will develop a tendency to select the easiest and shortest path to attain it. Their behaviors are so pervasive that they have an answer to every escalation raised against their unethical practices. Unethical practices can include but not limited to such as ‘not entirely meeting the quality parameters’, ‘using the alternative ways to do the task’, ‘taking the unethical assistance of outsiders’ and ‘focusing just on one parameter and that to work fast’. Additionally, financial incentives can create an environment of pay inequality which can lead to serious consequences like a turnover. Performance of a few employees can also be affected by. A compensation benefit is not just a resource to financial needs but also signifies the values and status. This is why there can be comparisons between benefits being distributed between the managers and the employees. Employees will end up having frustration, envy, jealousy, resentment and disappointment. They will feel overlooked and will simply look for the better options. Therefore, monetary benefits create pay inequalities which demoralize collaboration, performance and retention.

Misconception of Financial Rewards: Pay-for-Performance

According to Gagné (2018), organizational behavior is undergoing a number of developments currently; however, the level of developments is different in SMEs and multinational firms. SMEs are hanging around things they have been doing such as recruitment & retention, training and the incentives program. Despite implementing these strategies, they are finding it difficult to reduce the attrition. They have continued to recruit fresh talents but have failed to improve the rate of retention. They have become dependent on incentives program; however, have failed to analyze its impact on employees and the workplace environment. There is a need for integration between the management and the human resource towards the attainment of goals. They should work in areas like the socio-cultural environment and ethical practices at the workplace which are getting affected by the incentives program. On the other hand, many big firms are trying to improve its compensation plans by including a list of new benefits to employees like wellness program, leave policy and others. These policies are definitely the few of the requirements which employees look to. However, they have other needs and wants as well. When such needs and wants go unnoticed, attrition occurs. It is best to have the regular feedback sessions where employees will be given to sharing their expectations from the management. Implementing all the feedbacks can be difficult; however, those that are feasible with organizational capacity should be implemented. Until and unless employees are valued, they will not feel like being the part of the company in long-term.  

In the opinion of Elmishali, Stern, and Kalech (2018), few companies are adopting the emerging technologies like artificial intelligence (AI). They are doing it to reduce the workload which can be a good idea to improve the employee satisfaction level. Implementing (AI) in appropriate areas will also enhance the work efficiency and speed up the process. Human resource and the management will then have the option to shift from existing monetary policies to a more strategically defined compensation structure. Strategies will help to redesign the compensation structure and to make it more relevant with employees. Non-monetary benefits can produce a relatively better impact not only on the performance but also on the quality of work. This will promote adherence to the ethical code of conducts, attainment of culture to perform and adaptability with social awareness.

In summary, it can be concluded that a strategic approach from the management and the human resource will of high values in regards to improving the compensation structure. Compensation structures have undergone and are undergoing the changes to make it much more relevant to employees. However, attrition is still happening. Attrition is a big issue considering the global shortage of skilled workforce and the investments made in the training & development programs. A zero percent attrition is close to impossible; however, it can be reduced effectively by using the strategically planned compensation system. In this regard, the role of management and the human resource will of high values. They should integrate and try to collect as much data as possible reflecting the needs and wants of employees.

References

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Gagné, M., 2018. From strategy to action: transforming organizational goals into organizational behavior. International Journal of Management Reviews, 20, pp.S83-S104. [DOI: org/10.1111/ijmr.12159]

Guerci, M., Radaelli, G., Siletti, E., Cirella, S. and Shani, A.R., 2015. The impact of human resource management practices and corporate sustainability on organizational ethical climates: An employee perspective. Journal of Business Ethics, 126(2), pp.325-342. [DOI: 10.1007/s10551-013-1946-1]

Härtel, C.E. and O’Connor, J.M., 2014. Contextualizing research: Putting context back into organizational behavior research. Journal of Management & Organization, 20(4), pp.417-422. [DOI: 10.1017/jmo.2014.61]

Nyberg, A.J., Pieper, J.R. and Trevor, C.O., 2016. Pay-for-performance’s effect on future employee performance: Integrating psychological and economic principles toward a contingency perspective. Journal of Management, 42(7), pp.1753-1783. [DOI: 10.1177/0149206313515520]

Shin, Y., Kim, M.S., Choi, J.N., Kim, M. and Oh, W.K., 2017. Does leader-follower regulatory fit matter? The role of regulatory fit in followers’ organizational citizenship behavior. Journal of Management, 43(4), pp.1211-1233. [DOI: 10.1177/0149206314546867]

Strauss, K., Parker, S.K. and O’Shea, D., 2017. When does proactivity have a cost? Motivation at work moderates the effects of proactive work behavior on employee job strain. Journal of Vocational Behavior, 100, pp.15-26. [DOI: org/10.1016/j.jvb.2017.02.001]

Yousaf, A., Yang, H. and Sanders, K., 2015. Effects of intrinsic and extrinsic motivation on task and contextual performance of Pakistani professionals: the mediating role of commitment foci. Journal of Managerial Psychology, 30(2), pp.133-150. [DOI: org/10.1108/JMP-09-2012-0277]