Pros And Cons Of Using Financial And Non-Financial Rewards As Motivators In The Workplace

Financial Rewards as Motivators

Motivation plays an important role in all business sectors, whether state owned or private. It is important because it works as a driving force for the staffs towards achieving certain goals which increase the company’s production too (Olafsen et al 2015). The essay discusses the pros and cons of money and other factors such as paid holidays, bonus, employee discounts, paid vacation, company parties or recreations, discount coupons, as motivating factors for the employees (Landry et al 2016). The essay further throws light on the range of advantages and disadvantages of monetary and also non – monetary rewards. The reward can be used as a motivating factor for the employees who lack motivation and proper productivity. The use of monetary reward as a motivating factor becomes a threat when it disturbs the workplace atmosphere and creates hostility amongst the employees who run after bonus and incentives. Employee turnover, mental depression, absenteeism, burnouts are a few of the results of lack of motivation and the deadly rush for monetary motivation is the negative factor related to this issue (Kuranchie-Mensah and Amponsah-Tawiah 2016). It can be deduced that there are almost equal number of pros and cons of money as a motivating factor and the organization is responsible to maintain the two.

There are many organizational behavior theories such as Maslow’ hierarchy of necessities, Herzberg’s motivator-hygiene, equity theory and many others. Employees stay stuck to work when they are satisfied with their job and motivated in their respective priority fields. Different people have different priorities (Mikkelsen, Jacobsen and Andersen 2017). Everyone cannot be satisfied with only the monetary rewards. Maslow’s hierarchy shows the five primary categories of needs that should be given importance to motivate the staffs (Nimri, Bdair and Al Bitar 2015). They are physiological needs, safety and security needs, social needs esteem needs and self-actualization needs. According to Herzberg theory, there are five features of work that bring about satisfaction, that are goal accomplishment, appreciation, the job, duty or responsibility and progression (Koch et al 2014). His theory builds the scope for appreciation, personal growth and improvement among their staffs. The company should promote an employee after completing a certain period working in the company and certify him with appreciation and recognition. The equity theory declares that the more an employee gets rewarded, the more he gets satisfied with the input and efforts he/she has given to work. 

There are few potential organisational problem situations such as employees who lack motivations may tend to damage or interrupt the daily production of the organization. Culture- shock, excessive workload, language problem, difficulty in team management, accommodation and daily transport problems can affect their performance. Some employees who are engaged with the company tools and machines on a daily basis and are supposed to maintain safety while using them and need the most attention (Sari 2018). Hence, it is the responsibility of the organization to maintain a steady workforce and behave sensitively regarding social, cultural, and ethical issues. An organization should take care of the emotions of the employees to continue the business smoothly. Lack of motivation and lack of job satisfaction may lead to absenteeism, poor quality work, crude production, environmental and reputational risk, financial and health risk and others.

Disadvantages of Financial Rewards

Employees can get motivated by money through a far range of organization. The American Compensation Association and the American Productivity Center conducted a survey which proved that up to 99 percent of companies using money as a reward delivered the highest production and resulted in being positive (Koch et al. 2014). If money is kept as the motivating device in a particular organization, it can open various ways of using it. There are various ways such as bonus, commission, pay, gift vouchers, foreign business trip rewards, which can initiate a competition among the employees to achieve greater goals. Money appeals each employee, irrespective of their designations. It appeals to a lower class worker and equally attracts a CEO of a company. Therefore, another advantage of using money as a motivator is that it fascinates all types of staffs. Since the ultimate aim of most of the people is to live a better life in the future than today, employees strive to work hard to earn some extra dollars at the end of the month. 

There are some apparent developments and specifications in organizational behavior recently. In today’s scenario of growing competition in the market, employers prefer non-monetary or extrinsic rewards over intrinsic rewards because it is cost-effective and influential in motivating the employees and recognizing new talent and high-calibre recruits (Nimri, Bdai and Al Bitar 2015). Research has been conducted on the benefits of financial and non-financial rewards, and it has been found that comparably those companies which focus more on non-financial rewards have become successful in retaining employees for a long time than those companies which focus more on financial rewards. Companies depend more on non-financial rewards when the budgetary flow goes through some kind of interruption or loss (Posey, Roberts and Lowry 2015). Therefore, non –financial rewards should be incorporated in a company’s plan to keep encouraging its employees. Some of the most popular non-financial rewards include recognition by co-workers and the management, awards for loyalty and consistency in work, flexible timings, promotion to higher posts as an appraisal of performance, training to brush up the skills and many others. The American Association of Retired Persons in 1999 went through a survey which found that according to the retired persons’ non-financial motivation is catchier than the financial one when it is tailored to the staff’s age group ( Ajmal et al 2015). Some organization offer the opportunity to work even after retirement in a flexible schedule which is highly welcomed by the employees nearing the retirement. Feedback from the management is more wanted by the younger employees and the policy of after retirement job retains the employees for a long period.

Non-Financial Rewards as Motivators

A survey was conducted by Mercer in 2011, a consultant company on the staffs of Mexico, Brazil, Canada, Argentina and United States and all agreed that “being treated with respect” is the most important and desired motivating factor (Ajmal et al 2015). It develops the company’s reputation because the more they recognize, care and praise the employees, the more they stay loyal and committed to the company’s name. There is a mass of employees for whom money hardly matters. They work for passion and appraisal. Their priorities are different, and they expect to receive more non-financial rewards in the course of their employment. 

There are as many disadvantages as there are advantages of motivating the employees with extrinsic and intrinsic rewards. For instance, when a company has a productive and profitable year, it can afford to reward the talented employees (Sari 2018). But the company may not receive equal profit the next year and becomes unable to reward the employees even after their excellent performance. It also may prove demotivating if the employees do not receive the same amount of reward that they had received in the past financial- year. In many companies, there are team-work appraisals, and sometimes teamwork production is greater than an individual’s production. Often in a rush to fulfill teamwork targets an individual gets exhausted to compete with the workforce. This can cause depression (Imran et al 2014). The competition for bonus and all disrupts the workplace relationship between the co-workers. Instead of helping each other they tend to overtake each other which violates the peace within the office. Burnouts are another drawback of financial rewards. Bonus sometimes depends on the count of overtimes a person does. The employees try hard to work for long days and nights to achieve bonus which can prove harmful for the employee and the employer as well (Popov 2017). Low morals, less productivity are among the first problems caused by overwork. It can affect the customer relations too. Many companies provide incentives by sales an employee has done. The result is the employee strives hard to make the maximum sales to receive a bonus. The customers get exhausted from the employees push them hard to buy the product. If the person who is receiving the gift or reward (non-financial) does not understand the value of the reward, it can be disappointing for the employee. Therefore, the management should check whether the person can evaluate the worth of the appraisal or gift. The management should observe the different personalities of the team and encourage with a reward suitable to them. 

Disadvantages of Non-Financial Rewards

Therefore, it can be concluded that in every organization, motivation is significantly essential for the productivity of the company and the management, and the team leaders have a remarkable role to play to keep the employees motivated. There are two types of motivation to get the best out of the employees: financial and non-financial. The different employees in a company have their expectations, but it is the responsibility of the management to develop and combine with the theories suitable to bring them job satisfaction. There is no fixed theory to be used, but an organization can apply a ‘mix’ theory on the staffs. The employees should be given a single platform to express their feedbacks and concerns so that the management could focus on them. Disadvantages go side by side with the advantages of rewarding an employee in financial and non-financial ways. Sometimes favors provided to the employees in the form of non-financial rewards may cause a loss for the company itself. The work from home facility can slow down the speed of the work since the home is always a comfortable and relaxing place. The employee may take advantage of the facilities. Summing up a company is run by its employees. They are the foundations of any organization. If they stay motivated, the company will see development, and if they do not, the company will face a wide range of employee turnovers. Hence, there are pros as well as cons, but the responsibility is completely on the shoulders of the management to balance the two, to establish the company in world order. 

References:

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