THE IMPACT OF MONETARY REWARD ON EMPLOYEE PRODUCTIVITY
- Background of the Study
This project is on The impact of monetary reward on employee productivity. Monetary rewards are essential in an organization and has being identified by human resource as a means of achieving sustainable competitive advantage. Since organizations are operating in a dynamic and competitive business environment, they need to develop strategies to acquire and retain the competent workforce. Human asset are considered to be the most important asset of any organization and in order to get the efficient and effective result from human resource, motivations such as monetary rewards are necessary (Rizwan et al., 2016).
Based on the importance of motivation, it has been divided into two categories by researchers namely intrinsic and extrinsic, where extrinsic motivation comes from external factors such as financial rewards and needs to be refilled at regular intervals not to lose its effect, while intrinsic motivation comes from inside of an individual and is the kind of motivation every organization wishes their employees would have (Mahaney et al., 2006). Motivation provides a necessary dynamic in today’s environment that explicitly creates and encompasses positive impact on job functions (Lai, 2011).
According to (Bartol et al., 2002), rewards can be defined as all forms of financial returns and tangible services and benefits an employee receives as part of an employment relationship. According to Allen and Kilmann (2001), reward practices play a vital role in improving employee productivity. (San et al., 2012) argues that if an organization fails to reward employees, it will directly affect employee productivity. An efficient reward system can be a good motivator but an inefficient reward system can lead to demotivation of employees in terms of low productivity, internal conflicts, absenteeism, high turnover, lack of commitment and loyalty, lateness etc. An organization needs to develop strategic reward systems for employees in order to retain competent employees which result to obtain sustainable competitive advantage. Financial rewards have always been important in managing employee’s performance.
Cross (2019) describes incentives as variable rewards granted according to variations in the achievement of specific results. Also he went further to call it a stimulus to greater action. They may be used to incite action or greater effort. An incentive is anything which can be given in addition to wages. Incentives are therefore motivations for work, as they could be financial or non-financial rewards. Incentives provide a zeal in the employees for better performance. It is a natural thing that nobody acts without a purpose behind. Therefore, a hope for a reward is a powerful incentive to motivate employees. Besides monetary incentive, there are some other stimuli which includes job satisfaction, job security, job promotion, and pride for accomplishment (Ovidiu, 2013)
To achieve organizational set goals and objectives irrespective of size, develop strategies to compete in highly competitive markets and to increase employee performance. The Human Resources Management has a role to hire and come up with retention strategies for the best employees, especially the ones holding key roles that can be difficult to replace because of the technical competencies required. Organizations consider the human capital as being their main asset, capable of leading them to success or if not managed properly can lead to failure of the organization and high staff turnover (Fisher, 2012).
Mudor and Tookon (2011) contend that every organization desires to be successful as much as current environment is very competitive. It is the responsibility of the Human Resources Management to come up with the right incentives and rewards that can motivate employees to produce more. Employee motivation is important since there is a direct relationship between motivation and productivity. Traditionally, incentives were used only for the top management, but during the last decade, different forms of programs with the purpose of raising motivation amongst all employees have spread across the organization. According to Merchant and Van der Stede (2008) business leaders have embraced different theories of motivation in realizing that motivation and productivity can be created if proper tools are used.
A reward strategy is seen as one of the most important strategies in human resource management function, as it influences the productivity of employees and growth of organization. (Waruni, 2014) explains that private sector organizations always try to align their reward strategy with the human resource strategy which finally leads to create an integration between reward strategy and organization’s business strategy. The principal reward for performing work is pay. However, many employers also offer reward packages of which wages and salaries are only a part. The packages typically include: bonuses, pension schemes, health insurance, allocated cars, beneficial loans, subsidized meals, profit sharing, share options and much more (Agwu, 2013). Reward management influences performance by recognizing and rewarding good performance and by providing incentives to improve it. It means additional remuneration or benefit to an employee in recognition of achievement or better work. Mehmood (2013) points out that rewards play a vital role on increasing employee productivity and change the behavior of dissatisfies employees.
Reward management is one of the strategies used by Human Resource Managers for attracting and retaining suitable employees as well as facilitating them to improve their performance through motivation and to comply with employment legislation and regulation. Reward systems are very crucial for an organization (Maund, 2001).
Rewards include systems, programs and practices that influence the actions of people. Reward system is an important tool that management can use to channel employee motivation in desired ways. In other words, reward systems seek to attract people to join the organization to keep them coming to work, and motivate them to perform to high levels. The purpose of reward systems is to provide a systematic way to deliver positive consequences. Fundamental purpose is to provide positive consequences for contributions to desired performance (Wilson, 2013). The only way employees will fulfil the employers dream is to share in their dream (Kotelnikov, 2010).
Within an organization, the best performance is feasible with most committed employees that can only be achieved through employee motivation. Kreitner and Kinicki (2004) assume that motivation contains “those psychological processes that cause the arousal, direction and persistence of voluntary actions that are goal directed.” Motivation depends on certain intrinsic, as well as, extrinsic factors which in collaboration results in fully committed employees. According to Board (2007), tangible incentives are effective in increasing performance for task not done before, to encourage “thinking smarter” and to support both quality and quantity to achieve goals. Incentives, rewards and recognitions are the prime factors that impact on employee motivation. As the employees engage in their working activities purposely for owns sake, then they will feel intrinsic motivation in their behaviours as their activities will essentially be enjoyable and satisfactory (Vansteenkiste, 2005, p. 22). The factors like incentives and rewards are the most preferred factors for employee motivation programs.
When employees are rewarded, they get work done, when employees surpass their target or exceed their standard they should be rewarded immediately as a way of motivating them. Effective reward systems should always focus on the positive reinforcement, as such encourages the desired behavior in organizations. This encourages employees to take positive actions leading to rewards. Reward programs should be properly designed in the organization so as to reinforce positive behavior which leads to performance (Purkayastha and Chaudhari, 2011).
Danish Refugee Council assists refugees and internally displaced persons across the globe including Nigeria. DRC was founded in Denmark in 1956 and has since grown to become an international humanitarian organization with more than 7,000 employees and 8,000 volunteers. According to DRC’s website, they work in conflict-affected areas, along the displacement routes, and in the countries where refugees settle. Their work range is on everything relief to strengthen the opportunity for a brighter future for refugees and internally displaced persons (DRC, n.d).
- Statement of the problem
High performance of organizations is always linked with high employee engagements, in the current economic environment, organizations and managements have to make major decisions like cost cutting, restructuring decision and downsizing. At the same time, they have to take the action which helps to motivate, and enhance loyalty of the employees in their Zafarullah and Sharjeel (2014).
According to Armstrong (2007), well-motivated people become proactive, the objective of every organization is to examine and understand the signs to motivate and retain employees, or else the organization may find it difficult to maintain and manage its loyal work force. Workers leave organizations due to the fact that they are not motivated enough, while some are not willing to leave because they are enjoying some benefit in terms of promotion, increase in salaries and wages, bonus and some other incentives.
James (2014) cited three warning signs of a demotivated workforce these include poor workplace atmosphere, slipping job standards and decreased productivity. He further stated that if any of these factors is observed to be trending downwards then there is a great chance that the organization is dealing with a demotivated workforce and steps are to be taken to help such a situation. Most businesses and organizations have failed to recognize the importance of motivations as a concept be it intrinsic such as employee well-being, relationship with co-workers, relationship with managers, organizational policies etc. or extrinsic such as training and career development, good working conditions, compensation, promotion amongst other factors that enhance or improve employee performance as well as organizational productivity levels.
It is against this background that the researcher is interested in investigating the impact of monetary rewards on employee’s productivity, with major focus on Danish Refugee council operating in Maiduguri, Nigeria.
1.3 Objectives of the study
The main objective of the study is to ascertain if various reward and incentive options have specific impacts on employees from a motivational perspective. specific objectives include;
- To analyze the extent to which organizational monetary rewards can affect employee’s productivity at their workplace.
- To identify the extent to which the employees well-being can affect his/her effectiveness at a workplace.
- To investigate the monetary rewards techniques that can be set and adopted to improve on employee’s productivity in an organization.
- To examine the way employees, respond to job rewards by management of an organization especially in relation to their level of on-the-job productivity.
1.4 Research Questions
For the purpose of this study the following research questions were developed.
- Do organizational monetary rewards affect employee’s productivity at their workplace?
- Can the well-being of employees affect their effectiveness at their workplace?
- To what extent can the monetary rewards techniques of an organization help in improving employee’s productivity in the organization?
- How do employees respond to job rewards by management of their organizations?
Ho1: Organizational monetary rewards cannot affect employee’s productivity at their workplace.
Ho2: Organizational monetary rewards can affect employee’s productivity at their workplace.
Ho3: The well-being of employees cannot affect their effectiveness at their workplace.
Ho4: The well-being of employees can affect their effectiveness at their workplace.
1.6 Significance of the study
This research work is of paramount importance to employers, who will get to understand areas they might have being neglecting as regards to employee’s motivation and for those who don’t consider encouraging productivity through rewards, this research seeks to bring out the benefits especially for organizations and businesses that aims at growth and expansions. Also it will be important to employees especially those who don’t see rewards such as monetary rewards as reasons to do more for the growth of a business or organization.
In another vain it’s also important to the government, especially through its relevant business bodies that make policies and state guidelines used by businesses to operate with, this research will tend to encourage government to reward businesses that have track records such as in payment of tax, as when they do so, the business management too will learn to understand that they also have to motivate their own employees who work hard to ensure they can keep up with their functions with government.
Finally, this research is significant to students and researchers, who may wish to embark on research in the same area as it will serve as a guide and source of further reference.
1.7 Scope/ limitations of the study
The study is meant to examine the impact of monetary rewards on employee’s productivity. There are many refugee councils in Nigeria especially in Northern Nigeria currently helping the government with relieve and care for displaced persons and the researcher will not be able to study and reach out to all of them. In view of this, the study has been delimited to just Danish refugee council based in Maiduguri.
1.8 Definition of terms
For purpose of this study certain words and concepts are used which may appear obscure to a reader not well versed in the field of business and organizations. It is therefore pertinent to define such words or terms as used in this study to make them easily understandable to any interested party. Such terminologies and words are there defined below as used in the study.
Incentives: Incentives means an inducement which rouses or stimulates one to action in a desired direction. They also referred to as benefits that are promised to employees to motivate them to achieve their best and improve their behavior, productivity and output continuously (Smriti, n.d).
Rewards: Armstrong (2012) defines reward as a benefit that is provided in recognition of achievement, service, commendable behavior etc. It is only given to an employee only after he has provided evidence of his positive behavior and achievements. The aim of a reward is to show the employees that their work and efforts within the organization are valued and is given as an appreciation for the work already completed. They are used to improve morale, increase productivity and encourage employees to contribute their best quality of work.
Reward system: This is an instrument used to increase employee’s productivity. It seeks to attract and retain suitable employees, encourage good employee relationship and commitment. Mehmood (2013) explicates reward system is the requirement of any organization to attract, hire and retain most suitable employee to gain competitive edge in a competitive environment.
Employee Motivation: According to (Goudas, Biddle & Fox, 2011), motivation is the level of energy, commitment and creativity that employees bring to their jobs. It is an internal drive that causes an individual to decide to take action, which is usually influenced by biological, intellectual, social and emotional factors. Motivation can also be defined as the process of boosting the morale of employees to encourage them to willingly give their best in accomplishing assigned tasks.
Employee Productivity: Amir and Amen (2013) describe employee productivity as being a performance measure of both efficiency and effectiveness of an employee or a group of employees. They further explain that productivity can be evaluated in terms of output of an employee within a specific period of time.
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