In today’s workplace, companies and managements are increasingly using non-monetary rewards as an incentive to motivate and influence employee performance, as well as to meet the financial and productivity objectives of the company.
Introduction
Successful and profitable management of business operations is the fundamental objective of any business enterprise and a productive workforce is the key to ensuring organizational success. Literature and studies on human resource management have always and continue to emphasize the importance of motivational programs including rewards and recognition, towards molding a productive workforce. The paper attempts to establish the option of non-monetary rewards towards employee motivation, by researching and studying the impact of implementing non-monetary reward programs by companies to meet the financial and productivity objectives and also comparing the same with monetary or cash reward programs.
Workplace motivators are considered to include both monetary and non-monetary incentives. [Ballentine et al, 2003; Merchant, 1989] While cash or monetary incentive constitute the primary motivation, essential to fulfill the needs and wants of the workforce, management experts and researchers have also emphasized the significance of non-monetary rewards to motivate and influence employee performance. Non-monetary rewards are assuming greater significance in the present tight economic scenario, characterized by limited budgets for performance bonuses and incentives.
LITERATURE REVIEW | STRATEGIC REWARD MANAGEMENT
... reward management including principles of reward strategies, building blocks of total reward strategies as well as performance management in relation to rewarding employees. Companies ... monetary value of rewards and motivation is not very high. Monetary rewards ... proposed reward. Training and development The primary objective of ... incentives, profit sharing etc. With performance pay as part of the reward ...
According to a survey conducted in 2000 by Watson Wyatt, an increasing number of employers were found to use non-monetary rewards as compared to the previous year, 1999 – the three commonly used non-monetary rewards by employers include career advancement opportunities (76% employers surveyed as compared to 60% in 1999), flexible work hours (73% as against 64% in 1999) and opportunities to gain new skills (68 as compared to 62% in 1999).
[Cited Author Unknown1, 2001] Apparently, the trend in favor of non-monetary reward programs is continuing, particularly, in recruiting and retaining the younger generation employees, who value recognition and career advancement.
Non-Monetary Incentives Vs. Cash Incentives
Monetary or cash incentives are rewards to employees for their admirable job performance, essentially involving money. Monetary incentives include salary increases, profit sharing, stock options and warrants, project bonuses, festival and/or performance-linked scheduled bonuses, additional paid vacation time. As compared to monetary rewards, non-monetary incentives reward employees for excellent job performance through opportunities. [Ballentine et al, 2003] Non-monetary incentives and rewards offer employee autonomy and personal recognition and include pleasant work environment, flexible work hours, training, new and challenging opportunities, and also mementos, trophies etc. These incentives are sometimes called internal rewards, as they meet the employees’ internal needs such as, recognition, self-esteem and fulfillment, thereby influencing employee motivation.
Until the recent years, employers essentially used monetary incentives to maintain a positive motivational environment for attracting and retaining employees [Kepner, 2001, Cited Ballentine, et al, 2003]. However as research in organizational and industrial psychology advanced, the importance of non-monetary rewards to recruit and retain resourceful workforce has been established. Empirical research has reportedly revealed that non-monetary rewards may often be more important than monetary rewards. [Merchant, 1989] Informal and honorary recognition are considered to be powerful tools to promote organizational and team goals and objectives, particularly in motivating employees in the weak economic times.
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Now, considering the advantages of non-monetary awards over cash awards – Jerry McAdams, who co-authored Organizational Performance and Rewards, has reportedly observed that non-monetary awards have four major advantages, when compared to cash awards. [Cited Author Unknown2, 1995]
– Memory Value – The memory and value of non-monetary rewards are observed to last longer in comparison with that of cash, which is more often gone when cash is spent.
– Flexibility – Non-monetary incentives and recognition offer the flexibility to design motivational rewards depending on organizational or team goals within the budgetary limitations.
– Trophy Value – Non-monetary awards can be displayed to co-workers and friends as a trophy given in appreciation of good work.
– Less expensive – It is understood that employers spent less money on non-monetary awards as compared to cash awards. It is reported that employers accomplished the same level of performance improvement with cash and non-monetary awards and that the awards held approximately the same perceived value.
[Author Unknown2, 1995]
Effect of Reward Programs on Employee motivation
Management practitioners and researchers have established beyond doubt the positive, catalytic effect of rewards –monetary as well as non-monetary—on employee and business performance and productivity. ‘Reward’ implies offering recognition of and incentives to employees, individually and as members of teams, for their commendable performance and acknowledging their contributions to the organization’s mission. There are many ways to acknowledge and reward excellent performance, from a genuine “Thank You!” note to establishing formal cash incentive and recognition award programs and granting the premier honors. Rewards are considered to improve employee productivity by around 20-30 percent. In order that organizations achieve the desired goals, reward systems need to be closely aligned to organizational goal.
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However, the increasing tendency of companies to use non-monetary rewards only very few companies understand the impact of these reward programs on the performance of the companies towards meeting financial and business objectives. This could be due to the fact that non-financial measures such as quality of product and services, reliability in delivery etc, which often form the basis of rewards and recognition, have not received the management attention they deserve considering their importance for financial success of businesses
High employee turnover is considered to be a serious issue affecting business organizations, and is often the result of lack of reward and recognition for good performance and the lack of opportunities for career advancement. The causes of employee turnover include such things as non-competitive compensation, poor supervision, inadequate training, poor working conditions, monotony, poor fit between the employee and the job, high stress, poor communications, and unresponsive organization practices
Employee turnover involve both direct and indirect costs and are often very high for many organizations, considerably affecting the financial performance of an organization. Direct costs include the time, effort and expense that goes into recruitment, selection, and training of new people. Indirect costs include factors such as increased workloads and overtime expenses for coworkers, and also reduced productivity associated with low employee morale.
The U.S. Department of Labor suggests the impact of employee turnover on the financial performance of an organization. According to estimates, “it costs a company one-third of a new hire’s annual salary to replace an employee”
Conclusion
Managers today realize the fact that high staff turnover can prove costly and reward employees with monetary or tangible as well as non-monetary or intangible compensation to limit employee turnover, improve employee morale and job satisfaction and enhance productivity. Companies and organization that use a comprehensive and strategic reward programs are able to retain the talented employees with themselves, thereby enhancing the productivity to meet financial objectives and long term business success. It may be concluded that non-monetary rewards are at times more, if not equally important as monetary rewards in motivating employees for enhanced performance and gaining competitive advantage for continued success.
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