This essay is written to understand, argue and evaluate if financial rewards is the one best way to motivate employees within an organization. Motivation can be defined as "the goal directed behavior that is initiated, directed and sustained by enabling a cognitive decision making process." (Buchanan and Huczynski, 2010, P.267). Motivation is very important to boost job performance. Employee in the organization can be motivated through financial as well as non-financial rewards or motives. Motive can be defined as "a socially acquired need activated by a desire for fulfillment." (Buchanan and Huczynski, 2010, P.266). Motivation pushes the employees in the organization to their fullest and in turn even helps them in personal development. During tough times, employees are the only ones to boost up the level of the organization, thus, motivated employees help in achieving the desired goals of the organization and making motivation a key factor. Financial incentives or motives " refer to incentives which are in direct monetary form or measurable in monetary term and serve to motivate people for better performance."(NCERT, 2007, P.190). Non-financial incentives or motives are required as "all the needs of individuals are not satisfied by money alone. Psychological, social and emotional factors also play an important role in providing motivation. Non-financial incentives mainly focus on these needs." (NCERT, 2007, P.191). The question here is that if financial rewards, motives or incentives are the best way to increase work motivation?
In order to thoroughly understand this question, evaluations of both financial and non-financial rewards have to be conducted. To begin, financial rewards have been studied at large by numerous theorists. Some theorists support financial rewards at large. According to Frederick W. Taylor(2011), the most important motivator for employees are salaries and extra benefits such as cash rewards , travel allowances , housing, etc. He also stated that when employees get the same wage regardless of their goals they have to achieve, they tend to work less which may lead the company to an unstable situation Likewise Henry Gantt believed money rewards are a better way for reimbursing the hard work of an employee added to the normal salary. The two methods treat workers as 'laborers' who toiled only for money and has been discouraged by the current form of management system.
One theory was by Douglas McGregor, better known as theory X and theory Y, which differentiated between leadership styles/skills and management. Firstly he presumed that motivation and skills are different for all the members of a firm and also that all employees look at the same motivation in a different manner. Theory Y focuses on employees who are able to practice self-control and are able to direct themselves along with a liking towards their job. These employees are not just responsible but are also challenge seekers. New challenges and opportunities motivate these employees. These employees do not require much of supervision as they are self-motivated and show a great morale at work. These employees are not needed to be controlled or punished and help achieve goals and objectives more efficiently. Now when looking at the employees of theory X, one realizes that these employees do not enjoy their job or have a certain amount of disliking towards it. They are high irresponsible and need to guided, supervised and directed from time to time when given a certain task or responsibility. These employees burden the managers from time to time as they needed to be forced to work and when behaving not according to the code of conduct, they have to be punished. So people with needs such as self-actualization and more, work better with managers of theory Y as compared to theory X. But a certain amount of balance is needed between theory X and Y so all employees can grow and make progress in their careers.
"The financial incentives generally used in an organization are listed below:
Pay and allowances: For every employee, salary is the basic monetary incentive. It includes basic pay, dearness allowance and other allowances.
Productivity linked wage incentives: Several wage incentive plans aims at linking payment of wages to increase in productivity at individual or group level.
Bonus: Bonus is an incentive offered over and above the wages/salary to the employees.
Profit sharing: Profit sharing is meant to provide a share to employees in the profits of the organization.
Co-partnership/stock: Under these incentive schemes, employees are offered company shares at a set price lower than market price.
Retirement Benefits: Several retirement benefits such as provident fund, pension and gratuity provide financial security to employees after their retirement.
Perquisites: In many companies perquisites and fringe benefits are offered such as car allowance, housing, medical aid, and education to the children etc., over and above the salary. " (NCERT,2007,P.190-191)
However, "if our biological and safety needs are not satisfied, we die. If our needs of love and esteem are not satisfied, we can feel inferior and helpless, but if these needs are satisfied, we feel self-confident. Self-actualization and transcendence, Maslow argued, are our ultimate goals. While the implications if self-actualization have been widely explored, the meta-physical concept of transcendence has been largely ignored by management writers and researchers." (Buchanan and Huczynski,2010,P.268).