Effect of Intrinsic Rewards on Employee’s Performance: A Study from

Education Sector of Pakistan

Dissertation Submitted By :

Hira Batool

Under Supervision Of :

Mansoor Mahmood

In Partial Fulfillment For the Degree of

MBIT

February 2016

Institute of Business and Information Technology

University of the Punjab

Lahore

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Chapter 1

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Introduction :

In any organization n there should be more than financial rewards given to their employees .

Non-monetary incentives are long term while monetary incentives are considered to be short

term .They provide a significant level of employee’s satisfaction and the least costly non-

financial reward is to say just “Thank you”. Many organizations understand the fact that offering

rewards and incentives that not only recognize but validate and value outstanding work are

important. We can define rewards as anything that can boost up the frequency of employee’s

action so here In this paper I will be covering how intrinsic rewards that are qualitative in nature

are helpful in bringing employee’s performance.

Problem Statement :

The general perception about the performance of employee’s is that money seems to be the only

reason for which employee’s choose to work however it is experienced that money alone cannot

do anything. We have been exposed to Maslow’s hierarchy of needs, Herzberg’s hygiene theory,

Theory X and Theory Y.

Here the researcher seeks to assess whether non monetary incentives bring employee’s

performance

Scope of the Study :

There are both monetary and non-monetary benefits in existence but we cannot recognize both in

this single study so we have confined our scope to only non-monetary incentives in public sector

universities of Pakistan mainly Lahore , Punjab.

Objectives of the Study :

The primary reason foe this study is to see the impact on intrinsic compensation on employee’s

performance in public sector universities of Pakistan.. In this study we will see the application of

these incentives and how they actually improved one’s performance. Also giving light to the fact

that what sort of intrinsic rewards are being given to the employee’s of public sector universities.

We will search whether or not these incentives have enhanced employee’s performance in terms

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of their job commitment, job satisfaction , job attitude, organizational citizenship behavior, work

punctuality and few others .

Hypothesis :

Ho: There is a significant relationship between employee’s performance and non monetary

incentives

Hi: There is no relationship between employee’s performance and non monetary incentives

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Chapter 2

Literature Review :

“Successful leaders use praise effectively. Employee achievements and/or performance improvement is a vital part of performance management. Sincere and honest praise lets employees know that you appreciate their efforts. This simple act takes little time but will provide many benefits. With a few positive, encouraging words and a pat on the back, you can recognize and reinforce desired performance behaviors. An employee who feels that his or her best efforts are valued by you is likely to continue those efforts. It is important that your employees know they are viewed as valuable members of the organization. With praise, you can create and reinforce a positive self-image in your employees, making them feel like winners. This is most desirable in confusing or unclear situations where the employee is trying to do the right thing but is uncertain of the actual performance level.Employees under stress also need a few words of praise to let them know they have done the right thing in a difficult situation. When an employee has been assigned necessary but unchallenging tasks, they, too, must be praised for their contributions.” (Reward and Recognition)

“Non-financial rewards can have an even more substantial impact on employee satisfaction and motivation than traditional financial rewards. A study by the Hay Group involving around four million employees found that employees listed work climate, career development, recognition and other non-financial issues as key reasons for leaving a job. Even well-compensated employees may leave a company if dissatisfied with these aspects. Companies with excellent non-financial incentive plans can attract, motivate and retain talented people.According to a survey conducted by consulting company Mercer in 2011, employees in Argentina, Brazil, Canada, Mexico and the United States all listed “being treated with respect” as the single most important factor in motivation. Recognition and praise can send employees the message that the company respects them and values their contribution. Financial incentives and bonuses were number 13 on the list in all five countries. American employees rated “base pay” fifth on the list, so although financial rewards remain important they actually have less importance for most employees than respectful treatment and recognition.” (Scott Thompson)

“Non-financial objectives, such as customer loyalty and employee training, target assets that are difficult to quantify but are equally as important as financial objectives. The balanced scorecard, a concept created by professors at the Harvard Business School, integrates financial and non-financial objectives to measure and manage organizational performance.” (Sessoms)

“In a knowledge economy where the greatest asset an employee can offer an organization is their intelligence, experience, problem solving ability and change-savvy persona, intrinsic rewards are especially important to workers. In fact, Frederick Herzberg, who is one of the leading theorists of workplace motivation, found intrinsic rewards to be much stronger than financial rewards in increasing employee motivation. This is not to say that employees will not seek financial rewards in addition to intrinsic rewards, rather it just means that money is not enough to maximize motivation in most employees. People want to feel like their contributions matter.” (Hartzell)

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“Non-Cash incentives have Evaluability, meaning they capitalize on affective reactions to the award, and increase the utility value of the award. For example, non-cash incentives like a big screen television will serve as a reminder to the participant about his or her performance (and the firm) every time it is watched. Vacation travel provides memories, pictures, etc. In the case of a non-cash incentive, the award itself is the physical marker. “ (Jeffrey, 2003)

According to Hatice Özutkua (Özutkua, 2012) “It has been found that there is a significant difference between intrinsic and extrinsic rewards in terms of their effect on people results performance indicators. The use of intrinsic reward practices exhibited a significantly positive effect on people results performance indicators. However, it has been determined that effect of extrinsic reward practices on people results is not significant. This study highlighted the importance of the reward system for implementing TQM, especially putting the intrinsic reward system behind the use of TQM practices on the job.”

According to NILAY YAVUZ (YAVUZ, 2004) “non-monetary incentives are valued highly by the employees, even in the absence of monetary incentives. Among the non-monetary incentives, job related non-monetary incentives are more preferred as the incentive that wouldincrease the employees’ interests in their jobs the most. This may imply that mostof the employees in the organization value meaningful job with moreresponsibility, variety of tasks and opportunity to use variety of skills, autonomyover job, participation in decision making, promotion, development opportunitiesetc.”

In an article published on website (Green, 20144)“Monetary incentives don’t buy workplace happiness. The age old methodology of motivation, using monetary ‘carrots’ – such as perks or financial remuneration – has a weak exchange rate with today’s knowledge worker, for whom the most valuable currency is recognition. As the Harvard Business Review explains: “Though necessary, these extrinsic motivators [perks, promotion, pay] don’t necessarily excite people to work smarter or harder. Instead, they prompt employees to do only the minimum required to get that next raise or job title.”” ( Build a motivated workforce, 2007)

“Employees are viewed as an important element and considered as the human capital of any organization. If employees are motivated and satisfied, they will perform their duties diligently and actively. De-motivated employees are likely to put in little or no effort in their jobs, produce low quality work, mostly avoid their workplace and even exit the organization when they have available opportunities. On the other hand, employees who are motivated to work are likely to be determinant, innovative and competent. Motivated employees are content, dedicated and work enthusiastically, resulting in the optimum level of employee’s retention, loyalty, and harmony. These aspects contribute significantly to the growth and development of the overall organization. ” (Dhanonjoy Kumar)

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According to the study conducted by (Rizwan Qaiser Danish, Muhammad Khalid Khan, AhmadUsman Shahid, Iram) “The employees who area appreciated by intrinsic rewards within the organization not only perform well according to their job description but also get motivated positively for the welfare of organization and for them. Employees struggle when their organization appreciate their work, reward them, respect them and consider them as a vital part of the organization. The employees efficiently do their jobs, behave effectively in the organization, and remain loyal to their organization. Reward management system and performance appraisal techniques can be improved by paying attention on human resource management approaches that improve the performance of the organization.”

In a study conducted by (Cheema, 2013) it was concluded that “verbal praise of appreciation from management in front of colleagues, feeling of being valued in the bank, a positive working environment, encouragement by upper management on new initiatives, effective internal communication, gaining respect and good relationship with other co-workers, proper and correct appraisal of employee by management are motivating factors for employees. Non-monetary rewards and effective recognition has a significant positive impact on employees‟ motivation”

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Chapter 3

Research Methodology :

In order to test the hypothesis , Descriptive analysis technique will be used and quantitative study

will be conducted. Independent variable i.e intrinsic rewards will be taken to ascertain its effect

on dependent variable i.e employee’s performance. Survey method will be employed to collect

data using a standard and well – structured questionnaires from different public sector

universities in Pakistan mainly focusing those universities which are in Lahore . Questionnaires

will be handed over to respondents in printed form.

Data will be analyzed using Statistical package for The Social Sciences (SPSS). We will be

utilizing descriptive statistics and Charts to elaborate our results in an effective way.

Population :

Our focus will be on the employees of public sector universities mainly in Lahore – Punjab

Sample Size :

Sample will be around 500 .

Tools :

To test the research hypothesis , the Pearson product moment chi-square and graphs will be

used.Likert scale will be used to measure performance in terms of job satisfaction , attitude

towards job , organizational citizenship behavior. One sample T-test will also be employed .

Expected Results :

Be reviewing literature , it has been found that non monetary rewards have a significant impact

on employee’s performance and this had been viewed by his job performance, his attitude

towards organization , work punctuality and through his organizational citizenship behavior.

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Limitations of the Study :

1: Data will be collected from Public sector universities only in Lahore

2: We cannot force anyone to give their opinion

3 :The procedure used for data collection is so common i.e questionnaires , other data collection

methods can be used

4 : Budget constraint is always a big limitation.

5 : This study has taken only one dependent and one independent variable , there are many other

dimension which can also be taken and we can incorporate their effects on each other.

Practical Implications :

The findings of the study will provide a valuable understanding for policy makers on how to

retain their best employees and it will provide them an insight of what their employees actually

want .This will also help them make their employee more committed to their organization and

hence desired benefits will be achieved once their employees will be showing their full

citizenship behavior. By optimal provision of intrinsic rewards academic administration will be

able to make their core work force more satisfied and committed . As the data will be collected

from the public sector universities of Lahore only so the results wont be generalized.

Conclusion :

There has been a lot of research already conducted on this study yet I chooses this because I

wanted to test this theory myself by applying it on the employee’s of public sector universities of

Lahore . There can be more to done just by seeing the effect , we can use these measurement for

our future work i.e by making such policies that include intrinsic rewards so that to make our

workforce motivated enough to perform their duty in full zeal and zest.

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References :

Build a motivated workforce. (2007). Retrieved from Harvard Business Review.

Cheema, D. F.-E.-A. (2013). Impact of Non-monetary Rewards on Employees’ Motivation: a Study of Commercial Banks in Karachi. Journal of Management and Social Sciences.

Dhanonjoy Kumar, M. Z. (n.d.). Impact of Non-Financial Rewards on Employee Motivation. Asian Accounting and Auditing Advancement.

Green, S. (20144, September 14). It’s Kudos Not Cash: How Non-Monetary Social Recognition Delivers More For Less. Retrieved from HRVoice.org: http://www.hrvoice.org/it%E2%80%99s-kudos-not-cash-how-non-monetary-social-recognition-delivers-more-for-less/

Hartzell, S. (n.d.). Reward Systems & Employee Behavior: Intrinsic & Extrinsic Rewards. Retrieved from Study.Com: http://study.com/academy/lesson/reward-systems-employee-behavior-intrinsic-extrinsic-rewards.html

Jeffrey, S. (2003). The Benefits: Of Tangible Non-Monetary Incentives. The Incentive Research Foundation,.

Özutkua, H. (2012). The Influence of Intrinsic and Extrinsic Rewards on Employee Results: An Empirical Analysis in Turkish Manufacturing Industry. Business and Economics Research Journal.

Reward and Recognition. (n.d.). Retrieved November Friday, 2015, from Florida International University : https://hr.fiu.edu/index.php?name=reward_recognition

Rizwan Qaiser Danish, Muhammad Khalid Khan, Ahmad Usman Shahid, Iram. (n.d.). Effect of intrinsic rewards on task performance of employees. INTERNATIONAL JOURNAL OF ORGANIZATIONAL LEADERSHIP .

Scott Thompson, D. M. (n.d.). The Importance of Non-financial Rewards for the Organization. Retrieved from CHRON: http://smallbusiness.chron.com/importance-nonfinancial-rewards-organization-45146.html

Sessoms, G. (n.d.). The Importance of the Non-Financial Objectives Theory. Retrieved from CHRON: http://smallbusiness.chron.com/importance-nonfinancial-objectives-theory-37874.html

YAVUZ, N. (2004). THE USE OF NON-MONETARY INCENTIVES AS A MOTIVATIONAL.

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