Impact of incentives on motivation level of employee (2)

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IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL OF EMPLOYEE

By

IKRAM ULLAH5/28/2012

2889-FMS-BBA-S10

SUBMITTED TO SYED RAZA ALI

IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL OF EMPLOYEE 2012

Table of content

1. Introduction 32. Purpose of study 3 3. Objective 4 4. Problem statement 4 5. Rationale of study 5 6. Literature review 5 7. Conceptual framework 8 8. Hypothesis 9 9. Methodology 9 10.Result analysis 10 11.Conclusion 16 12.Appendix 17

By Ikram Ullah


INTRODUCTION

Motivation can be define as the willingness to exert high levels of effort toward organizational goals, conditions by the effort’s ability to satisfy some individual needs. We will narrow our focus to organizational goals in order to reflect our singular interest in work-related behavior. The three key elements in our definition are effort, organizational goal and individual.

Incentives are something that incites or tends to incite to action or greater effort, as reward offered to increase productivity.

Prior to 1970’s there was hardly concept of employee incentives program, the Human resource department as was only engaged in arranging picnic trips and ceremonies. But with the passage of time not only technologies have changed but theories of handling human resource have also being changed.

Nowadays the key tool use by manager to get desire behavior from employee is the incentive program. In which they identify the key need, want and demand of employee and satisfy them by providing relevant incentives.

PURPOSE OF STUDY

The purpose of our research is summarized as follows:-

By Ikram Ullah


To find out what kind of incentives program use by organization to increase employee’s motivational level.

How it impact employee loyalty, commitment and productivity. How organization provide relevant incentive packages to employees. How it creates goodwill between organization and employee. How it is useful in attaining organizational goals.

OBJECTIVES

Following are the objectives of our research:-

Suggest solutions how to identify employee’s need before providing incentives.

Suggest how relevant incentives program impact employee productivity.

Suggest solutions how to get desire behavior from employee at work or job.

PROBLEM STATEMENT

How organizations manage and improve employee incentive program to increase work-related performance in organization?????

Employee productivity or performance can be directly affected by incentive program in both positive and negative way. If the manager succeeded in identify the need of employee and satisfy it by providing relevant incentives program then his motivational level will increases and he will put more effort towards job related activities.

Organization must have sufficient funds to lunch incentive programs. And use these funds effectively and efficiently to satisfying needs of employee.

By Ikram Ullah


Organizational incentive program also creates goodwill between employee and organization. It realizes the employee’s beliefs that his organization does care about them as a result their chances of switching or leaving will ultimately reduces.

Assets are not all about technological equipment, but human resource is also important assets of any organization, they play key role in attaining organizational goals. Motivated employee will be committed, productive and loyal for organization.

RATIONALE OF STUDY

Nowadays one of the intensive issue or problem organization faces that is voluntarily withdrawal or turnover of employees, the main reason behind most of turnover of employees is that the organization sometime failed to satisfy employees need. That’s why organization has reshaped their policy that is from production-oriented they turning into employee-oriented. In Employee-oriented organizations emphasize interpersonal relations. They take personal interest in the needs of their employees.

In my research I have focuses different incentive program and their impact on employee organizational behavior, and how it is helpful in increases employees’ motivational level. Employee incentive program is also one of basic tool which help organization in achieving its goal because human resource is one of the important asset of any organizations.

LITERATURE REVIEW

Incentive Although there are potentially a very large number of incentives that could be utilized, a useful distinction is between the material and the nonmaterial. Additionally, material (or tangible) incentives could be broken down further into monetary and non-monetary. Thus, three incentive types were identified: (1) monetary (cash); (2) non-monetary tangible (rewards such as restaurant coupons for meals or vacation trips); and (3) non-monetary intangible (“employee of the week” recognition, positive performance reviews, and public praise from management (J.Condly, E. Clark and D. Stolovitch. 2003)

1. Extrinsic motivation (material or tangible)

By Ikram Ullah


When employees are motivated by extrinsic rewards such as additional compensation, gift certificates or material rewards (salary, bonus, and commission), managers may see improved performance. According to Frederick Herzberg's theory, the needs will motivate the worker but only by satisfying the worker's lower-level needs. The downside is the employee will want better rewards or continue to expect the same rewards for maintaining the higher level of performance.

2. Intrinsic motivation (non-material or intangible)Malone and Lepper (1987) have defined intrinsic motivation more simply in terms of what people will do without external inducement. Intrinsically motivating activities are those in which people will engage for no reward other than the interest and enjoyment that accompanies them. Malone and Lepper have integrated a large amount of research on motivational theory into a synthesis of ways to design environments that are intrinsically motivating. This synthesis is summarized in Table 5.1. As that table shows, they subdivide factors that enhance motivation into individual factors and interpersonal factors. Individual factors are individual in the sense that they operate even when a student is working alone. Interpersonal factors, on the other hand, play a role only when someone else interacts with the learner. These are discussed in detail on the following pages.

Relationship between Incentives and Organizational Performance forEmployees:

Business organizations are facing significant challenges on internal and external work environment, so organizations cannot maintain institutional performance without providing incentives to their employees based on their efficient and effective work (Al-Nsour June 21, 2011).

1. The Concept of Financial incentivesFinancial incentives mean the amounts paid to employees, either in the form of a lump sum or in the form of monthly payments including all additional income for the individual. They are considered the oldest forms of incentives which characterized by quick and immediate form that make individuals feel of an immediate feedback of their effort. As defined by Lawzi (1995) financial incentives are set to satisfy basic human needs, encouraging workers to do their best of work performance, the recruitment of their capabilities and increase the level of their competences such as salary, bonuses, allowances, profit sharing and rewards. Financial incentives also defined by Jadallah (1997) as all means of payment based on increase and or improve productivity. Therefore the more the workers produce the more they earn. While the fall in quantitative or qualitative production deprive the worker from earning partial or total incentives.Financial incentives aim to raise production efficiency and improve performance through encouraging individual to behave in a desired away. Financial incentives are the most important and influential factors to the individual's desire to work when such

By Ikram Ullah


wages are appropriate and capable of satisfying his needs. On the contrary, low payment that is not appropriate to his efforts of work leads to the low efficiency of productivity (Al-Harthi, 1999).

2. The Concept of Moral Incentives"A person has a moral incentive to behave in a particular way when he has been taught to believe that it is the right or proper or admirable thing to do. If he behaves as others expect him to, he may expect the approval or even the admiration of the other members of the collectivity and enjoy an enhanced sense of acceptance or self-esteem. If he behaves improperly, he may expect verbal expressions of condemnation, scorn, ridicule or even ostracism from the collectivity, and he may experience unpleasant feelings of guilt, shame or self-condemnation" (Johnson, 2005, p, 1).Moral incentives are those related to work environment such as; supervision leadership, fellowship, the Working conditions of light, heat, ventilation, noise, decorations and participation in management (Hassan, 2002).

RELATIONSHIP BETWEEN INCENTIVE AND MOTIVATION:

MotivationThe term “motivation” is derived from the word “motive” which means a reason for action.The degree to which an individual wants and tries hard to do well at a particular task or job (Mitchell, 1982).

Work environment is important for motivation regarding the quality of peer group interactions, leadership styles and salary and reward systems (Roethlisberger & Dickson, 1939).Motivation is related with individuals’ different interests and needs. Individuals also have different preferences in terms of how to be recognized for the work they do. Nonmonetary incentives can take the form of improving working conditions, recognizing good work through small gifts, letters of appreciation, plagues, tickets to restaurant etc., providing some services for the employees, organizing social activities in the work place, assigning challenging duties etc. Consequently, the use of non-monetary incentives may provide this variety to meet different individual needs and interests (YAVUZ, 2004).

Relationship

All organizations, whether public or private, need motivated employees to be effective and efficient in their functioning, in addition to the other factors. Employees who are motivated to work energetically and creatively toward the accomplishment of

By Ikram Ullah


organizational goals are one of the most important inputs to organizational success. Consequently, the challenge for organizations is to ensure that their employees are highly motivated (YAVUZ, 2004).

Observation

It has been observed and confirmed the the motivational level of those employees who getting benefit i.e. bonuses, compensation and commission and those who not getting benefits are not the same. Its human fact that he love to get reward monitory or non-monitory. Those organizations which has reward system they have created goodwill relationship with their employees as result the productivity, performance and loyalty of employees are at high level. Besides all above facts incentives system also fulfill the litter tensions, anxiety and needs of employees.

CONCEPTUAL FRAMEWORK

My research is based on the relationship between incentives and motivation. In organizational context motivation is define as, the degree to which an individual wants and tries hard to do well at a particular task or job. Various authors (YAVUZ, Roethlisberger & Dickson, and Al-Nsour) in their research studies mention that incentives do impact motivational level of employees.

By Ikram Ullah


Establishing the hypothesis for verification:

Hypothesis is the logical relationship between two are more variables expressed in the form of testable statements. Relationship is based on the network of association established in a theoretical framework formulated for the research studies.

HYPOTHESIS NO 1:

“Incentives have positive impact on motivational level of employees”

Incentives do impact greatly employees motivation, the higher the incentive, higher would be employee’s productivity, loyalty and job satisfaction. Ultimately it creates win-win situation where both organization and employee’s. Organizations get benefits in the form of employee’s loyalty and productivity toward their jobs and employee get benefits in the form of meeting his need, which are satisfy by incentives.

HYPOTHESIS NO 2:

“Incentives have no impact on motivational level of employees”

Incentives have no impact on motivational level of employee’s. This case happened when irrelevant needs are satisfy. Then employee’s behavior will be indifferent towards his organizational work.

METHODOLOGY

1. Sampling design:

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Population of the current study was the student of International Islamic University Islamabad,

both male and female selected on the bases of convenient sampling. Primary source of data was

use to generate data. Total population size was 41.

2. Research instrument:

Main research instrument was Questionnaire. According to the objective and importance of the

study and to manipulate variables of interest, total numbers of 41 questionnaires were

distributed. Total number of 40 out of 41 was received. Questionnaire of the current study

consists of two parts; Part-1 asks the respondents about their demographics, Part-2 consists of

the statements of variables. All the statements were measured on Liker Scale Strongly disagree

(5) Disagree (4) Agree (3) Strongly Agree (2) Neutral (1).

By Ikram Ullah


RESULTS AND ANALYSIS

This portion includes results and analysis of the collected information from respondents of the current study. Reliability analysis, frequencies percentage, regression and correlation results are discussed in this portion.

Reliability analysis

To see the reliability and validity of all the items that how much all the items were consiedtent and reliable to measure the opinions of respondent’s author’s compared cronbatch alpha of all the factors individual and as a whole.

Scale: ALL VARIABLES

Case Processing Summary

N %

Cases Valid 40 97.6

Excluded 1 2.4

Total 41 100.0

a. List wise deletion based on all variables in the

procedure.

Reliability Statistics

Cronbach's

Alpha N of Items

.608 10

Alpha results show in Table that the statements of the questionnaire were consistent with the responses

of the responses and were able to measure opinions of respondents in true sense. In this regard over all

alpha of the items were found 0.608 that is more than acceptable value of 0.50 recommended.

Frequencies percentage:

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Percentage Frequency Distribution a percentage frequency distribution is a display of data that

specifies the percentage of observations that exist for each data point or grouping of data

points.

Following are the frequency percentages of each question.

(IN1) Financial incentive increases employee work productivity

Frequency Percent Valid Percent

Cumulative

Percent

Valid neutral 5 12.2 12.2 12.2

strongly agree 14 34.1 34.1 46.3

agree 20 48.8 48.8 95.1

Strongly disagree 2 4.9 4.9 100.0

Total 41 100.0 100.0

(IN2) Intrinsic rewards increases employee on job satisfaction.


Cumulative

Percent



agree 23 56.1 56.1 92.7

disagree 1 2.4 2.4 95.1


Total 41 100.0 100.0

By Ikram Ullah


(IN3) Incentives develops employee attitude toward organization.


Cumulative

Percent



agree 21 51.2 51.2 95.1

disagree 2 4.9 4.9 100.0

Total 41 100.0 100.0

(IN4) Incentives increases employee loyalty towards organization.


Cumulative

Percent



agree 17 41.5 42.5 87.5

disagree 4 9.8 10.0 97.5


Total 40 97.6 100.0

Missing System 1 2.4

Total 41 100.0

By Ikram Ullah


(M1) Motivated employees are real asset of any organization.


Cumulative

Percent



agree 17 41.5 41.5 97.6

disagree 1 2.4 2.4 100.0

Total 41 100.0 100.0

(M2) Relevant need satisfaction leads to high motivation.


Cumulative

Percent



agree 20 48.8 48.8 92.7

disagree 2 4.9 4.9 97.6


Total 41 100.0 100.0

By Ikram Ullah


(M3) Is money enough to motivate employee.


Cumulative

Percent



agree 4 9.8 9.8 36.6

disagree 19 46.3 46.3 82.9


Total 41 100.0 100.0

(M4) Work recognition & appraisal motivates employees towards job.

Frequency Percent Valid Percent Cumulative Percent



agree 24 58.5 58.5 92.7

disagree 1 2.4 2.4 95.1


Total 41 100.0 100.0

(M5) Work environment is also important for motivation.

Frequency Percent Valid Percent Cumulative Percent



agree 22 53.7 53.7 95.1

disagree 2 4.9 4.9 100.0

Total 41 100.0 100.0

By Ikram Ullah


(M6) Motivated employees are effective and efficient in their functioning.


Cumulative

Percent



agree 19 46.3 46.3 97.6

disagree 1 2.4 2.4 100.0

Total 41 100.0 100.0

ConclusionIt is concluded that incentive do impact motivational level of employee as a result their productivity, loyalty and job satisfaction increases. But at the same time if irrelevant incentives are provided then the employee would behave indifferently or null. Cronbach Alpha is .608 that shows there is no error and biasness incorporated during research procedure.

APPENDIX

A) Questionnaire.B) Table of Intrinsic motivationC) References

By Ikram Ullah


QUESTIONNAIRE

NAME: GENDER EDUCATION

STATUS

Note: Based on your knowledge and experience, please indicate your views about the impact of incentive on motivational level of employees.

Scale: Strongly disagree (5) Disagree (4) Agree (3) Strongly Agree (2) Neutral (1)

1. Financial incentive increases employee work productivity. Strongly Disagree Disagree Strongly Agree Agree Neutral

2. Intrinsic rewards increases employee on job satisfaction. Strongly Disagree Disagree Strongly Agree Agree Neutral

3. Incentives develops employee attitude toward organization.

By Ikram Ullah


Strongly Disagree Disagree Strongly Agree Agree Neutral

4. Incentives increases employee loyalty towards organization. Strongly Disagree Disagree Strongly Agree Agree Neutral

5. Motivated employees are real asset of any organization. Strongly Disagree Disagree Strongly Agree Agree Neutral

6. Relevant need satisfaction leads to high motivation. Strongly Disagree Disagree Strongly Agree Agree Neutral

7. Is money enough to motivate employee. Strongly Disagree Disagree Strongly Agree Agree Neutral

8. Work recognition & appraisal motivates employees towards job. Strongly Disagree Disagree Strongly Agree Agree Neutral

9. Work environment is also important for motivation. Strongly Disagree Disagree Strongly Agree Agree Neutral

10. Motivated employees are effective and efficient in their functioning. Strongly Disagree

Disagree Strongly Agree Agree Neutral

TABLE OF INTRINSIC

MOTIVATION

By Ikram Ullah

Table 5.1. The Factors That Promote Intrinsic Motivation.

Factor

Description

Related Guidelines

Challenge

People are best motivated when they are working toward personally meaningful goals whose attainment requires activity at a continuously optimal (intermediate) level of difficulty.

1. Set personally meaningful goals.

2. Make attainment of goals probable but uncertain.

3. Give enroute performance feedback.

4. Relate goals to learners' self esteem.

Recognition

Learners feel satisfaction when others recognize and appreciate their accomplishments.

1. Recognition requires that the process or product or some other result of the learning activity be visible.

2. Recognition differs from competition in that it does not involve a comparison with the performance of someone else.

cooperation

Learners feel satisfaction by comparing their performance favorably to that of others.

1. Cooperation occurs naturally as well as artificially.

2. Cooperation is more important for some people than for others.

3. Cooperation is a useful real-life skill.


REFERENCES

Pouliakas, K1Centre for European Labour Market Research (CELMR), University of Aberdeen Business School, Scotland

Steven J. Condly University of Central Florida, Richard E. Clark University of Southern California, Harold D. Stolovitch, Ph.D.HSA Learning & Performance Solutions, LLC

Marwan Al-Nsour (Associate professor) Faculty of Planning and Management, Al-Balqa’ Applied University Assalt, Jordan

Dow Scott, Ph.D., Loyola University Tom McMullen, Hay Group World at Work An Assessment of Employee Attitudes Towards Incentive Programs in Central

Texas Municipalities with Populations of 20,000 and Under by Lisa R.1.Freeman Incentive Programs to Improve Transit Employee Performance BY RONALD J. HARTMAN

Columbia, Maryland , ELAINE M. KURTZ Brooklyn, New York, ELIZABETH K. MOSER Baltimore, Maryland.

By Ikram Ullah


Career Incentives, Performance Base Pay, Organizational Benefits Influencing Employee Performance: A Case on Libyan Tobacco Company.

THE IMPACT OF A PIECE RATE INCENTIVE SCHEME ON EMPLOYEE OUTPUT AT A SELECTED AUTOMOTIVE COMPANY By Anthony Walsh.

Motivation and monetary incentives: A closer look BYSusan DelVecchio East Carolina University and Judy Wagner East Carolina University.

Pay and Non-pay Incentives, Performance and Motivation by Orvill Adams, Department of Organization of Health Services Delivery, World Health Organization, Geneva

THE USE OF NON-MONETARY INCENTIVES AS A MOTIVATIONAL TOOL: A SURVEY STUDY IN A PUBLIC ORGANIZATION IN TURKEY BYN_LAY YAVUZ.

Intervening factors affecting the relationship between incentives and employee motivation: a case study of pharmaceutical manufacturing organisation in Navi Mumbai.

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%20intrinsic%20motivation.htm

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http://www.ehow.com/info_8123051_effect-incentives-performan

http://www.moph.go.th/ops/hrdj/hrdj11/pdf11/Pay43.pdf

http://www.ccsenet.org/journal/index.php/ijbm/article/downlo

http://www.emeraldinsight.com/journals.htm?articleid=1556632

http://www.worldatwork.org/waw/adimLink?id=39032

https://digital.library.txstate.edu/bitstream/handle/10877/3624/fulltext.pdf

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Impact of incentives on motivation level of employee (2)

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