How can rewards motivate employees

Guzzo, Richard D. Jette, and Raymond A. Katzell Personnel Psychology Summer McLean, et al. Balkin and Luis R. Rock and Lance A. Pittman, Jolee Emery, and Ann K. Deci and Richard M. Ryan New York: Plenum Press, Freedman, John A. Norton and Company, One of the largest reviews of how intervention programs affect worker productivity, a meta-analysis of some comparisons from 98 studies, was conducted in the mids by Richard A.

The raw numbers seemed to suggest a positive relationship between financial incentives and productivity, but because of the huge variations from one study to another, statistical tests indicated that there was no significant effect overall.

By contrast, training and goal-setting programs had a far greater impact on productivity than did pay-for-performance plans. Why do most executives continue to rely on incentive programs? Rewards buy temporary compliance, so it looks like the problems are solved.

Moreover, it does not occur to most of us to suspect rewards, given that our own teachers, parents, and managers probably used them. Finally, by clinging to the belief that motivational problems are due to the particular incentive system in effect at the moment, rather than to the psychological theory behind all incentives, we can remain optimistic that a relatively minor adjustment will repair the damage.

Over the long haul, however, the potential cost to any organization of trying to fine-tune reward-driven compensation systems may be considerable. The fundamental flaws of behaviorism itself doom the prospects of affecting long-term behavior change or performance improvement through the use of rewards. Consider the following six-point framework that examines the true costs of an incentive program. Of course, money buys the things people want and need.

Moreover, the less people are paid, the more concerned they are likely to be about financial matters. Indeed, several studies over the last few decades have found that when people are asked to guess what matters to their coworkers—or, in the case of managers, to their subordinates—they assume money heads the list.

Even if people were principally concerned with their salaries, this does not prove that money is motivating. There is no firm basis for the assumption that paying people more will encourage them to do better work or even, in the long run, more work. Many managers understand that coercion and fear destroy motivation and create defiance, defensiveness, and rage.

They realize that punitive management is a contradiction in terms. Punishment and rewards are two sides of the same coin. Rewards have a punitive effect because they, like outright punishment, are manipulative. Punishment and rewards are actually two sides of the same coin. Both have a punitive effect because they are manipulative. Further, not receiving a reward one had expected to receive is also indistinguishable from being punished.

Whether the incentive is witheld or withdrawn deliberately, or simply not received by someone who had hoped to get it, the effect is identical. And the more desirable the reward, the more demoralizing it is to miss out. The new school, which exhorts us to catch people doing something right and reward them for it, is not very different from the old school, which advised us to catch people doing something wrong and threaten to punish them if they ever do it again.

What is essentially taking place in both approaches is that a lot of people are getting caught. Managers are creating a workplace in which people feel controlled, not an environment conducive to exploration, learning, and progress. Relationships among employees are often casualties of the scramble for rewards. As leaders of the Total Quality Management movement have emphasized, incentive programs, and the performance appraisal systems that accompany them, reduce the possibilities for cooperation.

Peter R. Scholtes, senior management consultant at Joiner Associates Inc. No one is improving the system for collective gain. The system will inevitably crash. The surest way to destroy cooperation and, therefore, organizational excellence, is to force people to compete for rewards or recognition or to rank them against each other. For each person who wins, there are many others who carry with them the feeling of having lost. And the more these awards are publicized through the use of memos, newsletters, and awards banquets, the more detrimental their impact can be.

Furthermore, when employees compete for a limited number of incentives, they will most likely begin to see each other as obstacles to their own success. But the same result can occur with any use of rewards; introducing competition just makes a bad thing worse. Start small, recognize little and large accomplishments, implement creative, non-monetary rewards, and think about what your employees love. Following these steps will ensure that your employee reward system will be successful, both for your employees and for your business which will thrive with a little help from these tips.

Product Platform. Physical Security Conferences for We use cookies to enhance your experience and for marketing purposes. Read more. March 19, Be Creative!

This study attempts a to identify the role of intrinsic rewards on job performance and b to focus on discovering that employee motivation mediates the relationship between intrinsic rewards and job performance.

Therefore, this study is based on an innovative idea that aims to observe the supposed correlation, i. The authors ensure that, if organizations recognize the worth of intrinsic reward actions as honestly as possible, they would get best performance from workers. The main objectives of the study are interlinked with each other because conventional motivation theories like the Motivation-Hygiene Theory by Herzberg Herzberg et al. The remainder section of the article consists of the following.

The next section explains the point of view of prior researchers who have contributed to analyzing respective variables. Brief existing literature is reviewed followed by research methodology and data collection. Then, empirical results are discussed with the conclusion and future research.

Intrinsic rewards refer to those incentives that have been given to the employees of an organization. An intrinsic reward is an internal reward that employees achieve from completing their tasks or projects successfully. These rewards are mostly psychological and are based on the effort and abilities of a person. Intrinsic rewards elicit a positive emotional reaction and work to motivate employees to continue to improve as well as make lasting behavioral changes when needed Ryan and Deci, For example, when someone completes a task successfully, they will often experience a sense of satisfaction and achievement.

This intrinsic reward then motivates the employee to continue to complete that task successfully in the future to further experience those positive emotions. The prior studies are in favor of the positive consequence of a reward system on the performance of the employees. Devaro et al. The study concluded that training has a high frequency in non-profit organizations, and these non-profit organizations have lower base wages as compared with for-profit organizations.

According to the study by Tymon Jr et al. Stumpf et al. The findings of their study showed that intrinsic rewards related positively with satisfaction with the organization and intentions to stay at both time periods, with programs supportive of employee innovation further enhancing employee satisfaction and retention more strongly during the change effort. Furthermore, Mosquera et al. The results of their study indicated that intrinsic rewards have a positive and significant impact on the job satisfaction of the employee.

Bassett-Jones and Lloyd explained that intrinsic motivation and appreciation play a vital role in the satisfaction of employees rather than money and bonuses. Yang examined the individual performance and outcomes of his study and indicated that we cannot verify individual performance.

Even so, he also claimed that if the performance of the employees is observable, then organizations can use direct bonuses or relational contracts to motivate them based on their performance. Ajila and Abiola explained that intrinsic rewards have a positive and significant influence on the performance of the employee in an organization.

The results further indicate that intrinsic rewards such as career development, responsibility, recognition, and learning opportunities are less influential on the job performance of an employee as compared to extrinsic rewards like pay, bonuses, promotion, and benefits. The employees prefer to get immediate monetary benefits as compared to the recognition of their works.

Barber et al. Berdud et al. They have collected the information with the help of interviews. The study concluded that doctors were intrinsically motivated due to two dimensions which included medical practice and pro-social dimension.

Based on the above, we hypothesize the following:. H1: Intrinsic reward and employee performance have a significant and positive association. The most significant outcome of motivation, arguably, is individual performance.

Besides, motivation is completely related to enthusiasm and commitment Van Den Broeck et al. To energize workers and make them concentrate on their work in an inclusive manner, all these positive-affect states are theorized.

Furthermore, to be positively linked to in-role performance in the domains of education, work, and physical Cerasoli et al. Furthermore, to boosting performance, motivation energizes a wide range of attitudes, outcomes, thoughts, and emotions. The key benefits of attitudes are the perceptions of autonomy and effectiveness Cho and Perry, Yen and Tang investigated the association between electronic word-of-mouth motivation and hotel attribute performance.

The motivation of the employees and their performance explained that internal and external motivations are important factors for employee performance. Sanyal and Biswas investigated the attitude of the employees of the software companies in West Bengal India toward performance appraisal. They found the best effects of employee motivation toward performance appraisal.

Likewise, van der Van Der Kolk et al. The findings highlighted that intrinsic motivation enhances the performance of the employee. Zlate and Cucui revealed that performance is closely connected with motivation. His study is intended to present the motivation process within universities as a complex process, which leads to the performance of the personnel only if motivational mechanisms are known and properly applied by University managers.

According to the study by Rita et al. Kuvaas et al. The findings of the study showed that internal motivation was positively correlated with work performance and has a negative link with turnover intention and burnout. However, extrinsic motivation has a positive relationship with turnover intention and burnout and has a negative correlation with work performance. Also, the performance pay reduces if it is not accompanied by motivation.

The effect of motivation on organizational performance has been investigated by Osabiya He concluded that employees should be given the job he has been trained for. Motivated workers perform better than less motivated workers, because motivated workers have some sort of recognition and achievement through motivation. We assume that similar results would be found in the domain of work and thus hypothesize the following:. H2: Employee motivation is positively and significantly correlated with employee performance.

A reward management system involves the policies, processes, and practices of the organization for rewarding its workers by their skills, commitment, contribution, abilities, and artifice. Reward Management System Tool includes both extrinsic and intrinsic rewards, which are also called financial and non-financial rewards. Extrinsic rewards are salary increase, bonus system, prerequisite, etc. Yang, A basic explanation of motivation is the capability to change behavior.

Motivation is a drive that holds one to act because human behavior is directed toward some goal Kleinginna and Kleinginna, Social cognitive theory claims that rewards given for the success of challenging performance standards may result in high motivation Schunk, ; Netz and Raviv, Karami et al. The results of their study revealed that reward management has a significant positive impact on the performance of the employee, and the motivation of the employee significantly mediated the effect of reward management system on employee performance.

Stringer et al. The results provide some support for the complementary nature of intrinsic and extrinsic motivations. Intrinsic motivation was positively associated with pay and job satisfactions, whereas extrinsic motivation was negatively associated with job satisfaction and not associated with pay satisfaction. Likewise, Pratheepkanth assessed the reward system and its impact on employee motivation in commercial Bank of Sri Lanka Plc, in Jaffna District.

The aim of his study was to investigate whether rewards and recognition have an impact on employee motivation. The overall findings of the study showed that rewards and recognition have a positive and significant impact on employee motivation.

The results also revealed that staff and employees from non-white racial backgrounds experienced lower levels of rewards and motivation. Kuvaas suggested that employees will take more responsibility when offered developmental opportunities. Motivated employees via rewards are also more engaged and involved with their jobs as compared with employees with low motivation. Accordingly, we propose following hypothesis:. The earlier literature has concentrated on different dimensions of motivation and its effect on the performance of the employee in the manufacturing sector and large organizations but according to our best knowledge, none of the studies have discussed this relationship in small and medium-sized enterprises.

Also, this analysis has different methods compared to previous studies. This study fills the gap in the sphere of knowledge and addresses the role of intrinsic rewards in the performance of employee with the mediating mechanism of employee motivation in the SME sector of Pakistan.

Thus, we assume that:. H4: Employee motivation will mediate the relationship between intrinsic reward and employee performance. Figure 1 shows the conceptual model of the study, which has been constructed based on a literature review. Figure 1. Conceptual framework illustrates the associations examined in this study.

To examine the objective of the study, a sample of employees of SMEs has been collected through the questionnaire. The survey was conducted from early March to late April These questionnaires were originally developed in both languages English and Urdu national language for a better understanding of the local entrepreneurs.

Initially, self-administered questionnaires were distributed among the employees of SMEs in Islamabad and Rawalpindi cities of Pakistan. Study area is chosen due to the density of large numbers of enterprises, and it was convenient for authors to perform the data collection procedure. The SMEs involved in this study were cosmetics, electronics, food and beverage, pharmaceuticals, minerals, and construction.

Almost 50 and fewer workers were working in every enterprise. The aim of the study and questions were clarified to the participants before giving them a questionnaire, which enabled them to fill the questionnaire easily. The questionnaire consisted of demographic information control variables such as age, income gender, and education of the employees and studied variables like an intrinsic reward, employee motivation, and employee performance.

The single factor test of Harman Manzoor et al. The total number of respondents was , of which Almost The evaluation of employee motivation was performed by six self-report items based on the prior measure Cameron and Pierce, , and we have retrieved relevant items from the study of Talukder and Saif and Kuvaas Employee performance was measured with the 7-item scale developed by Williams and Anderson , which were previously used in the literature for the assessment of job performance Arshadi, This study deals with four control variables, namely, age, gender, income, and education.

SPSS software Table 1 demonstrates the descriptive statistics, mean, standard deviation, Pearson's correlations, and discriminant validity of all the study variables.

The findings depict a positive and significant correlation among all the variables. We have conducted a confirmatory factor analysis CFA based on exploratory factor analysis EFA and used the maximum likelihood estimate. All these values surpassed the good fit criteria. Manzoor et al. The convergent validity of the variables was estimated by observing the factor loading, composite reliability CR , and average variance extracted AVE Table 3.

We found that CR ranged from 0. These values are greater than the suggested cut-off point of 0. According to Bagozzi and Yi , the CR ensures the minimum cut-off of 0. Table 3 shows that the value of alpha is above 0. Hair et al. Thus, the measures do not have any slight problem with convergent validity. Table 3. Factor loading of indicators and overall reliability of the constructs.

To see the discriminant validity, the squared root values of correlations among the constructs are shown in Table 1 where all these values are greater than the inter-related correlations Asif et al.

Additionally, the measurement model shown in Table 4 confirms the construct validity as suggested by Barroso Castro et al. Table 4. Measurement model for explanatory variable intrinsic reward , dependent variable employee performance , and mediator variable employee motivation. Are your Corporate Reward programs geared up to handle the challenge? Ensure that employees understand and appreciate the rewards as worth the effort Employees who view the rewards as worth the effort will appreciate your effort and be more motivated to work hard to obtain them.

Take that extra time to help them understand and appreciate the reward. Make sure that employees understand how to earn the rewards As the HR Team you should clearly define how employees can earn their rewards. When employees have a comprehensive understanding of what is expected of them, they will be more capable and focused in achieving performance standards.

Make your rewards a mix of both monetary and non-monetary Reward systems that include a combination of monetary and non-monetary rewards have a wider appeal and a greater aspirational merit attached to them. A thoughtful non-monetary gift will have a stronger emotional pull while a monetary gift will bring about a greater sense of gratification.