prestige insitute of management and research

8/7/2019 PRESTIGE INSITUTE OF MANAGEMENT AND RESEARCH

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PRESTIGE INSITUTE OF MANAGEMENT

AND RESEARCH, INDORE.

BUSINESS RESEACH METHODOLOGY.

MINOR RESEACH PROJECT.

Roll of monetary Reward system in performance and efficiency

of employees in corporate.

SUBMITTED TO: - SUBMITTED BY:-

Prof.Deepak Jarolia Chitra Nyar

Pauli Jhariya

Shurti Bajpayee

Vinayak Singh


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CONCEPTUAL FRAMEWORK

The success of any company can be determined by how well they are able to utilise and

mobilise their resources to give them the best results. Unlike other resources, human resources haveemotions and needs. It is therefore imperative that management recognises these emotions

and needs when developing their human resource management systems. Effective development

of these systems can provide a competitive human resource advantage. As access to capital

and information becomes a less important means of advantage so does the human resource

become an increasingly important means of differentiating oneself from ones competitors. This is

the reason why a companys human resources are considered to be its most important asset.

In order to stay competitive and ensure that the company has a long-term future, it

is important to improve these performances on an ongoing basis. These performances will

only improve with the buy-in of the employees into higher levels of performance motivated

by related rewards. The company will benefit because its labour productivity will increase,

labour cost per unit will decrease and it will become more price competitive. This is especially thecase where the manufacturing process is labour intensive. The researcher therefore realises the

potential benefit in researching the effectiveness of non monetary reward systems in labour

intensive companies. Improving job performance does not happen on its own, but gets driven

by peoples motivation. According to Armstrong and Murlis (1994:40) rewards and more

specifically non-monetary rewards normally drive a person. It is therefore important to look at

the payoffs of non-monetary rewards.

Managers are constantly searching for ways to create a motivational environment where

associates (employees) to work at their optimal levels to accomplish company objectives. Workplace

motivators include both monetary and non-monetary incentives. Monetary incentives can be diverse

while having a similar effect on associates. One example of monetary incentives is mutual funds

provided through company pension plans or insurance programs. Because it has been suggested

that associates, depending on their age, have different needs pertaining to incentives, traditional

incentive packages are being replaced with alternatives to attract younger associates.

Some researchers have argued that the motives that drive one to focus on money are more

relevant than the intensity of the focus itself, and they subsequently differentiate between

instrumental materialism and terminal materialism. Instrumental materialism describes using

material goods as a means for attaining personal goals and fulfilment; whereas terminal materialism

involves using material possessions to achieve social status and elicit envy from others. They also

divide motives for materialistic pursuit into three different categories: positive, negative and

freedom of action. Positive motives involve using money for basic necessities and as a measure of

achievement. Negative motives refer to using money to gain power or superiority over others.

Negative motives also include efforts to allay ones self-doubt. Motives concerning freedom of

action simply imply spending money in any way that one desires. When the significant negative

correlation between subjective well-being and money importance was analyzed, while controlling

for the influence of motivation, the correlation lost its statistical significance. In addition, when

calculated independently, the relationship between negative motives and money importance was

both negative and statistically significant. As a result, attributed the correlation between

psychological well-being and money importance to negative motives alone. This suggests that not all

motives for wanting money lead to decreased happiness. Their findings suggest that it is not the

importance of money that contributes to well-being; rather, attempting to use money to alleviate

self-doubt and increase self-esteem leads to problems. They add that such motives become


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problematic when money is used for things it cannot provide, e.g., self-esteem, happiness and

genuine friendship.

Personal accountability for high performance. Effective incentive programs that motivate all

employees, and reward those employees, teams, and organizational units whose performance

exceeds expectations. These elements include leadership support; clearly defined and transparent

criteria; use of incentive programs can be an important part of performance management systemsbecause they can serve to align employee performance expectations with agency missions and goals

as well as reinforce multiple awards for both individuals and teams; targeting only high-performing

teams and employees; publicizing awards; and regularly monitoring, evaluating, and if needed,

updating incentive programs on a periodic basis.

Range of incentivesboth monetary and non monetary. Neither one incentive program is

right for all situations, because neither will motivate all employees under all circumstances.

Employees can have vastly different motives for acquiring wealth including using money to fulfil

psychological needs. Thus, it is not surprising that money alone is less an effective motivator for

employees than when it is used in conjunction with non-financial

Reinforcements. We review the nuances of financial incentives and make basic recommendations

that can form the basis of best practice compensation and incentive policies.

Research consistently substantiates the effectiveness of financial incentives on job

performance, although companies need to consider the issue of job quantity versus quality and also

be aware of the limitations of financial incentives. Employees can have vastly different motives for

acquiring wealth including using money to fulfil psychological needs. Thus, it is not surprising that

money alone is less an effective motivator for employees than when it is used in conjunction with

non-financial reinforcements. We review the nuances of financial incentives and make basic

recommendations that can form the basis of best practice compensation and incentive policies.


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LITRETURE REVIEW

In a much publicized study, Gupta and her colleagues analyzed thirty-nine studies conducted

over four decades and found that cold-hard cash motivates workers whether their jobs are exciting

or mundane, in labs and real-world settings alike. But the research team acknowledges that money

is not the only thing that concerns employees noting that beyond a certain point higher salaries

will make employees happier, but it will not buy better performance. Still, Gupta warns that

employers who dole out small merit raises less than 7% of base pay may do more harm than

good. According to her, small raises can actually be dysfunctional in terms of motivation because

employees become irritated that their hard work yielded so little. Because of this, she advises

employers who must give small raises to be careful about linking them to results and to be

scrupulous about being fair.

.

Financial incentives moderately to significantly improve task performance, but their

effectiveness are dependent upon organizational conditions. Differences in institutional

arrangements contribute to the feasibility and effectiveness of various monetary incentives, as do

differences in employees preferences for specific incentives. Therefore, companies are wise to

study these issues before implementing changes to existing incentive plans. This is especially

pertinent for service organizations, where financial reinforcements tend to produce a stronger effect

on task performance than non-financial rewards used alone. Even stronger results are seen with a

composite approach. For example, one meta-analysis of 72 field studies found that monetary

incentives improved task performance by 23%, social recognition improved task performance by

17% and feedback elicited a 10% improvement18. Simultaneously combining all three types ofreinforcements improved performance by 45%.

According to Carrell et al. (1995:348) performance management is a term that was

developed when the emphasis of performance appraisal was broadened to include all of the

management tools. Performance appraisal is there to ensure achievement of performance goals.

The tools to be used to improve performance should include reward systems, job design,

leadership, training and performance appraisal.

Armstrong (1999:427) says that performance management should be based on managing by

agreement or contract and not by command. He also states that performance management should

be designed to achieve individual and organisational objectives. It is during the course of this

research that the researcher wants to focus on the reward systems as a tool to motivate people

to improve performance.

Armstrong and Murlis (1994:205) define performance management as a process or set of processes

for establishing shared understanding about what is to be achieved, and of managing and

developing people in a way which increases the probability that it will be achieved in the short

and longer term.


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According to Bruce and Pepitone (1999:38) it is important to remember that people

work harder and smarter not for the company but for themselves. It is managements

responsibility to find the link between the employees needs and what will make them do

exceptional work.

Bruce and Pepitone (1999:40) says management needs to help their employees feel more

motivated on the job and build the connection between their own interests and the interests

of the organisation

Hartle (1995:82) says that reward is an important part of the feedback loop in performance

management. Money is not necessarily the only reward. He says that a reward will only have a

positive effect if the individual values the reward and the reward is appropriate to the effort

that was put in and to the achievement.

Hartle (1995:82) mentions a wide range of types of reward:

Praise;

Promotion; Individual bonuses;

Merit pay;

Team bonuses;

Prizes, and

Special awards.

Hellriegel et al. (1999:489) say that to be motivators, rewards must be aligned with the

things that people value. The rewards can be determined by simply asking the employees what

things they want. Employees will vary in their responses, because some employees value monetary

rewards, whereas others value scheduling flexibility, especially training and developmentopportunities. Some people see their jobs as the source of a pay cheque and little else.

Others derive great pleasure from their jobs and association with co-workers. The subject of

organisational rewards includes, but goes far beyond, monetary

Compensation.

According to Satisfaction Compensation Programs for Growing Companies (1997)

recognition and celebration of achievement can build on job satisfaction felt by team members. It is

mentioned that there are various ways to recognise successful performance.

Kreitner et al. (1999:250) say these rewards can vary from subsidised lunches to stock

options, from boxes of chocolates to golf club membership. The most basic form of rewards is pay

and benefits, but there are less obvious social and psychic Rewards. Social rewards can include a

simple praise and recognition from others both inside and outside the organisation. Psychic rewards

are more from the inside, and include personal feelings of self-esteem, self-satisfaction, and

accomplishment. Despite the fact that reward systems vary widely, it is possible to identify and

interrelate some common components


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According to Newstrom and Davis (1997:167) money has always been

Important to employees for the following reasons:

Because of the goods and services that it will purchase;

Because it can be regarded as a status symbol, and

Because it represents to employees what their employer thinks of

Them.

Hartle (1995:195) uses the term reinforcement when he mentions the initial process of

recognising and praising behaviour. He says that it is a powerful motivational technique for

shaping, rewarding and encouraging the recurrence of certain behaviours. He says reinforcement

should:

identify both what the employee did effectively and why it is effective;

provide big rewards for Herculean efforts;

be sincere;

be timely;

be specific, and

identify both the results and the competencies demonstrated in achieving those end results.

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