Compensation and Benefits
The Effects of Monetary and Other Incentives on Employee Motivation and
Productivity
More and more organizations continue to implement incentive programs
in order to develop motivational rewards for their employees. Most successfully
run companies offer incentive programs because the results clearly show an
increase in employee morale and overall productivity. Successful companies
recognize the importance of these systems and make sure to adopt one that fits
the specific needs of their employees.
“Organizations that encourage managers to engage employees by making it a
performance criteria and rewarding engagement through incentive programs
indicate that their organizations more effectively foster employee engagement
and motivation than those organizations that do not. ” [CITATION Sco10 \p 8 \l
1033 ]
It is proven that companies with the most highly involved and motivated
employees have some sort of incentive system in order to reward employees for
hard work. These incentives keep the employees continuously motivated
throughout their career.
Motivated employees are more productive than those who are not
motivated. [CITATION Jam98 \p 3 \l 1033 ] Based on this information, it is
obvious that there are many benefits to incentive programs, which is why most
successful businesses have a system in place. Over a length of time and with
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more experience, under a system of incentives, employees learn how to be more
productive. [CITATION Obl12 \p 305 \l 1033 ] For example, if one year an
employee just skates by doing the bare minimum at work and misses out on the
incentive that everyone else receives, they will learn that they need to put in a
more productive effort, in order to reap the rewards. There was an experiment
done by Smoot and Duncan in 1997 that tested the impact of three different
types of incentive plans on worker productivity. They found a positive
relationship between the incentives and worker productivity. In turn, they found
that incentive programs resulted in higher productivity than regular flat rate pay
systems. [CITATION Sch00 \p 21 \l 1033 ] Incentives show employees that good
things can result from hard work and the more successful you help to make the
company, the more successful you will be yourself. With this realization an
employee becomes motivated to be more efficient and productive in their job.
There are a few different types of monetary incentive plans. Profit/gain
sharing incentives motivate employees by encouraging them to individually work
to increase the success and productivity of the company in order to receive a
portion of the extra profit gained. Team-based incentives motivate employees to
work in collaboration and see the success of oneself as part of the success of the
team. If members are capable of working in this environment this is a good way
to increase workload and quality of work done by employees. Individual
incentives motivate employees because they can work alone and at their own
pace to achieve their goal, without relying on other employees. Employees must
feel a strong sense of motivation to achieve the best results. On the spot cash
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rewards and bonuses are rewards that you receive after reaching a certain
benchmark. These are good incentives for those who wish to receive a lump-
sum payment for their hard work. [CITATION Ste12 \p 2 \l 1033 ] There are also
Ad Hoc/Project- based incentives which are incentives offered to help workers
reach a deadline on time. Employees receive a reward to motivate them to put
in extra work to complete their project in time. [CITATION The13 \p 3 \l 1033 ]
Profit Sharing incentives work well for employees and employers because
both parties are gaining from the system. While employees work harder to make
more money for themselves, they are of course making more money for the
company in the process. It is easy to see why this method is completely tied to
employee productivity levels. In fact ” research evidence is quite clear that
employee profit sharing does increase company productivity.” [CITATION
Lon12 \p 900 \l 1033 ] There are performance goals that must be reached by an
employee in order to make them eligible for the profit sharing. This serves as a
tangible motivator for employees wishing to make a larger sum of money from
their work. The use of an escalating profit sharing technique offers an even
larger motivational incentive. The better your work results, the larger the
percentage of profit sharing you receive. This technique results in endless
motivation for the employee, because there is no benchmark or limit to achieve in
order to qualify for the profit sharing. With a regular benchmark, they could just
coast or relax after they reached it. But without limits, they can keep working
hard and be eligible for a bigger portion of the profit shares, the more revenue
they produce for the company. With this type of incentive, employees are
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motivated to reach beyond the status quo and keep striving for the highest
productivity level they can achieve.
Team-based incentives are useful for many companies, especially ones
which require teamwork to cater to the needs of customers. An example of this
type of environment would be a company in the healthcare field. There has been
research done both within and outside of the healthcare field, which has shown
that team-based performance incentives actually increase the effectiveness and
quality of the company as a whole. [CITATION Blu13 \p 65 \l 1033 ] When a
member of the organization’s team strives to work harder to attain a goal, it can
encourage other members of the group to put forth more effort to reach the goal
as well.
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