You are on page 1of 22
Bahria University Islamabad Research Paper Impact of Monetary and Non-monetary benefits upon employee’s motivation, working in

Bahria University Islamabad

Research Paper

Impact of Monetary and Non-monetary benefits upon employee’s motivation, working in organizations of Islamabad .

Organizational

Behavior

SUBMITTED TO

Nusrat Huma

SUBMITTED BY

Muhammad

Salman

Khan,

Wardah Anwar, Zahra Haider, Sidra Ehsan, Sana Salahudin,

Table of Contents

Introduction:...................................................................................................2

Research objectives:......................................................................................4 Justification of the study:................................................................................4 Research Question:........................................................................................5 Theoretical framework:..................................................................................5 Literature review:...........................................................................................7 Research methodology:................................................................................11

Questionnaire............................................................................................20

References:..................................................................................................23

References:

Title:

The title of the proposal is, “Impact of monetary and non-monetary benefits upon employee’s motivation, working in organizations of Islamabad.”

Introduction:

The theme of the topic and its purpose is to review the importance of monetary as well as non monetary benefits in order to motivate the employees and enhance their performance. The unit of analysis selected includes organizations of Islamabad and the impact of monetary and non monetary compensation on the employee’s performance in the prevailing economic conditions. Many employees working in the certain organizations are tied to the organization due to heavily paid benefits in the form of cash and other facilities and these things are even a part of the salary package. But the point that arise curiosity in the brain is that what actually attracts more towards motivation and interest in the job, the benefits in the form of cash or the other benefits which may include transportation, free fuel, rent facility, medical insurance etc. the applicability of the topic varies in the environments. In China, people prefer more the non monetary benefits and do not rely much on the papers in their pockets, however in some parts of the world, money is considered as the most valuable benefit that can be gained by good performance and which also creates interest in the employees for good performance. Similarly, an area with less transportation facility would require transportation benefits instead of monetary benefits. All the organizations which come under our analysis concentrate a lot on the benefits and compensations for their employees because it helps the employee to realize himself as a valuable asset of the company and his significance in the company, so it will induce loyalty and job satisfaction in the employee and in the end he would obviously perform well to enhance

the productivity factor of the economy. Thus compensations and benefits of all type play a vital role to increase the production in the economy.

Another thing as a result of this research can be that it may also increase the competition race among the firms, thus more the competition, more would be the technological progress by the firms to get at the top of the order. Another benefit of this research can be that the future employees would realize the benefits provided by firm and if they suit them then they will work hard to be the part of that firm, hence the firm would have more learned and competitive employees. Thus, it can be assumed that this research can enhance the economic progress of Pakistan.

Problem statement:

Employees require intrinsic motivation or extrinsic motivation? Employees in our analysis may think of self esteem nothing and may prefer psychological needs over them due to recession and present economic conditions. Our society is a place where money matters so in our analysis results may vary. Money has always been thought of as an unethical mean to motivate people and make them work like animals. Pakistan, most people do the same thing. But is the same case here? Do people here really prefer non monetary benefits like thank you, appraisal etc on money? This question has actually provoked curiosity to do this research and find out the answer of this question in our analysis. The concluded problem statement is,

[

“The basic source of motivation in Islamabad for employees is monetary benefits or non monetary benefits. What is preferred more by the employees from both kinds of benefits?”

This problem statement can solve many issues regarding the organizational decisions as which benefits and compensation would make employees more satisfied and motivated which would in turn help to improve the overall productivity of the organization. The

outcome of research would be interesting for the management decision makers and it may change the current practices of the organizations in terms of rewards and benefits.

Research objectives:

Following are the research objectives of the study.

Understand the importance of monetary and non monetary benefits to motivate employee.

Formulate

best

policies

relating

to

monetary

and

non monetary

compensation and hence improve production by motivating employees intrinsically and extrinsically.

Understand the preference of employee in relation with monetary and non monetary benefits.

Increase interest and psychological health of the employee.

 

Provision of benefits according to the needs of the employee, hence, inducting loyalty in them.

Justification of the study:

This research study would be helpful in many ways like:

Awaring managers the importance of benefits in an organization

Understanding the needs and requirements of the employees who are a part of intellectual capital

Best ways to design the monetary and non monetary beneficial policies according to the needs of the employee

Providing the employee with what he wants which would in turn promote loyalty and hard work in him

Understand the preference of the employees regarding the monetary and non monetary benefits in our unit of analysis

Stopping the false paradigm models applied to our organizations

Promote psychological health of the employee

This research is important

in

a

sense that

such type

of research has never

been

conducted in our society and it will yield excellent results to enhance our production and economy.

Research Question:

The research question of our research is,

“Do Employees in organizations of Islamabad prefer monetary benefits or non monetary benefits as a source of motivation for them?”

Theoretical framework:

In the research going to be conducted following are the variables:

Dependant variable: Employee’s motivation

Independent variables: D1: Monetary Benefits D2: Non Monetary benefits

To find out that what do employees in Pakistan actually prefer, the monetary benefits or the non monetary benefits in order to enhance their motivation.

The link between variables is very logical. If an employee performs well, expects some reward, even a “thank you” or “great job” compliment by the boss works for that employee. If an employee is given with certain monetary or non monetary benefits or rewards for good performance or even for being an employee of the organizations, that employee has a feeling that organization do cares for him and he gets motivated. Due to this motivation, employee becomes a long term member of the company and also works hard. Thus, the productivity of the organization increases.

The hypothesis is:

H1: Monetary benefits create more motivation in employees working in different organizations in Islamabad.

Ho1: Monetary benefits do not create more motivation in employees working in different organizations in Islamabad.

H2: Non Monetary benefits create more motivation in employees working in different organizations in Islamabad.

Ho2’: Non Monetary benefits do not create more motivation in employees working in different organizations in Islamabad.

The employee satisfaction and need assessment would be done to view the effect of independent variables on the motivation that is dependant variable.

DEFINITIONS:

Motivation:

The term “motivation” was originally derived from the Latin word movre, which means “to move”. But this one word is insufficient to describe the processes with how human behavior is activated. Given below are some representative definitions of motivation… ..

It deals with how behavior gets started, is energized, is sustained, is directed, is stopped, and what kind of subjective reaction is present in the organism while all this is going on (Jones, 1955)

Monetary benefits:

Monetary incentives include profit sharing, project bonuses, stock options and warrants, scheduled bonuses (e.g., Christmas and performance-linked), and additional paid vacation time. Traditionally, these have helped maintain a positive motivational environment for associates. 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. So simply we can say that

Monetary benefits = benefits with money

Non monetary benefits:

Non-monetary benefits are to reward excellent job performance through opportunities. Non-monetary incentives include flexible work hours, training, pleasant work environment, and sabbaticals. More appropriately,

Non monetary benefits = benefits without money

Literature review:

Managers are individuals who achieve their goals through other people. They are constantly searching for ways to motivate their employees to make them work at their optimal level of performance to accomplish the company objective. Various incentives are provided by the managers to their employees for motivation. The incentives that are provided by the mangers to their employees can be broadly classified as monetary incentives and non-monetary incentives.

Comparison of monetary and non-monetary incentives:

The purpose of monetary incentives is to reward associates for excellent job performance through money. Monetary incentives include profit sharing, project bonuses, stock options and warrants, scheduled bonuses (e.g., Eid and performance- linked), and additional paid vacation time. Traditionally, these have helped maintain a positive motivational environment for associates. 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. On the other hand, the purpose of non- monetary benefits is to reward excellent job performance through opportunities. Non- monetary incentives include flexible work hours, training, pleasant work environment, and sabbaticals.

Theories which support intrinsic motivation :

Various theories that support the concept that intrinsic motivation which is attained through non-monetary incentives is important and better than extrinsic motivation are as follows:

Maslow’s Hierarchy of needs

 

This theory states that the needs of social, esteem and self actualization are higher order needs. The differentiation between the higher order needs and lower order needs is that the higher order needs are satisfied at the individual level whereas the lower order needs are satisfied externally.

Herzberg’s two-factor theory

 

It supports the emphasis on factors associated with work like promotional opportunities, opportunities for personal growth, recognition, responsibility, and achievement which employees find intrinsically rewarding

McClelland’s Theory of Needs

 

This theory focuses on three needs: achievement, power and affiliation. They are defined as follows

Need for achievement: The drive to excel, to achieve in relation to a set of standards, to strive to succeed.

Need for power: The need to make others behave in a way that they would not have behaved otherwise

Need

for

affiliation:

The

desire

for

friendly

and

closely

interpersonal

relationships.

 

Cognitive evaluation theory

 

This theory states that allocating extrinsic rewards for behavior that had been rewarding intrinsically leads to decrease in overall level of motivation. Thus it supports the view that it is better to continue intrinsic motivation to boost the morale of employees.

Goal-Setting theory

This theory supports the idea that specific and difficult goals with feedback lead to higher motivation and performance.

Self-efficacy theory(Social cognitive theory)

It is the individual’s belief that a task assigned can be done. Higher the self efficacy higher is the confidence of the employee at the workplace.

Reinforcement theory

This theory states that the behavior is a function of its consequences. If employees feel that their efforts are duly rewarded then they will work in a more effective manner for the organization.

Equity theory

This theory states that individuals compare their job inputs and outcomes with those of others and then respond to eliminate any inequities. If their colleagues are given recognition employees will work towards achieving those rewards. This motivates them to perform them to work better which beneficial to the organization.

Expectancy theory

The strength of a tendency to act in a certain way depends on the strength of an

expectation that the act will be followed by an outcome and on the attractiveness

of that outcome to the individual. Thus when expectations from an employee increases the employee responds with better performance.

From the above theories (however different they may be) it is clear that intrinsic motivation is desired by the employees.

The literature review shows that most of the studies and researches conducted before relate to the European countries where non monetary incentives are considered much more valuable than the monetary incentives. There has been nothing about the comparison and importance in employee’s point of view regarding these two types of benefits. This is the reason that this research would be performed in Pakistan and Pakistan has been selected as the unit of analysis. Firstly, the literature applicability is not for Pakistan, it may lead to false paradigm model. Secondly, literature shows that non monetary benefits and intrinsic satisfaction is more important than monetary benefits but the situation may be different with respect to our unit of analysis, i.e. Pakistan.

Procedure to be followed:

The data would be collected from capital city of Pakistan and from each

organization six members would be selected, the research team would visit every organization just once to collect the data. The employees of the organizations would be sampled according to the departments from top to bottom and 3 members from each department would be selected to provide us with the most accurate and precise data. Random sampling of three people from each department would be done using probability sampling technique.

POPULATION AND SAMPLING:

The population of our research consists of three organizations in the main city Islamabad. The sample frame would be designed in order to form a list of those organization and show that which of them were actually considered and why. The

employees of the organizations would be sampled according to the departments from top to bottom and 3 members from each department would be selected to provide with the most accurate and precise data. Special care to minimize errors and biasness would be taken in order to show truism in the results. Random sampling of three people from each department would be done using probability sampling technique.

Research methodology:

The research methodology is a vital part to show the truism in our research proceedings. The design and methodology would be adopted in such a way that it would have minimized biasness in it and the true picture of the data collected from the respondents. Data will be collected in both forms the quantitative as well as the qualitative data in order to induce preciseness in our research work. The process of data collection would include having access to different organizations of the Islamabad, view their compensation and benefits policies, and view the difference of monetary and non monetary benefits and their ratio pursued in the company. Then we will interview the certain sample of different employees and shall ask them in what ways these benefits motivate you, what changes do you want in these policies ( assessing their needs), and finally what motivates you more, monetary or non monetary benefits. Some questionnaires would also be served to the target samples. Organization which have ease of access and which are governed by the government would be preferred in order to collect data.

Data Analysis and Findings:

Q1:-

What do you prefer as a best motivational tool?

 

Bonus

Yes

/

NO

Cash Reward

Yes

/

NO

Paid holidays

Yes

/

NO

Salary increase

 

Yes

/

NO

Promotion

Yes

/

NO

Letter of Appraisal

Yes

/

NO

Employee of the Month / Year

 

Yes

/

NO

Recognition through Newspaper

 

Yes

/

NO

Conclusion :

Q2:-Does your organization is giving importance to the motivational tools?

Conclusion :

Q3:- Do the productivity and performance of an employee is dependent on Monetary or on non monetary benefits?

Conclusion :

Q4:-Is the Monetary benefit or the non-monetary benefit best tool to motivate an employee?

Conclusion :

Q5:-What is more important for you?

Conclusion :

Q6:-Which option will you prefer if the company purchase a insurance policy for you or pay you amount equal to the amount of insurance?

Conclusion :

Q7:-For good performance what will you performance?

Conclusion :

Q8:-If your company is going to start its new branch in a rural area and your

company offers be your response?

you the post of CEO for that particular branch. What will

Conclusion :

Q9:-What will you do if your company offers you

Conclusion :

Q10:-What will you prefer among these?

Conclusion :

Grand Conclusion:

Recommendations:

Questionnaire

Name: ___________________ _____________

Gender:

___________________ Occupation: __________

Age:

Q1:-

What do you prefer as a best motivational tool?

Bonus

Yes

/

NO

Promotion

Yes

/

NO

Cash Reward

Yes

/

NO

Salary increase

Yes

/

NO

Letter of Appraisal

Yes

/

NO

Employee of the Month / Year

 

Yes

/

NO

Recognition through Newspaper

Yes

/

NO

Paid holidays

Yes

/

NO

PURPOSE: To know what managers and employees prefer among these monetary and non-monetary benefits and to know the inclination towards the monetary and non-monetary benefits.

Q2:-Does your organization is giving importance to the motivational tools?

  • Yes

  • No

PURPOSE: To see do the managers actually do what they say. Their will be a cross check on what managers saying, because we will be asking the same question from the employees of the same organization.

Q3:-Do the productivity and performance of an employee is dependent on Monetary or on non monetary benefits?

  • Monetary

  • Non-monetary

PURPOSE: To see what do managers and employees prefer in terms of their performance and what things increases their production and performance.

Q4:-Is the Monetary benefit or the non-monetary benefit best tool to motivate an employee?

  • Monetary

  • Non-monetary

PURPOSE: To see what actually been preferred by the lower and upper level of management.

Q5:-What is more important for you?

  • Salary Increase

  • Increase in Authority

PURPOSE: We are using in direct approach in this question in order to check that which will be proffered monetary or non-monetary benefit.

Q6:-Which option will you prefer if the company purchase a insurance policy for you or pay you amount equal to the amount of insurance?

  • Your Insurance

  • Equaling to the amount of insurance

PURPOSE: We are using in direct approach in this question in order to check that which will be proffered monetary or non-monetary benefit.

Q7:-For good performance what will you performance?

  • Cash prize

  • Promotion with minimal increase in salary

  • Awarded with a shield of Pride of Performance

PURPOSE: We are using in direct approach in this question in order to check that which will be proffered monetary or non-monetary benefit or both.

Q8:-If your company is going to start its new branch in a rural area and your company offers you the post of CEO for that particular branch. What will be your response?

  • Accept the post

  • Stay where you are at present

PURPOSE: We are using in direct approach in this question in order to check that which will be proffered monetary or non-monetary benefit.

Q9:-What will you do if your company offers you

  • Double salary for working in two shifts

  • Refuse to serve twice a day

PURPOSE: We are using in direct approach in this question in order to check that which will be proffered monetary or non-monetary benefit.

Q10:-What will you prefer among these?

  • Contract based job with high salary, faster promotion, no gratuity and no pension

  • Permanent job slow promotion, low salary, pension

with gratuity and

PURPOSE: We are using in direct approach in this question in order to check that which will be proffered monetary or non-monetary benefit.

References:

  • 1. Robbins, Judge. (2007). Organizational Behavior. Prentice Hall of India Pvt ltd.

  • 2. Hiam. (2003). Motivational Management. American Management Association

  • 3. Thomas. (2000). Intrinsic Motivation at work. Berret Koehler Publishers

  • 4. Hollyforde, Whiddett. (2005). The motivation handbook. Jaico Publishing house

  • 5. http://en.wikipedia.org/wiki/Professional_development

  • 6. http://en.wikipedia.org/wiki/Retirement _planning

  • 7. http://www.maritzrewards.com/pdfs/site-benefits.pdf

  • 8. http://etd.lib.metu.edu.tr/upload/12605141/index.pdf

  • 9. http://www.101rewards.com/non-monetary-rewards.html

10.http://www.recognitionrewards.com/top_five_items.htm

11.Wikipedia