Sustainability of Monetary-Based Incentives
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Sustainability of Monetary-Based Incentives to Enhance Employee Performance
Abstract
This paper’s general objective is to establish how monetary-based incentives influence the performance of employees in an organization. Monetary-based incentives entail compensation in the form of bonuses, raises, and sharing profits in which employees get offered money in return for performance. This means that the employers offer the employees a certain amount of money in exchange for a particular improvement of performance at work. Money becomes a motivating factor in the sense that the employees get offered on condition that they achieve a particular goal at work as set by the employer. The objectives for research that guide this paper include establishing how sustainable the monetary-based incentives are concerning enhancing the performance of employees in an organization. It also establishes to what extent monetary-based incentives motivate employees to ensure that they achieve positive outcomes in the organization. This paper makes use of literature in academic review journals and textbooks relevant to this topic to establish the applicability of the incentives that are monetary based. The literature reviews of the articles will help establish whether the application of monetary-based incentives in organizations enhances the performance of employees in the various organizations, as studied in the said literature. The findings of the various academic journal articles will then be used to determine their applicability in the world of business today. Organizations implement the use of monetary-based incentives to improve the performance of employees in an organization.
Keywords: sustainability, monetary-based incentives, employee performance.
Introduction
The performance of employees is a critical part of any organization in the sense that it needs to be efficient to ensure that the organization achieves the goals that it has put in place. Positive outcomes in the business get enhanced by the quality of work that the employees produce. Motivating employees is a significant factor that helps ensure the best performance of employees at work. There are several incentives that an organization can put in place to enhance the performance of the employees in the organization. These incentives can include improving the conditions under which the employees perform their duties to make them conducive and comfortable enough for them to be able to carry out their duties efficiently. Another incentive can be involving the employees in the processes of making decisions so that they can be able to air their concerns; this will help the organization in making decisions that put into consideration the needs of the employees to avoid conflict between the management and the employees that may arise from disagreement with a particular set of policies or rules. Another important incentive that can significantly enhance the performance of employees in an organization is the recognition incentive in which the management can praise the performance of employees whose work has stood out among the rest, announcing what an employee has accomplished in a meeting in the company and awarding an employee with an achievement certificate. Recognition will enhance performance because the other employees will be motivated to work hard so that they can also receive the same attention. Monetary-based incentives are those that entail compensation in the form of bonuses, raises, and sharing profits in which employees get offered money in return for performance. This paper presents a literature review on the concept of monetary incentives. It also provides a summary of the findings from the review and a discussion of how those findings apply to the world of business.
Literature review and analysis on the sustainability of monetary-based incentives
Monetary-based incentives have undoubtedly been used by many organizations to enhance the performance of the employees. Most companies have been using this incentive through bonuses and paychecks to show their employees that they get appreciated in the work they do. Compensation has been a significant motivating factor in the sense that employees working under this incentive are often working towards finding ways to enhance their performance in the organization. This incentive is mutually beneficial to both the organization and the employee in the sense that while the organization can meet its financial goals, the employee is also able to benefit from the bonuses. However, there is a significant number of ramifications that arise from the exclusive use of monetary incentives in an organization. The benefits and ramifications for those organizations that use monetary incentives get discussed in the literature provided in the discussion below.
Sustainability of monetary-based incentives
In the article by Cainarca et al., (2019), the authors talk about the effects of incentives that are monetary on the performance of the organization and the individual performance of employees. It addresses the role of these incentives in ensuring that the performance of the employees gets enhanced, and the outcomes that the organization intends to achieve are also achieved from the quality of work that arises from the enhanced performance by the employees. The authors of this article based their conclusion on a study of the distribution of incentives that are monetary among public administration employees. To be specific, the bureaucratic approach that gets used in paying employee premiums based on the specific positions that they hold gets compared with a merit approach that makes recognition and awards the contribution that gets made by every individual. The study of the performance of employees got done using a value index and a centrality index for task advice. The results indicated that a modification in the behavior of the individuals following the predictions and the theoretical modifications that got established.
The articles by Coccia (2019) provides that organizations must put in place incentives as they are essential in motivating employees to work better. Using incentives as a reward for work well done creates conditions that are favorable for the achievement of the goals that get set and support the development of the organization. This article presents an analysis of the differences between incentives that are extrinsic and those that are intrinsic in suggesting the implications of management that get directed towards supporting the motivation and enhanced employee performance in public organizations. High performance of employees can get motivated by the incentives that are monetary-based on the basis that the employees will be able to provide a demonstration of their creativity that is high because they will be focused on delivering for the organization to gain those bonuses.
The study by Li, (2019) gets based on research that was experimental carried out on a job for data entry to establish whether in motivating its employees, organizations should make use of both monetary incentives and incentives that are pro-social. The study established that pro-social incentives significantly reduce the quality of work. In the event where the compensation of workers is not inclusive of pro-social incentives, making that particular monetary compensation conditional on the work quality performed by the employees played a significant role in enhancing the performance of the employees, and thus there were improvements in the quality of work. Therefore, this study concluded that for an organization to enhance the performance of its employees in a way that will have a less negative influence on the organization, it has to put in place measures to ensure that the incentives that get used to enhance performance are both pro-social and monetary-based. The monetary-based incentives have to be accompanied by other incentives to ensure the goal of achieving a better performance of employees.
A study conducted by Al-Belushi & Khan, (2017) establishes the findings of an investigation into the effects of the incentives that are monetary on the motivation of employees and a critical examination of the monetary incentive type that best suits a particular situation. In this case, the motivation of employees in Shinas College of Technology. The results of the findings of this study from the study environment established that the employees in this setting got motivated by duty allowances and salary to provide their best performance in employment. Salaries and wages were the highest motivators compared to the other forms of monetary incentives. Therefore, it is clear that financial incentives enhance employee performance in the sense that it enhances job satisfaction and the satisfaction of employees.
Some studies conclude that incentives that are monetary-based play a significant role in the short term enhancement of the performance of employees. In Ponta et al., 2020, the authors present an analysis of the effects that monetary incentives have on the performance of the employees in an organizational setting. The goal of the study was to establish an understanding of how the distribution of incentives that are monetary following the position that employees hold in an organization impacts the performance of the employees in the organization. The results of the study established that distributing the incentives that are monetary following the merit the employees hold positively affects the performance of employees in the short term. Monetary incentives can have an influence that is powerful on the job satisfaction of employees, and as such, it should be considered by organizations to improve employee performance (Abro et al., 2017). This proves the fact that the use of monetary incentives enhances the performance of employees in organizations.
Ramifications of the application of monetary-based incentives
Negative cultural change. The study by Cognet et al., (2018) presents evidence that when organizations get the opportunities to set goals that are irrelevant to wages that get paid to the employees, they select agreements that have an incentive in which what they pay the employees is less responsive on the employee’s performance. The study established that the performance of employees gets enhanced when the organization sets goals that are clear despite the existence of weaker incentives. The study provides that the pervasive use of incentives that are monetary accounts for the findings that have previously presented suggestions that organizations unexpectedly rely on monetary incentives that are weaker in working towards enhancing the performance of employees in the organization. The dependence of an organization on using money as a performance enhancement incentive can significantly alter the culture of the organization in a way that is negative in the long run because the relationship between the organization and its employees will get altered. Basing the performance of the organization on monetary incentives can affect the values of the organization as the employees will not focus on upholding the organizational values. They will work hard only to acquire monetary benefits.
Employee demotivation in some settings. The study by Svensson (2019) gets carried out by the author in this article concerning the sustainability of monetary-based incentives. The study by the author was aimed at examining the effects of the level of incentive and objective numeracy and the type of incentive, whether monetary or non-monetary, that gets put in place in the performance of a task that is similar to that if a clerk. The author recognizes that it is the major method that gets used by most companies in the successful enhancement of the performance of employees in the organization. This method makes employees feel appreciated by the employers, which motivates them to perform better.
According to the author, past research has established that money is a significant motivator for high performance. However, there are some settings in which incentives that are based on money are less motivating to the productivity and effort of workers than in an instance where the incentives that are not monetary get used, concerning values that are the same. The author states that the difference between making use of the monetary-based incentives and the use of other incentives that are not monetary gets brought about by objective numeracy. The author establishes that those employees that have a test of objective numeracy that is higher and those employees that receive a high number of incentive that is monetary, across every condition, are the most highly motivated to place efforts into the tasks that are clerical compared to those with objective numeracy that is low. It got established that the type of incentive and the level of incentive interact in a way that is unexpected in predicting effort. The results of the study provided that high amounts of incentives that are monetary can be demotivating to the employees regardless of the numeracy.
They encourage unwanted behavior. Monetary incentives encourage behavior that is bad among employees in the sense that they will only produce quality work on the basis that they will get bonuses when the organization ceases to provide those financial benefits of quality performance on the part of the employees, they often relax and be less productive. The incentives also carry the costs of incurring inequality in pay, which could lead to a turnover of employees, causing significant harm to the performance of the organization. It is, therefore, critical that in considering the use of monetary incentives, organizations should also consider using other incentives to guarantee security in the performance of the organization (Coccia, 2019). Using several incentives can help the organization manage all scenarios concerning the performance that may arise in case one incentive fails in the long run.
Encourages behavior that is unethical. Employees in an organization can develop the character that is unethical and illegal when the monetary incentives get used. Employees may begin engaging in practices that are unfair and illegal in trying to meet the goals that have been set by an organization to get the financial compensation that comes with being the best (Feltovich, 2019). For instance, employees can engage in forgery in which they can participate in the manipulation of the accounts of the organization to enhance revenues to achieve profitability. Some employees in sales resort to increasing the prices of the items to become way above the prices that are stipulated by the organization to gain more profits and get compensated for performing better.
Application of Theory to the Workplace
Change management and employee motivation
In the current world of business, incentives that are monetary get used as the bedrock for programs for management of change, and the motivation of employees. The effectiveness of financial incentives gets brought out in the fact that most business organizations use it to improve their sales because the sales personnel get motivated by the fact that if they achieve more sales, there will be extra financial benefits in forms of commissions which get used by most organizations (White, 2016). The main activities for sales that most organizations use incentives that are monetary to motivate the employees into reducing results that are better include selling of products of insurance by agents for insurance and the banks for investment (Kaur, 2016). This is a significant motivator to the performance of the insurance agents as the more clients they get to take the insurance, the higher the financial benefits they get. Monetary incentives get used by organizations to show employees that their hard work has been recognized and is appreciated by the company. When other employees notice that the best performing employees get recognized and awarded for their achievements, they get motivated to develop strategies and become more creative in performing better as well to gain the same recognition and compensation for their exceptional performance (Lazear, 2018). The incentives that are monetary in business today drive outcomes that are better in business and align the behavior of the representatives for sale of particular products with the goals that the organization has set in achieving positive results in their profits from sales. This happens because the incentives motivate the team that gets involved in sales to focus on behavior that is desired by the organization in reaching its ultimate goals in sales.
Retaining and attracting top talent
Business organizations create designs that are monetary to retain employees that are equipped with top talent as well as attract new talents that are fresh in the market. This helps organizations gain a competitive advantage over other organizations in the same field of business practice. The issue of turnover of employees will be managed as the employees will be better satisfied with their jobs through the monetary incentives. Different incentives for motivation, including incentives that are financial, influence the ability to be satisfied with the job for employees in different ways (Huttu, 2017). Job satisfaction gets achieved through compensation that is monetary in such a way that employees will feel that the compensation is justified because of the effectiveness of their work in their organization, which is exceptional. Business organizations today often use this incentive-based on the fact that it has been proven to generate outcomes that are positive in many organizations.
Manage underperforming departments
In other instances, Business organizations apply the use of incentives that are monetary to restore organizations or departments that are underperforming to perform better (Ferreira et al., 2018). Significant improvements get noticed in underperforming departments in the instances where it gets established that the reason behind the underperformance is lack of motivation, and incentive measures get taken to address the underperformance (Armstrong, 2017). Turnover of employees is one of the significant effects of failure to meet the needs of employees, leading to underperformance in the organization as a whole or a specific department. This especially happens in the departments that deal with sales in that when they are not motivated, and they will not be able to work hard towards achieving the goals that are set by the organization. To restore the organization or specific department into its former level of performance, business organizations make use of the various incentives, especially the monetary incentives to foster the enhanced performance in employees as they get a reason to perform better.
Recommendations
Incentives that monetary play a significant role in the improvement of the performance of employees in an organization. They encourage competition that is friendly among the employees and teams in the sense that they will all be motivated to become better than the other members of the organization (Armstrong & Taylor, 2020). However, to ensure that organizations achieve the best outcomes and avoid surprises that may come with the use of financial incentives that are only beneficial in the short run, businesses should establish other incentives that are non-monetary to ensure that the performance of the employees gets maintained in the long run as the employees will find meaning in their work (Cassar & Meier, 2018). An organization that seeks to achieve continued success in business must explore other options as back up in the event of failure of one incentive to meet the long term goals of the organization.
Some of the incentives that are non-monetary that business organizations can engage in to motivate the employees to include creating activities for team building in which the employees can be able to learn more about each other and appreciate it, which improves their relationships with each other making it possible for them to work on the goals of the organization together and achieve positive outcomes. Improving the conditions of work is another incentive that can help enhance job satisfaction, contributing to the improved performance of employees (Khan et al., 2016). Facilitating the growth of the employees in their professions can play a significant role in motivating employees as they will feel appreciated by their employers. To ensure that the performance of the organization not only gets enhanced by the use of monetary incentives, organizations should also explore other incentives as well for the achievement of the long term goals of the organization’s objectives.
Conclusion
Business organizations make use of incentives that are monetary by using money to reward workers for their productivity in performance in the organization. Optimal production gets achieved by motivating employees through the reward system using money in the form of bonuses. Employees that work under the specific incentives that are monetary find ways of being more creative to achieve optimal outcomes in their performance. With their creativity comes the achievement of profitability in the organization through the accomplishment of their specific goals. However, organizations must establish additional incentives to motivate employees to avoid any potential setbacks that may arise from over-dependence on one incentive. Given the significant number of ramifications that come up from the use of monetary-based incentives, it is evident that the use of incentives that are monetary-based by organizations is not a sustainable practice.
References
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