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Financial and Non-Financial Incentives - Motivation
Management Concepts & Organisational Behaviour - Motivation
Financial and Non-Financial Incentives - Motivation
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The term ‘incentives’ means an inducement which arouses or stimulates one to action in a desired direction.
Financial and Non-Financial
Incentives
The term ‘incentives’ means an inducement which arouses or stimulates one to action in a desired direction. An incentive has a motivational power; it influences the decisions of individuals on putting in necessary effort towards task performance. In modern organizations, a large variety of incentives are used to motivate the people. These incentives may be broadly grouped into: (i) financial or pecuniary incentives, and (ii) non-financial incentives.
The financial incentives may be distinguished from the non-financial incentives on the following grounds:
1. Financial or monetary incentives are meant to satisfy those which money can buy. The needs for food, clothing, and shelter can be fully satisfied by money, but the needs for security, social affiliation and status can be partially satisfied by money. But non-pecuniary incentives are meant for satisfaction of those needs which can’t be satisfied by money. The examples are higher level needs such as status, ego, sense of responsibility, career advancement, autonomy.
2. Financial incentives are tangible, i.e. visible and measureable; they have a direct effect on the organization and the members. But non-financial incentives are intangible and they have an indirect influence on the organization and the members.
3. Financial incentives are determined by reference to several factors such as job evaluation, cost of living trends, fringe benefits offered by competitors, agreement between the employers and employees, etc. Non-financial incentives are based on the nature of jobs, strength of aspirations and urges of employees and behavioural orientation of management.
4. Financial incentives are generally used to motivate workers and other non-managerial employees. But non-financial incentives are used to motivate managerial and other higher level personnel. They are also used to supplement and support the pecuniary incentives in the organization.
Financial incentives do not work for ever to motivate the people at work. As a matter of fact, when the physiological and security needs are fulfilled with the help of money, money ceases to be the motivating force; it becomes the maintenance factor as said by Herzberg. Therefore, employees do not always run after money. They have other needs also. The want status and recognition in the society, they want to satisfy egoistic needs and they want to achieve something in their lives. In order to motivate the employees having these needs, management can take the help of following non-financial incentives:
Praise: Praise satisfies one’s ego needs. Sometimes, praise is more effective than another incentive. We have seen that in industry, at home or elsewhere, people respond better to praise. However, this incentive should be used with greater degree of care because praising an incompetent employee would create resentment among competent employees. Or course, occasionally, a pat on the back of an incompetent employee may act as incentive to him for improvement.
Competition: Competition is a kind of non-financial incentive. If there is a healthy competition among the individual employees or groups of employees, it will lead them to achieve their personal or group goals in a better way.
Opportunity for Growth: Opportunity for growth is another kind of incentive. If the employees are provided opportunities for their advancement and growth and to develop their personality, they feel very much satisfied and become more committed to the organizationa and become more committed to the organizational goals.
Feedback: Knowledge of the results/performance leads to employee satisfaction. A worker likes to know the result of his performance. He gets satisfaction when his superior appreciates the work he has done.
Worker’s participation in Management: Employees participation in management provides an important incentive to the employees. It gives them psychological satisfaction that their voice is being heard.
The term ‘incentives’ means an inducement which arouses or stimulates one to action in a desired direction. An incentive has a motivational power; it influences the decisions of individuals on putting in necessary effort towards task performance. In modern organizations, a large variety of incentives are used to motivate the people. These incentives may be broadly grouped into: (i) financial or pecuniary incentives, and (ii) non-financial incentives.
The financial incentives may be distinguished from the non-financial incentives on the following grounds:
1. Financial or monetary incentives are meant to satisfy those which money can buy. The needs for food, clothing, and shelter can be fully satisfied by money, but the needs for security, social affiliation and status can be partially satisfied by money. But non-pecuniary incentives are meant for satisfaction of those needs which can’t be satisfied by money. The examples are higher level needs such as status, ego, sense of responsibility, career advancement, autonomy.
2. Financial incentives are tangible, i.e. visible and measureable; they have a direct effect on the organization and the members. But non-financial incentives are intangible and they have an indirect influence on the organization and the members.
3. Financial incentives are determined by reference to several factors such as job evaluation, cost of living trends, fringe benefits offered by competitors, agreement between the employers and employees, etc. Non-financial incentives are based on the nature of jobs, strength of aspirations and urges of employees and behavioural orientation of management.
4. Financial incentives are generally used to motivate workers and other non-managerial employees. But non-financial incentives are used to motivate managerial and other higher level personnel. They are also used to supplement and support the pecuniary incentives in the organization.
Role of Non-Financial Incentives
Financial incentives do not work for ever to motivate the people at work. As a matter of fact, when the physiological and security needs are fulfilled with the help of money, money ceases to be the motivating force; it becomes the maintenance factor as said by Herzberg. Therefore, employees do not always run after money. They have other needs also. The want status and recognition in the society, they want to satisfy egoistic needs and they want to achieve something in their lives. In order to motivate the employees having these needs, management can take the help of following non-financial incentives:
Praise: Praise satisfies one’s ego needs. Sometimes, praise is more effective than another incentive. We have seen that in industry, at home or elsewhere, people respond better to praise. However, this incentive should be used with greater degree of care because praising an incompetent employee would create resentment among competent employees. Or course, occasionally, a pat on the back of an incompetent employee may act as incentive to him for improvement.
Competition: Competition is a kind of non-financial incentive. If there is a healthy competition among the individual employees or groups of employees, it will lead them to achieve their personal or group goals in a better way.
Opportunity for Growth: Opportunity for growth is another kind of incentive. If the employees are provided opportunities for their advancement and growth and to develop their personality, they feel very much satisfied and become more committed to the organizationa and become more committed to the organizational goals.
Feedback: Knowledge of the results/performance leads to employee satisfaction. A worker likes to know the result of his performance. He gets satisfaction when his superior appreciates the work he has done.
Worker’s participation in Management: Employees participation in management provides an important incentive to the employees. It gives them psychological satisfaction that their voice is being heard.
Suggestion System: Suggestion system in an incentive
which satisfies many needs of the
employees. Many organizations which use the suggestion system make use of cash
awards for useful suggestions. They, sometimes, publish the worker’s name with his
photograph in the company’s inhouse magazines/reports/brochures. This motivates
the employees to be in search for something which may be of greater use to the
organization.
Tags : Management Concepts & Organisational Behaviour - Motivation
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