Texila International Journal of Management

Volume 5, Issue 2, Aug 2019

Employee Motivation Incentives and Their impact on the Organization's

Article by Jacqueline Aziri

Abstract
This article presents literature on employee motivation incentives and evaluates their impact on
organizational productivity. The article aims at explicitly highlighting the effect of incentives on
different elements that influence organizational productivity. A qualitative analysis of literature was
employed to consolidate literature that informed the study. The findings indicate that incentivizing the
organization's activities undertaken by human resources helps in improving organizational
productivity. The results showed that incentives increase productivity by enhancing the following
elements; employee work performance, employee engagement, innovation and creativity,
organizational commitment and job satisfaction. This finding will provide useful information to
organizations when designing incentive schemes and analysing their functions and general impact.
Keywords: Employee motivation, incentives, organizational productivity, motivators.
Introduction
Improvement of organizational productivity is one of the principal functions of the top
management in any institution. Radically, organizational productivity is enhanced and determined by
a variety of elements such as; corporate culture, communications, systems and tools, training and
development, motivation and incentives, planning and programmes, control and reporting, staffing,
structure, process, strategy, goals and objectives (Cording et al., 2014). However, a growing body of
literature suggests that employee motivation is fundamental (Becker et al., 2018).
Contemporarily, the focus on employees has increased due to the fact the different trends such as
globalization, automation, organizational culture changes have become rampant. Such changes have
also altered characteristics of employees; hence, organizations ought to adapt their human resource
management strategies (Caliskan & Isik, 2016). One of the critical facets of contemporary adaptation
is employee motivation. Motivation is undertaken to ensure the commitment of human resources and
other members is enduring. As a human psychological trait, motivation influences the level of
engagement in a person’s behaviours (Hennessey et al., 2015). In general, motivation involves
imparting on individuals in a way that the impact can act as a primer to exceptional performances.
Employee motivation encourages individuals to adopt purposive behaviours and have the desire to put
in an effort and achieve specific goals and objectives. This level of motivation, a variety of dynamic
factors are considered as well as an appreciation of different theories of motivation.
Motivation refers to the force that encourages individuals to garner their objectives. The concept
can be extrinsic where motivations are harnessed from outside the person or intrinsic where
motivation is derived from the person instead of external influence. The positive results associated
with motivation have led organizations to continuously sought to motivate their employees and in
tandem, increase their productivity. Lack of employee motivation can dictate the failure of an
organization; thus, it is imperative for organizations to devise new methods of employee motivation
depending on employee characteristics. If suitable arrangements are used, productivity generally
increases, and when different strategies are employed, negative results such as high employee
turnover and low performances are witnessed (Deci and Ryan, 2014). From this perspective, this
research will seek to evaluate employee motivation Incentives and their impact on the organization's
productivity.

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ISSN: 2520-310X
Definition of employee motivation
There is no standard definition of employee motivation. Naile & Selesho (2014), define employee
motivation as imparting purposeful behaviours that can propel employees towards the primary goals
of the organization. Lazaroiu (2015), defines employee motivation as the provision of the steering
force to employees so that they can pursue professional and organizational goals and objectives.
Reasons for employee motivation
Homberg et al. (2015), posit that organizations engage in employee motivation to enhance
job satisfaction because of the lack or presence of motivation influences satisfaction. Job
satisfaction is an essential facet in employee motivation as it affects the quality of work and
the willingness to work. Fernandez & Moldogaziev (2015) argue that job satisfaction is
pegged on the capability of individuals to benefit from specific motivators such as
recognition, promotion, personal growth, and success. Hence, employee motivation is
undertaken to improve job satisfaction. Employee motivation is employed to increase
employee loyalty. Iqbal et al. (2015) explain loyalty itself is an example of commitment
where employees are willing to sacrifice their self-interests and further the company’s
objectives. Thus, employee motivation strategies are used to demonstrate that mutually
beneficial partnership is being adhered to whereby employee’s sacrifices are dully recognized
and compensated. Organizational commitment is also a fundamental element that provides an
impetus for employee motivation. This commitment is commonly fostered through rewards in
that “the rewards one receives from an organization and the experience one has while
achieving the reward impacts the extent of the attachment an employee has toward an
organization” (Smith, 2015). Employee motivation is vital in augmenting the willingness to
remain at a particular institution and desire to achieve its goals.

Figure 1. The interaction between intrinsic and extrinsic motivators with employee loyalty and commitment,
adapted from, Smith (2015)
The need to achieve organizational goals also underpins the need for employee motivation since
motivated employees have the desire to garner these goals. Furthermore, employee satisfaction and
promoting a healthy human resource is identified as an important reason to motivate employees. Most
organizations use incentives to foster physically and mentally healthy workforce by catering for their
psychological needs. Employee motivation is used to provide socialization and promote the tenets of

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Volume 5, Issue 2, Aug 2019
teamwork and collaboration at the workplace. Additionally, employee motivation is employed to
recognize the inputs and achievements of human resource as a method of satisfying their esteem
needs. Lastly, the practice is used to guarantee the financial security of employees.
Incentives and types of incentives
Faisal et al. (2015), define incentives as things that motivate a person to undertake specific actions
whether through cooperation or as an individual. There are different types of incentives employed in
workplaces to motivate employees. These are;
Offering incentive plans
These plans are used to motivate employees through mutual benefits. It takes different forms
depending on its suitability as an organization. Firstly, bonus pay is typically employed to encourage
employees in production; marketing and sales professions where the organization offers bonuses after
predetermined goals are achieved. Performance units are incentive plans where the top management is
rewarded after the company achieved predetermined financial milestones. Thirdly, Poole (2017),
advances that profit sharing incentive plan is also used to motivate employees. In such programs, pre-
taxed profits are distributed among employees depending on set parameters such as position held
within the organization, longevity of the employee at the organization, performance metrics and
amount of services delivered. Lastly, the incentive plan can offer stock options to workers that wish to
invest in the organization.
Financial rewards
Money is a primary element in addressing social/security and physiological needs. Hence, financial
incentives are given to employees as rewards for handwork and instil the motivation to achieve more.
These incentives are offered through the provision of cash prizes to employees to motivate them to
achieve specific goals or reward them for making such goals. These incentives are calculated as
percentages of sales closed or can be fixed amounts. They have actualized through organizations
bonus-programs or profit sharing. The financial rewards can also come in the form of spot bonuses.
They are commonly used to reward aspects such as teamwork, regular attendance, innovation, service
excellence, and job performance. Another strategy involves offering pay and benefits to employees to
encourage employee loyalty and commitment. However, Garbers & Konradt (2014), argue that
employee motivation is achievable through the use of monetary rewards under certain levels although
extended use can potentially erode teamwork and cohesiveness. Additionally, financial incentives are
limited in efficacy when job dissatisfaction in evident or when employees are self-actualized. Hence,
incorporation of nonfinancial incentives is essential.
Non-financial incentives
The human resources are the most valuable resource in an organization; hence, motivating them
towards personal and organizational goals is essential. For an organization to encourage employees,
non-cash-based incentives are employed in the creation of value to the worker. Firstly, organizations
can provide, work environment that is diverse, inclusive, safe and productive for workers such that
job satisfaction levels are high. Creation of a positive atmosphere at work helps in fostering
knowledge sharing, eliminations of conflict, setting goals and soliciting employee input; these
elements are vital in enhancing employee motivation.
Employee motivation is also enhanced through recognition and rewarding of employees for their
achievements by honouring them publicly and encouraging their contributions towards the company.
According to Shaw & Gupta (2015), praising employees and recognizing them helps in fostering
enjoyable working environments; this helps in inspiring employees towards achieving and creating
value for the company. Rewards and recognition are also essential in employee motivation as it
enhances initiative, creativity, and innovativeness in employees. Employee motivation is increased by
elevating the promotion potential of employees through constant feedback, provision of training and
development opportunities, helping employees fulfil career goals and keeping them informed about
the company. Job enrichment to add more challenges, scope and responsibilities motivate employees

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as they seek to accomplish their own career goals. Furthermore, employee empowerment and
autonomy are essential motivators given that it inspires the acquisition of positive skills and
confidence in subordinates.
Team incentives
These are incentives offered to teams when they complete team initiatives. The incentives are
afforded to groups relative to their performance and predetermined performance goals. However,
Babcock et al., (2015) argue that such incentives lead to uneven workload distribution and limit
healthy competition among employees as recognition and reward of top performers is forgone, and
teamwork is prioritized.
Impact of incentives on organization productivity
Incentives are essential in instituting higher employee engagement which is significant in
augmenting organizational productivity (Saks & Gruman, 2014). Fundamentally, engaged employees
are characterized by their willingness to protect the interests of the organization as well as an
enthusiasm to work. The concept of employee engagement is covered under behavioural, emotional
and cognitive perspectives which are similarly exploited by incentives. Higher organizational
productivity is achieved by curing employee disengagement stemming from issues such as; negative
organization culture, poor management, lack of upward mobility jobs, lack of engaging jobs, limited
employee benefits, inadequate salaries, the strain on mental well-being and poor working conditions.
Long-term employee engagement which is related to increased organizational productivity is attained
by injecting incentives in HR management. Targeted benefits and rewards such as profit-sharing,
work environment improvement, flexible scheduling, training, and development are promulgated to
improve employee engagement which translates to increased organizational productivity.
Innovation and creativity are important in increasing organizational performance and productivity.
As such, irrespective of the type of change, whether, it is corporate, technological, process or product
innovation will positively impact on the productivity of the company. This innovation and creativity
are commonly driven by implementing incentives for innovation. Incentivising innovation aspects
such as collaboration and teamwork help in increasing organizational productivity as a result of an
increased change. For instance, the incentive of recognition has been highlighted as an essential
element in the establishment and sustaining a productive innovation community which translates to
increased productivity. Additionally, increased productivity emanating from innovation is
underpinned by the incentive of creating an appropriate working environment that facilitates
development and exploitation of intellectual property. Furthermore, Faisal et al., (2015) advance that
organizational productivity is achieved through incentive fuelled innovation by reinforcing creativity
through performance related incentives and rewarding macro-innovation.
According to Lee & Steers (2017), organizational commitment is an essential element in increasing
organizational productivity. Organizational commitment is defined as, “the Emotional attachment that
an employee felt for an Organization to adopts characteristics or perspective of the organization”
(Khan et al., 2016). To achieve this commitment, offering intrinsic and extrinsic incentives to
employees is fundamentals. Organization productivity increases by minimizing negative aspects of
HR such as turnover, absenteeism, lateness, withdrawal behaviour and resistance to change by using
incentives to in still organizational commitment. Additionally, organizational commitment achieved
through incentives improves organizational productivity by augmenting employee job performance,
employee engagement, job satisfaction, and employee welfare.
A study conducted by Imran et al. (2015) showed that organizational productivity correlates with
job satisfaction which is harnessed from incentives. Ali et al. (2016) advance that incentives such as
profit sharing and performance-related pay routinely increase job satisfaction among employees. This
feeling of happiness emanating from incentives is derived from higher worker optimism and
rewarding environments which are associated with high organizational productivity. As such,
Edwards (2016) advances that, increased job satisfaction is directly correlated to 6.6% increase of
organizational productivity while a study conducted the University of Warwick indicated that jobs
satisfaction accounts for 12% increase in organizational productivity. These increases in productivity

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Volume 5, Issue 2, Aug 2019
are induced by incentives which increase the dedication to work, the drive to succeed and improve in
creativity.
According to Oswald et al. (2015), the use of performance related-pays (PRP) as an incentive
increases the intensity of work in the workplace. A research study conducted by (Lucifora, 2015),
indicates that performance-related incentives increase the labour productivity of employees by 5%
and organizational productivity by 9% by stimulating employees to work optimally and influencing
the recruitment process to highly talented employees. Additionally, these incentives increase
productivity as employees view PRP as positive and reasonable trade-offs that require them to
contribute towards the institution's success. Apart from this, organizational productivity is increased
by incentives due to selective employee sorting where high-productivity workers are selected, hired
and retained. Lastly, PRP incentives that are underpinned by an equitable distribution mechanism
increases organizational productivity by enhancing trust in management, organizational commitment,
and job satisfaction.
However, it is imperative to note that incentives can lead to poor performance in an organization.
Garbers & Konradt (2014), argue that the use of incentives leads to stress, overwork, complaints on
the distribution of pay and contentious behaviours. For instance, the use of financial incentives to
award individuals in a team may lead to individualism and increased competition as employees seek
individual recognition and reward; this precedent affects employee well-being, collaboration as well
as limiting organizational productivity. Reduced productivity is associated with employees working to
further their course as well as leading to a lack of trust in the management in cases where profit-
related incentives are used; this reduces the productivity of an organization.
Conclusion
The objective of this article has been to evaluate the subject of incentives and assess its impact on
organizational productivity. Fundamentally, there are different forms of incentives such as; financial
and non-financial incentives, intrinsic and extrinsic incentives and individual or team incentives.
Application of these incentives generates various effects with increased organization productivity
being a necessary result of incentivizing the workplace. From the analysis, it is shown that incentives
improve organizational productivity by impacting positively on the critical determinants of
organizational performance. The determinants impacted upon by incentives to increase organizational
productivity are; employee work performance, employee engagement, innovation and creativity,
organizational commitment and job satisfaction. Leveraging these determinants and augmenting them
with incentives leads to increased organizational productivity. However, literature has given caveats
on the use of incentives because it can lead to individualism, entitlement to financial rewards and poor
motivation of employees during recessions. In general, offering incentives to human resources is vital
in improving organizational productivity. Hence, the organization ought to leverage the plethora of
incentive schemes and strategies as an option of boosting productivity.
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