Explain the relationship between motivation and rewards.

Explain the relationship between motivation and rewards. Bring out the different reward systems in an organisational setting. Describe the role of financial and non-financial reward system in improving organisational performance with reference to your organisation or an organisation you are familiar with. Briefly describe the organisation you are referring to.


Answer. Motivation in simple words may be understood as the set of forces that cause people to behave in certain ways. It is a process that starts with a physiological deficiency or need that activities behaviour or a drive that is aimed at a goal or an incentive.



The concept of motivation occupies a central place in the discipline of Organizational Behaviour. It is a concept, which has received the maximum attention from the academicians and researchers alike. Since a motivated employee is highly productive and highly quality oriented, the managers are also interested the concept of motivation.

Most people understand the concept of intrinsic satisfaction or intrinsic motivation, i.e. when an activity is satisfying or pleasurable in and of itself. Naturally, these activities are things we like and want to do. For most of us, intrinsically enjoyable activities are things like eating, resting, laughing, playing games, winning, creating, seeing and hearing beautiful things and people, being held lovingly, having sex, and so on. To do these things we don't need to be paid, applauded, cheered, thanked, respected, or anything--commonly we do them for the good feelings we automatically and naturally get from the activity. Intrinsic rewards also involve pleasurable internal feelings or thoughts, like feeling proud or having a sense of mastery following studying hard and succeeding in a class.
Many, maybe most, activities are not intrinsically satisfying enough to get most of us to do them consistently, so extrinsic motivation needs to be applied in the form of rewards (positive reinforcements), incentives, or as a way to avoid some unpleasant condition ("negative reinforcement" or punishment). Examples: You work doing an ordinary job for pay. You study for good grades or to avoid failing or to prepare for a good future. You do housework to get a clean, organized house and/or a spouse's appreciation or to avoid her/his disapproval. A teenager comes home from a date on time in order to avoid being grounded. These are all activities that are commonly sustained by external pay offs, not because you love working, studying, cleaning, and coming home early.

Are rewards, particularly money rewards, really motivators? The answer to this question is YES and NO.

Money is understood to be powerful motivator for more than one reason. In the first place, money is fundamental for completion of a task. The employee takes pay as the reward for his or her work, and the employer views it as the price for using the services of the employee. Second, as a medium of exchange. Third, money is one of the hygiene factors, and improving maintenance factors is the first step in efforts directed towards motivation. Fourth, money also performs the function of a score card by which employees assess the value that the organization places on their services and by which employees can compare their values to others. Fifth, reinforcement and expectancy theories attest to the value of money as a motivator. Sixth, money acts as a punctuation in one’s life. It is an attention getting and effect producing mechanism. Money, has therefore tremendous importance in influencing employee behaviour. Seventh, money is easily vulnerable to manipulation. Finally, money will be a powerful motivator for a person who is tense and anxious about lack o money. But behavioural scientists think otherwise. They downgrade monetary rewards as a motivator. They prefer, instead, other techniques such as challenging jobs, goals, participation in decision-making and other non-monetary rewards for motivating employees.


Types of Reward Systems

The financial rewards are basically of three types:

• profit sharing;
• job evaluation; and
• merit rating.

Profit Sharing
Profit sharing could be on a macro basis or on a micro basis. The former relates to the entire company as a whole and the latter to a particular section or group dealing with a particular activity and/or product. On a macro level, it would be difficult to identify and reward outstanding performance. This is possible on a micro level by treating the particular activity as a cost and profit center by itself. This is easier said than done, since overheads and other common services have to be charged and this cannot be done completely objectively. The cost allocation in such cases is somewhat arbitrary and the profit will therefore not be a true reflection of the performance of that particular group or activity.

Job Evaluation
In case of job evaluation, the various component factors have to be isolated and evaluated for purposes of inter-job comparison. Each factor is assigned a rating on the basis of a scale agreed beforehand by the union and the management joint committee. The total rating for each job then forms the basis of wage structure. However, there must be a base level, representing, in effect, the 'minimum wage', depending on the nature of work and the geographical area. In some cases and in some countries these are stipulated by law. A typical, though somewhat broad, list of job factors is as follows:

• working environment;
• physical characteristics;
• mental characteristics;
• extent of responsibility;
• training and experience.

In case of managers, the factors are:

• responsibility;
• expertise;
• human relations.

Merit Rating
Merit rating has been used as an indicator of performance. Each employee is rated, typically as excellent, good, average or poor, in respect of the following abilities:

• communication;
• human relations, including leadership and motivation;
• intelligence;
• judgment;
• knowledge.
The rating, unfortunately, tends to be carried out purely mechanically and it carries a heavy bias of the rater who may be too lenient, may not be objective and may also have favorites or otherwise in the group being rated.

I am familiar with Nesco Ltd. Nesco is a leading producer of gas in Italy. At Nesco the following are used to improve organizational performance.

Financial Rewards
These rewards in organizations help employees to be more committed and motivated to their job and working environment:
• System rewards are automatically given to all employees for merely being members of their organisation. System rewards can be defined as being the basic wage rates.
• Individual rewards are given to employees based on the quality and quantity of their performance. Performance related pay (PRP) is seen as an individual reward policy, where pay is rewarded in relation to the volume of output. PRP can cause divisions amongst workers, where employees become more worried about the fact that their colleagues are being paid more than them.
• Growth rewards are received by employees for job innovation, learning and improvement.

The key to managing performance through rewards is linking the desired performance with the appropriate reward.

Non-financial Rewards
In an ever more competitive environment, the aim of organizations must now be to focus on increasing the added value of their employees. This is achieved, by encouraging employees to increase their effort and performance higher than the average standards. This has been carried out using employee appraisals and motivational methods.

Employers have become increasingly aware of the rich potential for good constructive ideas that exist from the employees on the job experiences. One method for using this knowledge is through suggestion schemes, these are becoming highly recognized, as they allow for improvements in all areas of work. These schemes are very flexible and can be readily adapted to meet all kinds of working conditions. Suggestion schemes can be seen as a means of increasing profit and worker participation.

Suggestion schemes aim to improve employee attitudes by directing their attention to the positive and progressive aspects of their jobs. This helps to boost employee morale and increase job satisfaction. It can be identified that if an employee is unhappy in his/her job it reflects on a negative attitude on his/her performance and also with other people.

Experience in many companies has shown low employee morale reflects on low productivity and increasing costly errors. Suggestion schemes play a useful role in increasing and maintaining morale.

Another method which is not related to pay is the performance appraisal system. This method is used as a means of raising individual performance and identifying development needs. Appraisal systems today are becoming part of the management culture, where managers feel it necessary to appraise and be appraised.

Self Rating, this is a form of appraisal where the employee takes a look at themselves, avoiding any negative feedback from traditional appraisals. Self rating is an effective way of trying to get the employee to look at what their roles are in relation to business needs.

It is fair to state that employees are not motivated by money alone. Paying different wage rates to employees doing the same jobs can cause more problems than benefits.

There are other incentives to reward employees, other than financial such as appraisals. Appraisals can prove to be an effective means for looking at human resources, as they allow us to:

• Ensure that the abilities and energies of individuals are being used effectively.
• Allow employers to identify better uses of individuals talents and experience.
• Training needs can also be identified.
• Future decision making as data of abilities can be kept on file for future reference.

Other examples of incentives/motivators include:

• Team briefings - Management tell sub-ordinates what needs to be achieved, this opens up the lines of communication, and makes everyone aware of what needs to be done.
• Team buildings - Employees are taken on outings to pursue some systematic group exercises led by a trainer or time spent on social activities. The logic is to enthuse a team working ethic.
• Quality circles - Regular meeting sessions where a group of employees discuss quality related issues.

It can be said that if managers are to be successful, they must focus on strategies that improve the overall performance of the business by using employees as a vital resource which needs to be nurtured and not just developing and implementing control systems to fix short term problems.