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IMPACT OF INCENTIVES ON
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MOTIVATIONAL LEVEL OF
EMPLOYEE
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By
IKRAM ULLAH
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SUBMITTED TO SYED RAZA ALI
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5/28/2012
2889-FMS-BBA-S10

2. IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL 2012
OF EMPLOYEE
Table of content
1. Introduction
2. Purpose of study
3. Objective
4. Problem statement
5. Rationale of study
6. Literature review
7. Conceptual framework
8. Hypothesis
9. Methodology
10.Result analysis
11.Conclusion
12.Appendix
By Ikram Ullah
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3
4
4
5
5
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9
9
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3. IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL 2012
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INTRODUCTION
Motivation can be define as the willingness to exert high levels of effort toward organizational
goals, conditions by the effort’s ability to satisfy some individual needs. We will narrow our
focus to organizational goals in order to reflect our singular interest in work-related behavior.
The three key elements in our definition are effort, organizational goal and individual.
Incentives are something that incites or tends to incite to action or greater effort, as reward
offered to increase productivity.
Prior to 1970’s there was hardly concept of employee incentives program, the Human resource
department as was only engaged in arranging picnic trips and ceremonies. But with the passage
of time not only technologies have changed but theories of handling human resource have also
being changed.
Nowadays the key tool use by manager to get desire behavior from employee is the incentive
program. In which they identify the key need, want and demand of employee and satisfy them
by providing relevant incentives.
PURPOSE OF STUDY
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4. IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL 2012
OF EMPLOYEE
The purpose of our research is summarized as follows:To find out what kind of incentives program use by organization to
increase employee’s motivational level.
How it impact employee loyalty, commitment and productivity.
How organization provide relevant incentive packages to employees.
How it creates goodwill between organization and employee.
How it is useful in attaining organizational goals.
OBJECTIVES
Following are the objectives of our research:Suggest solutions how to identify employee’s need before providing
incentives.
Suggest how relevant incentives program impact employee productivity.
Suggest solutions how to get desire behavior from employee at work or
job.
PROBLEM STATEMENT
How organizations manage and improve employee incentive program to increase work-related
performance in organization?????
Employee productivity or performance can be directly affected by incentive program in both
positive and negative way. If the manager succeeded in identify the need of employee and
satisfy it by providing relevant incentives program then his motivational level will increases and
he will put more effort towards job related activities.
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5. IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL 2012
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Organization must have sufficient funds to lunch incentive programs. And use these funds
effectively and efficiently to satisfying needs of employee.
Organizational incentive program also creates goodwill between employee and organization. It
realizes the employee’s beliefs that his organization does care about them as a result their
chances of switching or leaving will ultimately reduces.
Assets are not all about technological equipment, but human resource is also important assets
of any organization, they play key role in attaining organizational goals. Motivated employee
will be committed, productive and loyal for organization.
RATIONALE OF STUDY
Nowadays one of the intensive issue or problem organization faces that is voluntarily
withdrawal or turnover of employees, the main reason behind most of turnover of employees is
that the organization sometime failed to satisfy employees need. That’s why organization has
reshaped their policy that is from production-oriented they turning into employee-oriented. In
Employee-oriented organizations emphasize interpersonal relations. They take personal
interest in the needs of their employees.
In my research I have focuses different incentive program and their impact on employee
organizational behavior, and how it is helpful in increases employees’ motivational level.
Employee incentive program is also one of basic tool which help organization in achieving its
goal because human resource is one of the important asset of any organizations.
LITERATURE REVIEW
Incentive
Although there are potentially a very large number of incentives that could be utilized, a useful
distinction is between the material and the nonmaterial. Additionally, material (or tangible)
incentives could be broken down further into monetary and non-monetary. Thus, three
incentive types were identified: (1) monetary (cash); (2) non-monetary tangible (rewards such
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6. IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL 2012
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as restaurant coupons for meals or vacation trips); and (3) non-monetary intangible (“employee
of the week” recognition, positive performance reviews, and public praise from management
(J.Condly, E. Clark and D. Stolovitch. 2003)
1. Extrinsic motivation (material or tangible)
When employees are motivated by extrinsic rewards such as additional compensation, gift
certificates or material rewards (salary, bonus, and commission), managers may see improved
performance. According to Frederick Herzberg's theory, the needs will motivate the worker but
only by satisfying the worker's lower-level needs. The downside is the employee will want
better rewards or continue to expect the same rewards for maintaining the higher level of
performance.
2. Intrinsic motivation (non-material or intangible)
Malone and Lepper (1987) have defined intrinsic motivation more simply in terms of what
people will do without external inducement. Intrinsically motivating activities are those in which
people will engage for no reward other than the interest and enjoyment that accompanies
them. Malone and Lepper have integrated a large amount of research on motivational theory
into a synthesis of ways to design environments that are intrinsically motivating. This synthesis
is summarized in Table 5.1. As that table shows, they subdivide factors that enhance motivation
into individual factors and interpersonal factors. Individual factors are individual in the sense
that they operate even when a student is working alone. Interpersonal factors, on the other
hand, play a role only when someone else interacts with the learner. These are discussed in
detail on the following pages.
Relationship between Incentives and Organizational Performance for
Employees:
Business organizations are facing significant challenges on internal and external work
environment, so organizations cannot maintain institutional performance without providing
incentives to their employees based on their efficient and effective work (Al-Nsour June 21,
2011).
1. The Concept of Financial incentives
Financial incentives mean the amounts paid to employees, either in the form of a lump
sum or in the form of monthly payments including all additional income for the
individual. They are considered the oldest forms of incentives which characterized by
quick and immediate form that make individuals feel of an immediate feedback of their
effort.
As defined by Lawzi (1995) financial incentives are set to satisfy basic human needs,
encouraging workers to do their best of work performance, the recruitment of their
capabilities and increase the level of their competences such as salary, bonuses,
allowances, profit sharing and rewards.
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7. IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL 2012
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Financial incentives also defined by Jadallah (1997) as all means of payment based on
increase and or improve productivity. Therefore the more the workers produce the
more they earn. While the fall in quantitative or qualitative production deprive the
worker from earning partial or total incentives.
Financial incentives aim to raise production efficiency and improve performance
through encouraging individual to behave in a desired away. Financial incentives are the
most important and influential factors to the individual's desire to work when such
wages are appropriate and capable of satisfying his needs. On the contrary, low
payment that is not appropriate to his efforts of work leads to the low efficiency of
productivity (Al-Harthi, 1999).
2. The Concept of Moral Incentives
"A person has a moral incentive to behave in a particular way when he has been taught
to believe that it is the right or proper or admirable thing to do. If he behaves as others
expect him to, he may expect the approval or even the admiration of the other
members of the collectivity and enjoy an enhanced sense of acceptance or self-esteem.
If he behaves improperly, he may expect verbal expressions of condemnation, scorn,
ridicule or even ostracism from the collectivity, and he may experience unpleasant
feelings of guilt, shame or self-condemnation" (Johnson, 2005, p, 1).
Moral incentives are those related to work environment such as; supervision leadership,
fellowship, the Working conditions of light, heat, ventilation, noise, decorations and
participation in management (Hassan, 2002).
RELATIONSHIP BETWEEN INCENTIVE AND MOTIVATION:
Motivation
The term “motivation” is derived from the word “motive” which means a reason for
action.
The degree to which an individual wants and tries hard to do well at a particular task or
job (Mitchell, 1982).
Work environment is important for motivation regarding the quality of peer group
interactions, leadership styles and salary and reward systems (Roethlisberger & Dickson,
1939).
Motivation is related with individuals’ different interests and needs. Individuals also
have different preferences in terms of how to be recognized for the work they do.
Nonmonetary incentives can take the form of improving working conditions, recognizing
good work through small gifts, letters of appreciation, plagues, tickets to restaurant etc.,
providing some services for the employees, organizing social activities in the work place,
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8. IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL 2012
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assigning challenging duties etc. Consequently, the use of non-monetary incentives may
provide this variety to meet different individual needs and interests (YAVUZ, 2004).
Relationship
All organizations, whether public or private, need motivated employees to be effective
and efficient in their functioning, in addition to the other factors. Employees who are
motivated to work energetically and creatively toward the accomplishment of
organizational goals are one of the most important inputs to organizational success.
Consequently, the challenge for organizations is to ensure that their employees are
highly motivated (YAVUZ, 2004).
Observation
It has been observed and confirmed the the motivational level of those employees who
getting benefit i.e. bonuses, compensation and commission and those who not getting
benefits are not the same.
Its human fact that he love to get reward monitory or non-monitory. Those
organizations which has reward system they have created goodwill relationship with
their employees as result the productivity, performance and loyalty of employees are at
high level. Besides all above facts incentives system also fulfill the litter tensions, anxiety
and needs of employees.
CONCEPTUAL FRAMEWORK
My research is based on the relationship between incentives and motivation. In
organizational context motivation is define as, the degree to which an individual wants
and tries hard to do well at a particular task or job. Various authors (YAVUZ,
Roethlisberger & Dickson, and Al-Nsour) in their research studies mention that
incentives do impact motivational level of employees.
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9. IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL 2012
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Establishing the hypothesis for verification:
Hypothesis is the logical relationship between two are more variables expressed in the form of
testable statements. Relationship is based on the network of association established in a
theoretical framework formulated for the research studies.
HYPOTHESIS NO 1:
“Incentives have positive impact on motivational level of employees”
Incentives do impact greatly employees motivation, the higher the incentive, higher would be
employee’s productivity, loyalty and job satisfaction. Ultimately it creates win-win situation
where both organization and employee’s. Organizations get benefits in the form of employee’s
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10. IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL 2012
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loyalty and productivity toward their jobs and employee get benefits in the form of meeting his
need, which are satisfy by incentives.
HYPOTHESIS NO 2:
“Incentives have no impact on motivational level of employees”
Incentives have no impact on motivational level of employee’s. This case happened when
irrelevant needs are satisfy. Then employee’s behavior will be indifferent towards his
organizational work.
METHODOLOGY
1. Sampling design:
Population of the current study was the student of International Islamic University Islamabad,
both male and female selected on the bases of convenient sampling. Primary source of data was
use to generate data. Total population size was 41.
2. Research instrument:
Main research instrument was Questionnaire. According to the objective and importance of the
study and to manipulate variables of interest, total numbers of 41 questionnaires were
distributed. Total number of 40 out of 41 was received. Questionnaire of the current study
consists of two parts; Part-1 asks the respondents about their demographics, Part-2 consists of
the statements of variables. All the statements were measured on Liker Scale Strongly disagree
(5) Disagree (4) Agree (3)
By Ikram Ullah
Strongly Agree (2) Neutral (1).
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11. IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL 2012
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RESULTS AND ANALYSIS
This portion includes results and analysis of the collected information from respondents of the current
study. Reliability analysis, frequencies percentage, regression and correlation results are discussed in
this portion.
Reliability analysis
To see the reliability and validity of all the items that how much all the items were consiedtent and
reliable to measure the opinions of respondent’s author’s compared cronbatch alpha of all the factors
individual and as a whole.
Scale: ALL VARIABLES
Case Processing Summary
N
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12. IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL 2012
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Cases
Valid
40
1
Total
2.4
41
Excluded
97.6
100.0
a. List wise deletion based on all variables in the
procedure.
Reliability Statistics
Cronbach's
Alpha
N of Items
.608
10
Alpha results show in Table that the statements of the questionnaire were consistent with the responses
of the responses and were able to measure opinions of respondents in true sense. In this regard over all
alpha of the items were found 0.608 that is more than acceptable value of 0.50 recommended.
Frequencies percentage:
Percentage Frequency Distribution a percentage frequency distribution is a display of data that
specifies the percentage of observations that exist for each data point or grouping of data
points.
Following are the frequency percentages of each question.
(IN1) Financial incentive increases employee work productivity
Cumulative
Frequency
Valid
neutral
Percent
Valid Percent
Percent
5
12.2
12.2
12.2
strongly agree
14
34.1
34.1
46.3
agree
20
48.8
48.8
95.1
2
4.9
4.9
100.0
41
100.0
100.0
Strongly disagree
Total
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13. IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL 2012
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(IN2) Intrinsic rewards increases employee on job satisfaction.
Cumulative
Frequency
Valid
neutral
Percent
Valid Percent
Percent
2
4.9
4.9
4.9
strongly agree
13
31.7
31.7
36.6
agree
23
56.1
56.1
92.7
disagree
1
2.4
2.4
95.1
Strongly disagree
2
4.9
4.9
100.0
41
100.0
100.0
Total
(IN3) Incentives develops employee attitude toward organization.
Cumulative
Frequency
Valid
neutral
Percent
Valid Percent
Percent
5
12.2
12.2
12.2
strongly agree
13
31.7
31.7
43.9
agree
21
51.2
51.2
95.1
2
4.9
4.9
100.0
41
100.0
100.0
disagree
Total
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14. IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL 2012
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(IN4) Incentives increases employee loyalty towards organization.
Cumulative
Frequency
Valid
neutral
Percent
Valid Percent
Percent
6
14.6
15.0
15.0
strongly agree
12
29.3
30.0
45.0
agree
17
41.5
42.5
87.5
disagree
4
9.8
10.0
97.5
Strongly disagree
1
2.4
2.5
100.0
40
97.6
100.0
1
2.4
41
100.0
Total
Missing
System
Total
(M1) Motivated employees are real asset of any organization.
Cumulative
Frequency
Valid
neutral
Percent
Valid Percent
Percent
3
7.3
7.3
7.3
strongly agree
20
48.8
48.8
56.1
agree
17
41.5
41.5
97.6
1
2.4
2.4
100.0
41
100.0
100.0
disagree
Total
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15. IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL 2012
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(M2) Relevant need satisfaction leads to high motivation.
Cumulative
Frequency
Valid
neutral
Percent
Valid Percent
Percent
5
12.2
12.2
12.2
strongly agree
13
31.7
31.7
43.9
agree
20
48.8
48.8
92.7
disagree
2
4.9
4.9
97.6
Strongly disagree
1
2.4
2.4
100.0
41
100.0
100.0
Total
(M3) Is money enough to motivate employee.
Cumulative
Frequency
Valid
Percent
Valid Percent
Percent
neutral
7
17.1
17.1
17.1
strongly agree
4
9.8
9.8
26.8
agree
4
9.8
9.8
36.6
19
46.3
46.3
82.9
7
17.1
17.1
100.0
41
100.0
100.0
disagree
Strongly disagree
Total
(M4) Work recognition & appraisal motivates employees towards job.
Frequency
Valid
Percent
Valid Percent
Cumulative Percent
neutral
6
14.6
14.6
14.6
strongly agree
8
19.5
19.5
34.1
24
58.5
58.5
92.7
disagree
1
2.4
2.4
95.1
Strongly disagree
2
4.9
4.9
100.0
41
100.0
100.0
agree
Total
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16. IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL 2012
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(M5) Work environment is also important for motivation.
Frequency
Valid
neutral
Percent
Valid Percent
Cumulative Percent
2
4.9
4.9
4.9
strongly agree
15
36.6
36.6
41.5
agree
22
53.7
53.7
95.1
2
4.9
4.9
100.0
41
100.0
100.0
disagree
Total
(M6) Motivated employees are effective and efficient in their functioning.
Cumulative
Frequency
Valid
neutral
Percent
Valid Percent
Percent
2
4.9
4.9
4.9
strongly agree
19
46.3
46.3
51.2
agree
19
46.3
46.3
97.6
1
2.4
2.4
100.0
41
100.0
100.0
disagree
Total
Conclusion
It is concluded that incentive do impact motivational level of employee as a result their
productivity, loyalty and job satisfaction increases. But at the same time if irrelevant incentives
are provided then the employee would behave indifferently or null. Cronbach Alpha is .608 that
shows there is no error and biasness incorporated during research procedure.
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17. IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL 2012
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APPENDIX
A) Questionnaire.
B) Table of Intrinsic motivation
C) References
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18. IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL 2012
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QUESTIONNAIRE
NAME:
GENDER
EDUCATION
STATUS
Note: Based on your knowledge and experience, please indicate your views about the impact of
incentive on motivational level of employees.
Scale:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Strongly disagree (5) Disagree (4) Agree (3)
Strongly Agree (2) Neutral (1)
Financial incentive increases employee work productivity.
Strongly Disagree
Disagree
Strongly Agree
Agree
Neutral
Intrinsic rewards increases employee on job satisfaction.
Strongly Disagree
Disagree
Strongly Agree
Agree
Neutral
Incentives develops employee attitude toward organization.
Strongly Disagree
Disagree
Strongly Agree
Agree
Neutral
Incentives increases employee loyalty towards organization.
Strongly Disagree
Disagree
Strongly Agree
Agree
Neutral
Motivated employees are real asset of any organization.
Strongly Disagree
Disagree
Strongly Agree
Agree
Neutral
Relevant need satisfaction leads to high motivation.
Strongly Disagree
Disagree
Strongly Agree
Agree
Neutral
Is money enough to motivate employee.
Strongly Disagree
Disagree
Strongly Agree
Agree
Neutral
Work recognition & appraisal motivates employees towards job.
Strongly Disagree
Disagree
Strongly Agree
Agree
Neutral
Work environment is also important for motivation.
Strongly Disagree
Disagree
Strongly Agree
Neutral
Agree
10. Motivated employees are effective and efficient in their functioning.
Strongly Disagree
Disagree
Strongly Agree
Agree
Neutral
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19. IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL 2012
OF EMPLOYEE
TABLE OF INTRINSIC MOTIVATION
Table 5.1. The Factors That Promote Intrinsic Motivation.
Factor
Description
Related Guidelines
1.
Challenge
People are best motivated
when they are working toward
personally meaningful goals
whose attainment requires
activity at a continuously
optimal (intermediate) level of
difficulty.
2.
3.
4.
1.
2.
Recognition
Learners feel satisfaction
when others recognize and
appreciate their
accomplishments.
1.
cooperation
Learners feel satisfaction by
comparing their performance
favorably to that of others.
2.
3.
By Ikram Ullah
Set personally meaningful
goals.
Make attainment of
goals probable but
uncertain.
Give enroute performance
feedback.
Relate goals to learners' self
esteem.
Recognition requires that
the process or product or
some other result of the
learning activity be visible.
Recognition differs from
competition in that it does
not involve a comparison
with the performance of
someone else.
Cooperation occurs
naturally as well as
artificially.
Cooperation is more
important for some people
than for others.
Cooperation is a useful reallife skill.
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20. IMPACT OF INCENTIVES ON MOTIVATIONAL LEVEL 2012
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REFERENCES
1
 Pouliakas, K Centre for European Labour Market Research (CELMR), University of Aberdeen
Business School, Scotland
 Steven J. Condly University of Central Florida, Richard E. Clark University of Southern
California, Harold D. Stolovitch, Ph.D.HSA Learning & Performance Solutions, LLC
 Marwan Al-Nsour (Associate professor) Faculty of Planning and Management, Al-Balqa’
Applied University Assalt, Jordan
 Dow Scott, Ph.D., Loyola University Tom McMullen, Hay Group World at Work
 An Assessment of Employee Attitudes Towards Incentive Programs in Central
Texas Municipalities with Populations of 20,000 and Under by Lisa R.1.Freeman
 Incentive Programs to Improve Transit Employee Performance BY RONALD J. HARTMAN
Columbia, Maryland , ELAINE M. KURTZ Brooklyn, New York, ELIZABETH K. MOSER
Baltimore, Maryland.
 Career Incentives, Performance Base Pay, Organizational Benefits Influencing Employee
Performance: A Case on Libyan Tobacco Company.
 THE IMPACT OF A PIECE RATE INCENTIVE SCHEME ON EMPLOYEE OUTPUT AT A SELECTED
AUTOMOTIVE COMPANY By Anthony Walsh.
 Motivation and monetary incentives: A closer look BY
Susan DelVecchio East Carolina University and Judy Wagner East Carolina University.
 Pay and Non-pay Incentives, Performance and Motivation by Orvill Adams, Department of
Organization of Health Services Delivery, World Health Organization, Geneva
 THE USE OF NON-MONETARY INCENTIVES AS A MOTIVATIONAL TOOL: A SURVEY STUDY
IN A PUBLIC ORGANIZATION IN TURKEY BYN_LAY YAVUZ.
 Intervening factors affecting the relationship between incentives and employee
motivation: a case study of pharmaceutical manufacturing organisation in Navi Mumbai.
 http://search.babylon.com/?s=web&babsrc=home&rlz=0&q=literature+review+of+imp
act+of+incentive+on+employee+performanace&start=10
 https://digital.library.txstate.edu/bitstream/handle/10877/3624/fulltext.pdf
 http://www.worldatwork.org/waw/adimLink?id=39032
 http://www.emeraldinsight.com/journals.htm?articleid=1556632
 http://www.ccsenet.org/journal/index.php/ijbm/article/downlo
 http://www.moph.go.th/ops/hrdj/hrdj11/pdf11/Pay43.pdf
 http://www.ehow.com/info_8123051_effect-incentives-performan
 file:///D:/5TH%20SEMESTER/bsinss%20resear/litereature%20review/picture%20of%20i
ntrinsic%20motivation.htm
By Ikram Ullah
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