Professional Documents
Culture Documents
New File Sourabh Sharma
New File Sourabh Sharma
Submitted in the partial fulfilment of the requirement of the award of the degree
of
Bachelor of Commerce
From
MOTHERHOOD UNIVERSITY, ROORKEE
UTTARKHAND
Sourabh Sharma
2003190036
ABSTRACT
The purpose of this research is to determine the effect of financial and non-
financial incentives on staff performance in Pennisula Resort, Lagos State. The
population of the study comprises of 50 respondents, 10 management staff and
40 employees in Pennisula Resort Lagos State. The sample of the study consists
of 25 respondents, (5 management staff and 20 employees) which were selected
for the study using simple random sampling technique. The instrument used in
gathering information for the study is a self constructed questionnaire prepared
by the researcher titled The Effect of Financial and Non-financial Incentives on
Staff Performance Questionnaire (TEFNISPQ). The instrument was validated
by experts in financial institutions concerning financial and non-financial
insentives. To ensure reliability of the study, the test re-test method was used.
Frenquency tables and percentages was used to analyse the research questions, a
criterion percentage of 50 was established. Any item above 50 was accepted if
otherwise was also rejected. Findings from the study has shown that financial
and non-financial incentives affect employee’s performance. While financial
incentives are critical to motivate employees in Pennisula make ends meet and
better their socioeconomic status in unstable economy in Lagos where prices are
rocketing and salaries cannot match with prices of goods and services,
nonfinancial incentives also cannot be overemphasized.Based on the findings,
recommendations were made, such as, the employer (management) should
review and improve job guidelines and descriptions with employees (staff) and
also adjustment in wages, allowances, retirement benefits, leave benefits and
affordable housing scheme should be encouraged.
Chapter Title Page No.
No.
1 Research Design 3
Reference 35
Appendix 37
Chapter 1
Research Design
1.1. Introduction
This study is an analysis of the impact of financial incentives on the employee performance
in the organization.
In today’s competitive business scenario, companies are called up on to prepare the best
market strategy to improve their performance, and to come up with the way to keep their
employee motivation on the highest level so that the company as a whole can perform well
within the competition.
In this study an attempt has been made to analyze financial incentive as the widely used
available option to motivate the employees within the organization. Financial incentive is the
form of incentive or award given to the employee that based on the employee performance, in
which higher the performance of the employee will increase the incentive given to the
employee. Hence, this study focuses on how financial incentive can affect the performance
of the company and whether this incentive is always effective on affecting the performance of
the employee.
employees and reward the performance of the high performers. This can aid in retention
because no organization wants to lose best performers (Susan M. Heathfield, 2018).
Bonuses:Bonus pay is the sum of money employers give to employees beyond their existing
wages (Mike Kappel, 2018).Bonuses come in various forms and there have been arguments
as to the reasons why most organizations prefer to usebonuses to motivate their workforce.
The reason why most organizations prefer the usage of bonuses is that they are the easy way
to thank the workers. Bonus can also increase employee morale and motivate workers to
reach goals. When employees are happy, the organization is primed to perform better than
ever (Mike Kappel 2018). The purpose of motivating through bonuses is also carefully linked
to the purpose of supporting the employees’ happiness in relation to the organizations. Wages
and Salaries:Motivation of employees comes in several ways and salary is a major
contributory factor to motivation.People are often motivated by money so the salary a worker
is paid bythe employer can have a great influence on his performance in the organization. A
worker does not simply view his salaryas a dollar amount, he or she sees it as the value his or
her employer places on him or her as a worker. The level ofappreciation he feels can have a
direct impact on his overall performance. A worker is more likely to be motivated andperform
well if he/she is happy about the salary he/she is earning. A person earning a high salary feels
motivated to do agood job, because he/she wants to please the employer to retain the position.
The salaries most of the time brings to theemployees the feeling of security and allow them to
feel accomplished and give them a high-status ranking that they enjoy(Laura Woods. 2019).
(Bowen et al., 2008), support the notion that salary is a motivating factor. In their
researchconducted on quantity surveyors in South Africa and their findings indicated that
salary, advancement in career, individualsatisfaction and acknowledgements were some of the
factors that were motivating enough. The quantity of cash anindividual gets at the end of the
month has the potential of becoming the utmost forecaster of a person’s stimulus. Vacations
with Pay:The Organization ensures the wellbeing of an employee by offering them vacations
with pay. If employees have been working for longer duration more than seven years only
they are eligible for seven, fifteen and twenty years. These vacations can be advantageous for
the employees who need extra time to care for aging parents or fulfil other assignments.
Pension:A deferred income that workers gather during their working lives and that belongs to
them after specific time duration. When an employee reaches a certain age of 21 and have
completed one year of service, they are entitled to company pension plan. The objective
behind pension plan is to motivate and retain the employees. It is offered for rewarding
employees for staying with the organization until retirement. Employees are disqualified for
the pension award if they leave or are fired before retirement. Non-financial Incentives This
is compensation given in a transaction which does not involve cash. A non-monetary reward
can consist of almost any material object such as jewelry, precious metals or an automobile
for example. In business, a non-financial incentives can also be a service such as
improvements made on a property or repairs done on a car (Business Dictionary, 2018). In
employment, it is a reward to an employee other than extra pay. Many non-financial
incentives are company cars, recognition, training, job promotion. However, an employee
may be rewarded, for example, by being given a better office or a bigger budget to control, or
by being given the choice of where to take a posting in a company. Non-financial incentives
can be very cost effective for companies because, in contrast with a pay increase, little or no
income tax or national insurance contributions are paid. Non-financial incentive programmes
and reward programmes structured to motivate positive behaviour change through means
other than money motivate and retain employees; a motivated employee will achieve a great
deal. A demotivated employee will be slow, horizontal to error and not likely to achieve. Non-
financial incentives helps to build feelings of confidence and satisfaction in employees and
can be very important for their long-term effect (Armstrong, & Brown, 2016). Recognition
Recognition is the demonstration of appreciation for a level of performance, an achievement
or a contribution toan objective. It can be confidential or public, casual or formal. It is always
in addition to pay (Pitts, 2005). Employees alsoneed recognition because it is a strong non-
financial motivator. Some employees are just moved by the fact that their bosswill always
appreciate they do well and also encourage them when they face some challenges. Individuals
also like to sharetheir achievements with others and have it recognized and celebrated. When
this need is satisfied, it works as an excellent motivator. If employers rely on a financial
incentive alone to recognize contribution and achievement it is most possiblethat the
employee’s objective will become modified to secure the pay and nothing more and this in
turn will lead to adegraded culture of the organization. When used correctly recognition is a
cost-effective way of enhancing achievementsand enable people to feel involved in the
company culture (Pitts, 2005).
1.2. Review of literature
The term incentive refers to something that intends to ignite one and or calls for greater effort
to act in a given manner. An incentive is often understood as an inducement that is given to
the employees in order to motivate, encourage and maintain a desired behaviour (Allen,
2001). According to (Hicks, 2003), incentives are mechanisms aimed at achieving a specific
change in behaviour. Whereas performance refers to how well an employee fulfils assigned
task through effort and skill, an incentive refers to an inducement for a desired action.
Incentive pay is a form of compensation given to employees upon attainment of some form of
job performance (Armstrong, 2009). Hence, the main objective of incentive programs is to
motivate performance. Team directed incentives have a markedly higher effect on
performance compared to individually directed incentives.
According to Armstrong, money is the highly tangible form of recognition and an effective
means of helping people to feel that they are valued. He goes on to say that as a powerful
force money is linked directly or indirectly to the satisfaction of many of needs and intangible
goals (Armstrong M. , 2009). Money was found to result in higher performance than non-
monetary, tangible incentives like gifts, travel etc., and long-term programs lead to greater
performance than short-term. The move towards a variety of employee-oriented incentive
schemes such as skill based payment plans and performance linked rewards may be traced to
the trend towards quality improvement teams and employee commitment programs.
Highlighting the significance of such incentive schemes Armstrong points out that the main
focus of such plan is to treat employees like partners and to get them to think of the business
and its objectives as their own.
Greater performance gains were realized for manual than for cognitive work. Authors like
V.S.P. Rao maintains the view that individual incentive plans are the most widely used and
effective for performance plan in the industry. (Rao, 2005)
The primary objectives of the financial incentive according to Bay Jordan are: (1) to give the
employee some control over their income as the employee’s income will be based on their
performance, (2) to create a greater sense of responsibility of the job on the part of the
employee, and (3) stimulating the employee to work harder than what he/she usually does
(Bay, 2011).
Diana L. Deadrick, and K Dow Scott reported that financial Incentive works on improving
the employee performance by positively affecting the employee perspective on the job and
achievement itself (Scott, 2012).
Luis R. Gomez classifies compensation tools into two broad categories of job-based
approaches and skill-based approaches, depending on the unit of analysis used to make
pay decision. He describes pay incentive as a program designed to reward employees for
good performance and the effectiveness with which compensation is allocated can make a
significant difference in gaining of losing a competitive edge. He maintains the view that
companies that emphasize monetary rewards want to reinforce individual achievement and
responsibility and a greater emphasis on monetary reward is generally found among firms
facing a volatile market with low job security, firms emphasizing sales rather than customer
service and firms trying to foster a competitive internal climate rather than long term
employee commitment. (Luis R. Gomez, 2012).
1.5. Hypotheses
There is a positive relationship between the financial incentives and the employee
performance in the organization.
Group directed financial incentives have greater impact on employee performance than
individually directed incentives.
Long-term financial incentive programs have greater impact on employee performance over
short-term incentive programs.
Financial incentive programs have greater performance impact for manual work that
cognitive work.
1.6. Methodology
Chapter I
Research Design
This chapter consists of the type of research carried out which include sample size, objective
of the study, scope of the study, limitations of the study, techniques or tools for data collection
and statistical tools used for analyzing the data.
Chapter II
Analysis and Interpretation
This chapter consists of the analysis and interpretation of the study based on the findings of
the survey.
Chapter III
Findings, Suggestions, Conclusions
This chapter gives a review of the findings of the study from the analysis of the preceding
chapters and suggestions are given based on the findings and overall conclusions of the study.
This project was undertaken to study the impact of financial incentives on the employee
performance in the organization. The data was collected using Questionnaire which is
analyzed and presented below.
Chart 1
Tale 2.2
Age Frequency Percent Valid Percent Cumulative
Percent
18-22 years 7 14.3 14.3 14.3
23-26 years 6 12.2 12.2 26.5
27-30 years 6 12.2 12.2 38.8
30-35 years 16 32.7 32.7 71.4
Above 35 14 28.6 28.6 100.0
years
Total 49 100.0 100.0
Source: Primary data
Chart 2.2
0 1 5 20 1 27
Female (0.0) (3.7) (18.5) (74.1) (3.7) (100.0)
1 1 8 33 6 49
Total
(2.0) (2.0) (16.3) (67.3) (12.2) (100.0)
Interpretation
The test result shows that 74.1% female respondents (20) agree that financial incentives or rewards
affect their motivation level as against 59.1 % (13) male respondents. 22.7% (5) male responds
strongly agree that financial incentives affect their motivation level.
Inference
Financial incentives or rewards have greater impact on the motivation level of female employees that
the male employees. Female employees tend to value incentives more than the male employees.
1 10 10 3 24
Middle class (4.2) (41.7) (41.7) (12.5) (100.0)
1 6 14 2 23
Upper Middle Class (4.3) (26.1) (60.9) (8.7) (100.0)
0 0 1 0 1
Upper Class (0.0) (0.0) (100.0) (0.0) (100.0)
0 1 0 0 1
High Income Group (0.0) (100.0) (0.0) (0.0) (100.0)
2 17 25 5 49
Total
(4.1) (34.7) (51.0) (10.2) (100.0)
t = 0.654, 0.626
df: = 47, 34.052
p-value = 0.516, 0.536
Since p-value is greater than 0.05, the result is not significant.
Therefore, the null hypothesis is accepted.
Conclusion
Independent ‘t’ test shows that the null hypothesis H0 can be accepted. This means that there
is no difference between men and women with regard to the impact of financial
incentives on employee performance.
Chapter 3
Findings
The study has been aimed at finding out the Impact of Financial Incentives on Employee
Performance. Data has been collected from 49 employees who belong to different job
categories from across various types of organization such as IT industry, Health sector and
Service sector. The data was analyzed using SPSS tool and the following inferences have
been drawn on the tests run.
From the frequency table 2.1 and graph we can see that 55.1% of the respondents are
female i.e. 27 out of 49 respondents and the remaining 44.9% of them are male which
comprises of 22 respondents.
Majority of the respondents (32.7%) belong to the age group between 30-35 years,
followed 28.6% who belong to the age above 35 years of age, 14.3% belong to the
age group of 18-22 years and 12.2% each belong to the age group of 25-30 years of
age.
Frequency Table 2.3. and graph gives the distribution of respondents according to
different income groups. Majority of the respondents 24, (49%) belong to the middle
class and the remaining 23, (46.9%) belong to upper middle class and one each to
upper class and High Income group.
With regard to the educational background of the respondent, it is observed that a
significant number of 19 respondents are postgraduates and 17 of them are graduate
and 8 of them are with doctorate degree. Three of the respondents are 12 th pass and
one 10th pass.
Nine employees are in managerial job, 7 in executive job, 3 in supervisory category
and the remaining are in different service sectors such as healthcare and teaching.
The test analysis indicate that 58.3% (28) of the respondents agree that financial
incentives are the best option to motivate employees for excellent performance. It is
further observed that 29.2% (14) of the respondents strongly agree to the statement.
The data further shows that 36.7% (18) of the respondent agree salary increase as the
most motivating factor followed by recognition 26.5% (13), healthcare and promotion
leave 16.3% each.
The analysis indicate that 44.9% (22) agree group directed financial incentives more
efficient than individually directed incentives, while 26.5% (13) disagree with the
statement and 24.5% are neutral in their response.
The data analysis shows that 74.1% female respondents (20) agree that financial incentives or
rewards affect their motivation level as against 59.1 % (13) male respondents. 22.7% (5)
male responds strongly agree that financial incentives affect their motivation level.
The test result shows that 60.9% (14) of the upper middle class and 41.7% of the
middle class employees and one from the upper class agree that long-term financial
incentives are more effective compared to short-term financial incentive programs.
Only 8.7% of upper middle class and 12.5% of middle class employees strongly agree
that long term financial incentives are more effective compared to short-term financial
incentive programs.
Independent ‘t’ test shows that that there is no difference between men and women
with regard to the impact of financial incentives on employee performance.
Regarding the impact of financial incentives on the performance level, 70.8% of the
responded that financial incentives are effective and 6.3% rate financial incentives as
highly effective.
Respondents between the age group 30-35 years and above 35 years agree that
financial incentives have significant effect of their performance.
The same age group also indicate that larger business enterprises have variety of
reward and incentive programs as opposed to small and medium enterprises.
Performance related pay has been pointed out as the most valued type of incentive by
the respondent who belong to the age group between 30-35 years and above 35 years.
It is also observed that 56% of female and 43.8% of male respondents also choose
performance related pay as the most valued type of incentive.
Employees with 5-10 years of work experience observe that the financial incentives
do impact their performance in an effective manner, where 6.3% of the respondents
find it highly effective.
As many as 56.3% of employees in the private sector and 39.6% in the service sector
point out financial incentives as the best option to motivate employees for excellent
performance.
Only 26.5% (13) of the employees agree that they receive fair and just incentives for
their effort and level of responsibility. A significant number of 57.1% (28) of the
employees remain neutral in their response to the statement.
A significant number 31 (63.3%) of the employees agree that the absence of financial
incentives can demotivate them and 12.2% (6) of the employees strongly agree with
the statement. However, 10 (20.4%) of the employees do not agree that the absence of
financial incentives can demotivate them.
A total number of 32 (65.3%) of the employees agree that organization should provide
financial incentives as a means to improve employee performance and 11 (22.4%)
strongly agree with the statement.
DISCUSSION OF FINDINGS
Financial and non-financial incentives are very important for staff performance in
organizations. For a very long period of time, it was commonly thought that financial
incentive was the most powerfulmotivator. People went to work and did a good job in order
to be paid a fair wage. If they work hard and long enough, thatwage would increase, giving
them additional pay. It was a full circle concept where Money= Motivation, Motivation=
Work,Work= Money (Jennifer Foster, 2013). Findings from the study show that elements of
the financial and non-financial incentives exist in the organizations and have a positive
impact on staff performance. never the less, there are some financial and nonfinancial
incentives such as bonuses, pension, vacation with pay, medical care, recognition, trainning
etc which are not adequately put in place for better staff performance. When used correctly
recognition is a cost-effective way of enhancing achievementsand enable people to feel
involved in the company culture (Pitts, 2005). The study also found out that there is an effect
of financial incentives on staff performancein the organization. The items on the table
addressedpay, bonuses, vacation with pay, medical care and pension as important elements to
improving the quality of staff and their performances in the organization. Finally the study
sought to determine the effect of non-financial incentives on staff performance. From the
items on table 3, it was observed that the items on the table for non-financial incentives is a
great determinant to staff performance in the organization. It is obvious that when staff
working conditions are alright, he/she will be happy to put in his/her best in his job and vice-
versa.
Conclusions
Financial incentives are the best option to motivate employees for excellent
performance in the organization and they affect the motivation level of
employees in a significant manner.
Salary increase has been rated as the incentive factor that motivates the
employees most followed by recognition, healthcare and promotion leave.
Performance related pay is the most valued incentive factor for the employees
who belong to above 35 years of age.
Only a few employees agree that they receive fair and just incentives for their
effort and level of responsibility in the organization.
Large business enterprises have a variety of reward and incentive programs as
opposed to small and medium enterprises.
Long-term financial incentives are more effective compared to short-term
financial incentive programs.
Group directed financial incentives are more effective than individually
directed incentives.
Absence of financial incentives demotivates employees to a very large extent
and adversely affect their performance.
It is mandatory that organizations provide adequate financial incentives as a
means to improve the performance of employees.
Suggestions
Based on the findings of the researcher, the following recommendations are suggested:
Organisations should not be stereotype in the style or method of incentive put in place
Organisation should ensure that their employees are well remunerated in line with an
economic environment like ours Employers of labour should employ various types of
incentives from time to time and from employee to employee. This could vary from earning
commission to holiday package. Organisations should use money as often as possible
particularly with employees on lower level.
Reference
Allen, R. a. (2001). The Role of Reward ystem for a Total Quality Management Based
Strategy. Journal of Organizational Change Management 14 (2), 110-131.
Armstrong, M. (2009). A Handbook of Human Resource Management Practice. (10th Ed.).
London: Kogan Page.
Armstrong, M. (2009). Armstrong's Hand Book of Human Resource Management Practice
(11th Ed). London: Kogan Page.
Bay, J. (2011, December 30). "Employee Incentives Programs: How To Get Them Right.".
Retrieved from Team Technology: Online Business Resources:
http://www.teamtechnology.co.uk/employee-incentive-programs.html>.
Hicks, V. a. (2003). Pay and Non-Pay Incentives, Performance and Motivation. Anwerp: ITG
Press.
Luis R. Gomez, D. B. (2012). Managing Human Resources. New Delhi: PHI Learning PVt.
Ltd.
Rao, V. S. (2005). Human Resource Managment: Text and Case (2nd Edition). New Delhi:
Excel Books.
Scott, D. L. (2012, January 1). "Employee Incentives in Public Sector; A National Survey of
Urban Mass Transportation Authorities.". Retrieved from
http://www.pdii.net/docs/24_Employee_Incentives_In_Public_Sector_National_Surve
y_Urban_Mass_Transit_Authorities.pdf
Appendix
Kindly fill in the following questionnaire for the purpose of above mentioned study as a
requirement for the completion of my MBA programme at Kristu Jayanti college, Kothanur
P.O, Bangalore. This information will be strictly used for academic purpose only.
Name (Optional)
: .........................................................................................
.....
Age: 1. 18-22 years 2. 23-26 years 3. 27-30 years 4. 30-35 years 5. Above 35 years
Income Group: 1. Lower class 2. Middle class 3.Upper Middle class 4. Upper class 5. High Income group
3. Since how many years have you been working in this organization?
1. 0-5 Years 2. 5-10 Years 3. 10-15 Years 4. 15 -20 Years 5. Above 20 Years
5. Financial incentives are the best option to motivate employees for excellent
performance.
1. Strongly Disagree 2. Disagree 3. Neutral 4. Agree 5. Strongly Agree
6. Have you ever received any financial incentive from your company/organization?
1. Never 2. Seldom 3. Sometime 4. Most of the time 5. Very Freequent
7. Rate the level of your performance after you received monetary incentives in your
organization?
1. Highly ineffective 2. Ineffective 3. Effective 4. Undecided 5. Highly Effective
11. Do you think that the incentives or rewards affect your motivation level?
1. Strongly Disagree 2. Disagree 3. Neutral 4. Agree 5. Strongly Agree
12. Do you agree that you receive fair and just incentives for your effort and level of
responsibility?
1. Strongly Disagree 2. Disagree 3. Neutral 4. Agree 5. Strongly Agree
13. Do you feel happy and honored when you receive financial incentives?
1. Strongly Disagree 2. Disagree 3. Neutral 4. Agree 5. Strongly Agree
14. Do varied and successful reward management scheme attract you more to a business
than one with limited reward options?
1. Strongly Disagree 2. Disagree 3. Neutral 4. Agree 5. Strongly Agree
15. Financial incentives and rewards do not have any impact on the quality of work?
1. Strongly Disagree 2. Disagree 3. Neutral 4. Agree 5. Strongly Agree
16. Larger business enterprises have a variety of reward and incentive programs as
opposed to small and medium enterprises.
1. Strongly Disagree 2. Disagree 3. Neutral 4. Agree 5. Strongly Agree
18. Do you think that incentives and other benefits will influence your performance?
1. Strongly Disagree 2. Disagree 3. Neutral 4. Agree 5. Strongly Agree
19. Long-term financial incentives are more effective compared to short-term financial
incentive programs.
1. Strongly Disagree 2. Disagree 3. Neutral 4. Agree 5. Strongly Agree
20. Financial incentives have greater impact for manual work than intellectual/cognitive
work.
1. Strongly Disagree 2. Disagree 3. Neutral 4. Agree 5. Strongly Agree
21. Group directed financial incentives are more effective than individually directed
incentives.
1. Strongly Disagree 2. Disagree 3. Neutral 4. Agree 5. Strongly Agree
22. Financial incentives do not have impact on the performance of employees at the
higher level.
1. Strongly Disagree 2. Disagree 3. Neutral 4. Agree 5. Strongly Agree
23. Do you think that your performance is directly related to the financial incentives you
receive?
1. Strongly Disagree 2. Disagree 3. Neutral 4. Agree 5. Strongly Agree
24. Do you think that the absence of financial incentives can demotivate the employees?
1. Strongly Disagree 2. Disagree 3. Neutral 4. Agree 5. Strongly Agree
25. Do you think the organisation should provide finacial incentives as a means to
improve employee performance?
1. Strongly Disagree 2. Disagree 3. Neutral 4. Agree 5. Strongly Agree