In Economics and Sociology

7/31/2019 In Economics and Sociology

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Ineconomicsandsociology, an incentive is any factor (financial or non-financial) that enables

or motivates a particular course of action, or counts as a reason for preferring one choice to thealternatives. It is an expectation that encourages people to behave in a certain way.[1]Since

human beings are purposeful creatures, the study of incentive structures is central to the study of

all economic activity (both in terms of individual decision-making and in terms ofco-operation

andcompetitionwithin a larger institutional structure). Economic analysis, then, of thedifferences between societies (and between different organizations within a society) largely

amounts to characterizing the differences in incentive structures faced by individuals involved

in these collective efforts. Ultimately, incentives aim to provide value for money and contributeto organizational success.[2]

Contents [hide]

1 Categories 2 Other forms 3 Social pressure 4 Types of Incentives 5 Incentive in economics 6 Example: Incentive Regulation in the Utility Sector 7 Incentive problems 8 Incentives in Recession Times 9 See also 10 References

Categories

Incentives can be classified according to the different ways in which they motivate agents to take

a particular course of action. One common and usefultaxonomydivides incentives into threebroad classes:

1. Remunerative incentives (or financial incentives) are said to exist where an agent canexpect some form of material rewardespecially moneyin exchange for acting in a

particular way.

2. Moral incentives are said to exist where a particular choice is widely regarded as theright thing to do, or as particularly admirable, or where the failure to act in a certain wayis condemned as indecent. A person acting on a moral incentive can expect a sense of

self-esteem, and approval or even admiration from his community; a person acting

against a moral incentive can expect a sense of guilt, and condemnation or evenostracism

from the community.3. Coercive incentives are said to exist where a person can expect that the failure to act in a

particular way will result inphysical force being used against them (or their loved ones)
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by others in the communityfor example, by inflicting pain in punishment, or by

imprisonment, or by confiscating or destroying their possessions.

(There is another common usage in which incentive is contrasted withcoercion, as when

economic moralists contrast incentive-driven worksuch asentrepreneurship,employment, or

volunteeringmotivated by remunerative, moral, orpersonal incentiveswith coercedworksuch asslaveryorserfdom, where work is motivated by the threat or use of violence. In this

usage, the category of "coercive incentives" is excluded. For the purposes of this article,however, "incentive" is used in the broader sense defined above.)

Other forms

These categories do not, by any means, exhaust every possible form of incentive that an

individual person may have. In particular, they do notencompass the many other forms of

incentivewhich may be roughly grouped together under the heading ofpersonal incentiveswhich motivate an individual person through their tastes, desires, sense of duty, pride, personal

drives to artistic creation or to achieve remarkable feats, and so on. The reason for setting thesesorts of incentives to one side is notthat they are less important to understanding human action

after all, social incentive structures can only exist in virtue of the effect that social arrangements

have on the motives and actions of individual people. Rather, personal incentives are set apart

from these other forms of incentive because the distinction above was made for the purpose of

understanding and contrasting the social incentive structures established by different forms ofsocial interaction. Personal incentives are essential to understanding why a specific person acts

the way they do, but social analysis has to take into account the situation faced by any individual

in a given position within a given societywhich means mainly examining the practices, rules,

and norms established at a social, rather than a personal, level.

Social pressure

It's also worth noting that these categories are not necessarily exclusive; one and the same

situation may, in its different aspects, carry incentives that come under any or all of these

categories. In modernAmericansociety, for example, economic prosperity and social esteem areoften closely intertwined; and when the people in a culture tend to admire those who are

economically successful, or to view those who are not with a certain amount ofcontempt(see

also:classism,Protestant work ethic), the prospect of (for example) getting or losing a job carriesnot only the obvious remunerative incentives (in terms of the effect on the pocketbook) but also

substantial moral incentives (such as honor and respect from others for those who hold down

steady work, and disapproval or even humiliation for those who don't or can't).

Types of Incentives

1. Straight piece rate: In the straight piece rate system, a worker is paid straight for thenumber of pieces he produces per day. In this plan, quality may suffer.

2. Straight piece rate with a guaranteed base wage: A worker is paid straight for outputset by management even if worker produces less than the target level output. If worker
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penalized. Because the operators are actually in different markets, it is important to make sure

that the operators situations are similar so that the comparison is valid, and to use statisticaltechniques to adjust for any quantifiable differences the operators have no control over.

Generally regulators use a combination of these basic forms of regulation. Combining forms of

regulation is called hybrid regulation. For example, U.K. regulators (e.g. Ofgem) combine

elements of rate of return regulation and price cap regulation to create their form of RPI - Xregulation.[6]

Incentive problems

Incentive structures, however, are notoriously more tricky than they might appear to people who

set them up. Human beings are both finite and creative; that means that the people offeringincentives are often unable to predict all of the ways that people will respond to them. Thus,

imperfect knowledge andunintended consequencescan often make incentives much more

complex than the people offering them originally expected, and can lead either to unexpected

windfallsor to disasters produced by unintentionallyperverse incentives.

For example, decision-makers in for-profit firms often must decide what incentives they will

offer to employees and managers to encourage them to act in ways beneficial to the firm. Butmanycorporatepoliciesespecially of the "extreme incentive" variant popular during the

1990sthat aimed to encourage productivity have, in some cases, led to spectacular failures as

a result of unintended consequences. For example,stock optionswere intended to boostCEOproductivity by offering a remunerative incentive (profits from soaring stock prices) for CEOs to

improve company performance. But CEOs could get profits from soaring stock prices either (1)

by making sound decisions and reaping the rewards of a long-term price increase, or (2) by

fudging or fabricating accounting information to give the illusion of economic success, andreaping profits from the short-term price increase by selling before the truth came out and prices

tanked. Theperverse incentivescreated by the availability of option (2) have been blamed formany of the falsified earnings reports and public statements in the late 1990s and early 2000s.

Incentives in Recession Times

Though bonuses make an integral component of free market practices, continuing to pay them to

executives by companies benefiting from US Government financial help as planned and as

contracted is facing great criticism and opposition from politicians and media. The case ofAmerican Insurance Groupis an obvious example of how refused normal bonus incentives have

become after the capital market meltdown.

A possible solution against the criticism of overpaying executives in boom times andunderpaying them in recession times is by linking bonus targets to an Operating Index. By doing

so external effects (economic cycles) can be excluded from performance measurement. This

makes incentive pay more fair as bonuses are based on performance relative to other companiesin the peer universe.
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While the notion of a fair system seems to be an equal deal, those who are outperforming by a

large margin will feel slighted by this approach; Thus, a system based on individual companyperformance has been the standard.

See also

Look upincentiveinWiktionary, the free dictionary.

Read more:http://www.answers.com/topic/incentive#ixzz1HOTz1Zzv
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Incentive programmm

An Incentive Program is a formal scheme used to promote or encourage specific actions or

behavior by a specific group of people during a defined period of time. Incentive Programs are

particularly used inbusiness managementto motivateemployees, and insalesin order to attractand retaincustomers. Scientific literature also refers to this concept asPay for Performance.

Contents [hide]

1 Program design considerations 2 Types

o 2.1 Points programo 2.2 Employeeo 2.3 Consumero 2.4 Dealer/channelo 2.5 Saleso 2.6 Online programs

3 Monetary rewardso 3.1 Casho 3.2 Non-cash rewardso 3.3 Gift cards/certificateso 3.4 Merchandiseo 3.5 Travelo 3.6 Experiential

4 Non-monetary rewards 5 See also 6 References

o 6.1 Notes

Program design considerations

If programs are to be effective, all the factors that affect behavior must be recognized, including:

motivation,skills,recognition, an understanding of the goals, and the ability to measure progress.Often companies turn to incentive programs to counter failures in meeting targets, poor

behaviors or performance, unengaged employees, poormoraleor attitude, high turnover or loss

of talent, or increases in expectations from management.[citation needed]

Many companies mistakenly assume that what works for one organization will work well for all

organizations. Companies often attempt to create incentive programs without thinking in detail

about how each program feature will best suit their targeted audience.

To facilitate the creation of a profitable program, every feature must be tailored to the

participants interests. A successful incentive program requires clearly defined rules, suitablerewards, efficient communication strategies, and measurable success metrics. By adapting each
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element of the program to fit the target audience, companies are better able to engage program

participants and enhance the overall program effectiveness.

An incentive program represents a substantial investment to most organizations. Receiving a

sufficient return on that investment requires the full participation of the program participants.

Incentive programs are based upon the concept that effort increases as people perceivethemselves progressing towards their goal. Therefore programs should offer participants a

variety of products and services based on their unique interests and diverse needs. Successfulprograms need to carefully develop their reward methods to keep participants eager to approach

a new goal once they have achieved a reward.

Objectives should be drawn up on the basis of the organization's strategic goals and should be

straightforward and specific so that participants clearly understand the expectations. They should

be challenging, yet achievable; if they are viewed as unattainable, the program will be destined

for failure. Objectives may include motivating employees, recognizing performance, persuadingcustomers to make a purchase, or even reinforcing a marketing message. Once the program goals

have been determined, every aspect of the program must be measured against this goal in orderto ensure the program's success in goal achievement. If successful, objectives should providemeasurable results allowing the organization to trackperformanceand measure the overall

success of the program.

However, at its core, an incentive program is designed to lift the performance outputs of a group

of people engaged in some activity by increasing their motivation. There is nothing wrong with

this approach, but it should be part of a broaderQuality Managementsystem.[1]

W. Edwards Deming, a leadingQuality Managementscholar and consultant, taught and

demonstrated that motivation efforts are a form of tampering because they try to make

improvements to individual components of what is largelycommon cause variation. He arguedthat the overall performance of a unit was much more a function of the quality of materials,

process design and management, quality specifications and machine performancein other

words, the system. Deming went on to demonstrate that the result of an improvement strategybased on trying to lift the performance of each worker one-at-a-time would be no system

improvement; rather, it would simply be increased variation in performance. He encouraged

management to find ways to lift the performance of the whole system.[2]

In addition, incentive schemes will very often createmoral hazard. By giving the incentive ofhitting specific targets, the targets become the goal, rather than raising the performance of the

organization as a whole. This causes reduction in overall performance, even while increasing the

rate of hitting targets.

Types

Points program

Points-based incentive programs are a type of program where participants collect and redeem

points for awards. Depending on the program type and the organizational objectives, points can
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be awarded on a number of criteria including positive employee behavior, the demonstration of

organizational values, repeat customer purchases, the sale of new products, increased overallsales, or even the use of proper safety precautions. In addition to point awarding, the levels at

which points can be redeemed can be customized by the organization and set at virtually any

level. Points programs are a way for organizations to motivate behavior over time while

improving the organizations overall performance.

Employee

Main article:Motivation

Employee incentive programs are programs used to increase overall employee performance.

Employee programs are often used to reduce turnover, boost morale and loyalty, improveemployee wellness, increase retention, and drive daily employee performance.

Consumer

Consumer incentive programs are programs targeting the customers and consumers of anorganization. In a recent study conducted by Bain & Companys research, researchers found that

a simple 5% increase in a companys customer retention rates will increase the average lifetime

profits per customer.[3]Consumer programs are becoming more widely used as more companies

realize that existing customers cost less to reach, cost less to sell, are less vulnerable to attacks

from the competition, and buy more over the long term.

Dealer/channel

Dealer incentive programs are used to improve performance for dealer and channel resellersusing sales incentive programs. It can motivate the staff which in turn only helps business. These

programs help companies capture market share, launch new products, reduce cost of sales,increase product adoption, and ultimately drive sales.[4]

Sales

These programs are primarily used to drivesales, reduce sales costs, increase profitability,develop new territory, and enhance margins. Sales incentive programs have the most direct

relationship to outcomes.

A Sales Incentive Plan (SIP) is a business tool used to motivate and compensate a sales

professional (or sales agent) to meet goals ormetricsover a specific period of time, usually

broken into a plan for afiscal quarterorfiscal year. A SIP is very similar to acommissionplan;however, a SIP can incorporate sales metrics other than goods sold(or value of goods sold),

which is traditionally how a commission plan is derived. Sales metrics used in a SIP are typically

in the form ofsales quotas(sometimes referred to aspoint of saleor POS shipments), new

business opportunities and/ormanagement by objectivess(MBOs) independent action of thesales professional and is usually used in conjunction with a base salary.
http://www.answers.com/topic/motivationhttp://www.answers.com/topic/motivationhttp://www.answers.com/topic/motivationhttp://www.answers.com/topic/incentive-program-2#cite_note-2http://www.answers.com/topic/incentive-program-2#cite_note-2http://www.answers.com/topic/incentive-program-2#cite_note-2http://www.answers.com/topic/incentive-program-2#cite_note-Rwards.2C_Loyalty_and_Incentive_Programs-3http://www.answers.com/topic/incentive-program-2#cite_note-Rwards.2C_Loyalty_and_Incentive_Programs-3http://www.answers.com/topic/incentive-program-2#cite_note-Rwards.2C_Loyalty_and_Incentive_Programs-3http://www.answers.com/topic/saleshttp://www.answers.com/topic/saleshttp://www.answers.com/topic/saleshttp://www.answers.com/topic/metric-mathematicshttp://www.answers.com/topic/metric-mathematicshttp://www.answers.com/topic/metric-mathematicshttp://www.answers.com/topic/fiscal-yearhttp://www.answers.com/topic/fiscal-yearhttp://www.answers.com/topic/fiscal-yearhttp://www.answers.com/topic/fiscal-yearhttp://www.answers.com/topic/fiscal-yearhttp://www.answers.com/topic/fiscal-yearhttp://www.answers.com/topic/commissionhttp://www.answers.com/topic/commissionhttp://www.answers.com/topic/commissionhttp://www.answers.com/topic/sales-operationshttp://www.answers.com/topic/sales-operationshttp://www.answers.com/topic/sales-operationshttp://www.answers.com/topic/point-of-salehttp://www.answers.com/topic/point-of-salehttp://www.answers.com/topic/point-of-salehttp://www.answers.com/topic/management-by-objectiveshttp://www.answers.com/topic/management-by-objectiveshttp://www.answers.com/topic/management-by-objectiveshttp://www.answers.com/topic/management-by-objectiveshttp://www.answers.com/topic/point-of-salehttp://www.answers.com/topic/sales-operationshttp://www.answers.com/topic/commissionhttp://www.answers.com/topic/fiscal-yearhttp://www.answers.com/topic/fiscal-yearhttp://www.answers.com/topic/metric-mathematicshttp://www.answers.com/topic/saleshttp://www.answers.com/topic/incentive-program-2#cite_note-Rwards.2C_Loyalty_and_Incentive_Programs-3http://www.answers.com/topic/incentive-program-2#cite_note-2http://www.answers.com/topic/motivation


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SIPs are used to incentives sales professionals where total dollars sold is not a precise measure of

sales productivity. This is usually due to the complexity or length of the sales process or where asale is completed not by an individual but by a team of people, each contributing unique skills to

the sales process. SIPs are used to encourage and compensate each member of the sales team as

he/she contributes to the team's ability to sell. It is not uncommon for the members of such teams

to be located in different physical locations (often working in different countries) and for theproduct introduction to happen in one location and the purchase of such a product to occur in

another location.

Online programs

When first emerging in 1996, the use of online incentive programs was extremely rare.

According to the Online Incentive Council (OIC, defunct), since its emergence, the number of

online programs has almost doubled in size every year. At present, nearly every traditional

incentive company offers an online component in programs including employee motivation andrecognition, sales performance, channel programs, and consumer promotions. Companies that

run their programs online experience efficient communication, reporting, and awards fulfillment.Online incentive programs pose an attractive alternative to traditional offline programs sinceonline programs save money and time and allow organizations to have much greater control.

Monetary rewards

Selecting the appropriate rewards is vital to any programs success. The goal in choosing rewards

is to select items that will spark the participants interest or feelings, and support the programs

objectives. Effective rewards will both motivate short-term behavior and provide motivation overtime. There are several types of rewards.

Cash

While incentive program participants often state that they prefer cash to non-cash rewards,research has shown that cash is a poor motivator due to its lack of trophy value. In a recentstudy conducted by the Center for Concept Development, three of five respondents agree that a

cash payment is perceived to be part of an employees total compensation package and not as

part of an incentive program.[5]

Additionally, cash is quickly forgotten as many participants tendto spend it on everyday items or use it to pay bills. Given that most people do not generally talk

about cash awards, cash programs do little to generate the interest required to create an effective

incentive program.

Non-cash rewards

Merchandise and other non-cash rewards are more often perceived as separate fromcompensation. Accordingly, non-cash rewards tend to stand out as rewards for performance,

which enhances their long-term effect. Branded merchandise and other non-cash rewards havehigh trophy value, bringing greater recognition to the recipient at the time of the award and

possessing a long-term lasting effect that can result in increased engagement in the organizations

goals.
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Gift cards/certificates

Gift cards/certificates are prepaid retail cards or certificates which are redeemed at a later time atcheckout. In general, they are available in two types: (1) cards which carry a major credit card

brand, commonly referred to as universal gift cards (UGC), and are redeemable at all merchants

accepting the credit card brand; and (2) retailer-specific cards, issued by well-known merchants,redeemable only through the issuing retailer. In the 2005 Incentive Federation Study of

Motivation and Incentive Applications, gift cards were ranked as the most frequently used typeof corporate reward.[6]

Merchandise

Merchandiserewards can range anywhere from small branded key chains to high-end

electronics. In a 2005 study conducted by the Center for Concept Development, 73% ofrespondents agreed that more stimulating, memorable incentive programs can be built around

merchandise as opposed to cash rewards.[5]

Travel

Travel rewards can best be defined as a face-to-face event designed to motivate, either directly or

indirectly. In a 2005 study conducted by the Center for Concept Development, 51% of

respondents perceived that travel is remembered longer than other incentive rewards.[5]

Experiential

Experiential rewards provide program participants with an experience. This form of reward gives

organizations the ability to offer their employees and customers interesting experiences as

incentives. Examples might include a seaplane flight and lunch, a two hour horse ride on thebeach, a day of sailing for two, a chance to meet a star athlete, or the use of a party planner for an

occasion of the recipients choice. Experiential rewards allow participants to share their

experiences with others and reinforce the reward and the behavior that led to the giving of the

reward.

Non-monetary rewards

Non-monetary incentives are used to reward participants for excellent behavior through

opportunities. Non-monetary incentives may include flexible work hours, payroll or premium

contributions, training, health savings or reimbursement accounts, or even paid sabbaticals. If it

comes to environmental behavior, often labeling and recognition certificates are used. This mayinclude stickers, T-shirts with banner logo etc..

Read more:http://www.answers.com/topic/incentive-program-2#ixzz1HOUikYH9
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MOTIVATION THROUGH NON-MONETARY

INCENTIVES

TABLE OF CONTENTS

LIST OF TABLES

TABLE 1

5

TABLE 2

6

LIST OF FIGURES

FIGURE 1

3

FIGURE 2

8

1. INTRODUCTION

1

2. LITERARY REVIEW

2

2.1 COMPARISON OF MONETARY AND NON-MONETARY

2

INCENTIVES

2.2 PROBLEMS WITH MONETARY INCENTIVES

2

2.3 THEORIES WHICH SUPPORT INTRINSIC MOTIVATION

3

2.4 INTRINSIC MOTIVATION BY NON-MONETARY


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4

INCENTIVES

2.5 NON-MONETARY INCENTIVES

6

3. PRACTICES IN ORGANISATIONS

7

3.1 FLEXTIME

7

3.2 PROFESSIONAL DEVELOPMENT

8

3.3 FEEDBACK

8

3.4 TANGIBLE REWARDS

9

3.5 WORK ENVIRONMENT

12

3.6 ATTENTIVE EMPLOYERS

12

1

3.7 AUTONOMY

12

3.8 REDESIGNING OF JOBS

12

3.9 RETIREMENT PLANNING

13


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4. CASE STUDIES

14

4.1 MOTIVATION OF HEALTHCARE WORKERS FOR

14

BETTER SERVICE

4.2 HOW A UPS MANAGER CUT TURNOVER

15

5. CONCLUSION

17

6. REFERENCES

18

2

1. INTRODUCTION

The term motivation was originally derived from the Latin wordmovre, which means to move. But

this one word is insufficient to describe the processes with how human behaviour is activated. Given

below are some representative definitions of motivation..

The contemporary (immediate) influence on the direction, vigour, and

persistence of action (Atkinson, 1964)

It deals with how behaviour gets started, is energized, is sustained, is directed, is stopped, and what kind

of subjective reaction is present in the organism while all this is going on (Jones, 1955)

A process governing choice made by persons or lower organisms among

alternative forms of voluntary activity (Vroom, 1964)


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Motivation has to do with a set of independent/dependent variable relationships that explain the

direction, amplitude, and persistence of an individuals behaviour, holding constant the effects of

aptitude, skill, and understanding of the task, and the constraints operating in the environment

(Campbell & Pritchard, 1976)

Summarising the fore mentioned definitions, Motivation is the process thataccounts for an individuals intensity, direction, and persistence of effort toward

attaining a goal. Thus from the various definitions it can be seen that primary

concerns while discussing motivation are what energises, channelises, and sustains

human behaviour. By definition, managers are individuals who achieve goals through

other people. The saying If you want something done right, do it yourself is very

true as it is very difficult to find people who could do a challenging job well than to

do it yourself. But unfortunately managers cant step in for their employees who are

not performing well. They have the unenviable task of nurturing necessary

competencies and commitment in their employees. More often the employees are

competent enough to complete a task but they dont have the motivation to do theirjob to their potential. A recent Gallup poll found that a staggering 55% of employees

in the most powerful nation were found to have no enthusiasm for their work. The

necessity to motivate the employees is inherent in the primary objective of any

organisation-increasing profit. It is an established fact that satisfied and highly

motivated employees contribute their best in the workplace. Thus the profits are

maximised. Research findings have found many ways to motivate the employees in

their workplace. Apart from deploying financial and physical resources, every

organisation must utilize its human resources effectively. Motivation enables an

organisation to do so. Employees must be attracted to remain in an organisation. They

must perform the tasks for which they have been hired must do so in a dependablemanner. They must go beyond this dependable role performance and engage in some

3

form of creative, spontaneous, and innovative behaviour at work-a set of behaviours

commonly called extra-role behaviour. So for all these we need motivation.

Motivation can be achieved extrinsically by monetary incentives, or through

punishments and intrinsically through non-monetary incentives. This paper discusses

the scope of non-monetary incentives in motivation of employees.

2. LITERARY REVIEW

People wont change their behaviour unless it makes a difference to

them to do so

Managers are individuals who achieve their goals through other people. They are constantly searching

for ways to motivate their employees to make them work at their optimal level of performance to


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work counterproductively. Though the monetary incentives have a better effect than the monetary

incentives in the short run, they fail miserably in the long run and in extreme situations downfall of the

company (when employees start anticipating monetary incentives even for routine jobs and in absence

of which they start working inefficiently or go on a strike as in the case of some government employees).

Also most of the non-monetary incentives are intrinsic in nature. Intrinsic motivation is more effective as

the impetus to work is from within. Employees are working because they feel satisfied or fulfilled by the

activity they undertake. Under these circumstances the management can be regarded as more of a

support than control. So managers should concentrate more on non-monetary incentives after the

minimum level of monetary benefits and properly structure them according to their employees

preference. This will ensure high motivational level of the employees which will get reflected in their

better performance at work.

2.3 Theories which support intrinsic motivation

Various theories that support the concept that intrinsic motivation which is attained through non-

monetary incentives is important and better than extrinsic motivation are as follows:

Maslows Hierarchy of needs

This theory states that the needs of social, esteem and self actualisation are higher order needs. The

differentiation between the higher order needs and lower order needs is that the higher order needs are

satisfied at the individual level whereas the lower order needs are satisfied externally.

Herzbergs two-factor theory

It supports the emphasis on factors associated with work like promotional opportunities, opportunities

for personal growth, recognition, responsibility, and achievement which employees find intrinsically

rewarding

McClellands Theory of Needs

This theory focuses on three needs: achievement, power and affiliation. They

are defined as follows

Need for achievement: The drive to excel, to achieve in relation to a set of

standards, to strive to succeed.

Need for power: The need to make others behave in a way that they would not


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Self management

In employees perspective self-management is choosing activities, monitoring competence, committing

to purpose and monitoring progress. The intrinsic motivation that energises the work comes directly

from the four management events namely activities, purpose, opportunities and rewards. From these

four events the employees make a judgementof the meaningfulness of the task purpose, the degree of

choice available in selecting activities, the competence with which the activities are performed, and the

amount of progress being made to the task purpose. The judgements from self-management lead to

intrinsic rewards which in turn provide the energy for self- management which completes the cycle.

OPPORTUNITY

ACCOMPLISHMENT

Rewards

Rewards

From task

ACTIVITIES

From task

PURPOSE

Table 1: Intrinsic

rewards

of


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self-

management

Sense of meaningfulness

It is the opportunity that makes the employees feel that they are on a path that is worth the energy and

time-that they are on a valuable mission that matters in the larger scheme of things.

Sense of choice

It is the opportunity that the employees feel to select task activities that make sense to them and to

perform them in ways that seem appropriate to them. The feeling of choice is the feeling of being free

to choose-of being able to use their judgement and act out of their own understanding of task

Sense of competence

It is the accomplishment that employees feel in skilfully performing task activities that have been chosen

by them. The feeling of competence involves the sense that they are doing good, high-quality work on a

task.

Sense of progress

Sense of

CHOICE

Sense of

COMPETENCE

Sense of

MEANINGFULNESS

Sense of

PROGRESS

7


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It is the accomplishment felt in achieving the task purpose. The feeling of progress involves the sense

that the task is moving forward, and their activities are really accomplishing something.

2.5 Non-monetary incentives

The non-monetary incentives desired by employees across generations have gone rapid changes. The

following table shows the preferences in non-monetary incentives across generations.

Baby Boomers

(born between 1946-63)

Generation Xers

(born between 1964-81)

Generation Yers

(born after 1982)

Retirement planningFlexible schedules

Job training

Sabbaticals

Flexible schedules


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Professional development

Feedback

Tangible rewards

Work environment

Flexible schedulesProfessional development

Feedback

Tangible rewards

Work environment

Attentive Employers

Autonomy

Table 2: Preferences in non-monetary incentives across generations

Thus it is obvious that the demands of the current generation of employees are ever increasing and in

current scenario where there is low loyalty to the companies, high attrition rate these demands have to

be met reasonably well to attract prospective employees who can perform really well and to retain the

employees.

8

3. PRACTICES IN ORGANISATIONS

Various non-monetary incentives in Table 1 are affected by career stage and proximity to retirement.

The older the associate, the more the focus is placed on retirement or supplementing retirement

income with part-time or temporary jobs. The younger the associate, the more the focus is placed on

job satisfaction and the work environment.

Types of non-monetary incentives

Various types of non-monetary incentives are as follows.

Flextime

Professional development

Feedback


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Tangible rewards

Work environment

Attentive employers

Autonomy

Redesigning of jobs

Retirement planning

and others.

3.1 Flextime

Flextime refers to several arrangements that allow the employee to work a non-traditional schedule.

The employee and the manager agree in advance on the hours of work. Flextime is a popular option for

good reason--it lends balance to busy lives. Fortunately, flextime also benefits the manager too.

Allowing employees to work schedules that best suit their lives results in more productive workers. Themost common flextime arrangements include:

Compressed workweek

This arrangement allows the employees to work a full, 40-hour schedule in 4 days by extending the

hours they work each day. The compressed week can also be scheduled over 2 workweeks, during which

they work 9 longer days and have the tenth off. In any case, the compressed workweek maintains the

same overall number of hours, just divided up differently. The workload, benefits, and pay are not

affected by the arrangement.

Adjusted lunch

9


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Common

core

Lunch

Common

core

Flexible

hours

6 A.M 9 A.M

12 noon

1 P.M

3 P.M

6 P.M

Figure 2: Example of a Flextime schedule

The only problem with flextime is that it cant be extended to employees involved in production as the

work time also depends on the machines which have to be run continuously for a certain period of time.

Problems may arise if flextime is offered to employees of other departments and not to those of

production department. So it is better not to introduce flextime in organisations where it cant beextended to all the departments.

3.2 Professional development

In a broad sense professional development may include formal types of

vocational education, typically post-secondaryor polytechnic training leading to

qualification or acredentia l required to get or retain employment. Informal or individualized programs

of professional development may also include the concept of personalcoaching. Professional

development on the job may develop or enhance process skills, sometimes referred to as leadership

skills, as well as task skills. Some examples for process skills are 'effectiveness skills', 'team functioning

skills', and 'systems thinking skills'. Some examples of task skills are computer software applications,

customer service skills and safety training. Examples of skills relevant to a currentoccupation are

leadership training for managers and training for specific techniques or equipment for

educators,technicians, metal workers,medical

practitionersand engineers. For some occupations there is a provision for


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accreditation tied to "continuing professional education" and proving competence

regulated by a professional body.

10

3.3 Feedback

People dont quit organisations, they quit bosses. This can be extended to colleagues too. Improper

communication, negative relationship, backbiting etc can lead to inefficiency and counter productivity.

To overcome this, organisations are adopting feedback culture. It is the culture wherein all the

employees are taught the skills of effectively receiving and giving feedback which is the degree to which

carrying out the work activities required by the job results in the employee obtaining direct and clear

information about the effectiveness in their job performance. This includes telling each other frankly,

honestly and effectively what they think about their behaviour, job performance, ideas etc. Employees

prefer being told what others think about them directly instead of in the round about way and they like

being given feedback to self evaluate their performance. They also would like to frankly tell their bossesthe various problems and issues faced by them. Feedback is of two types positive and negative. Positive

feedback improves the morale of the receiver and negative feedback improves the performance of the

receiver. Poor feedback can reduce morale, the ability to do the job, confidence of employees and can

even lead to conflicts between the management and the employees. Hence great care has to be taken

while giving and receiving feedback. So when both the managers and the employees acquire these skills

of giving and receiving feedback the feedback culture works out well for the company. The following

factors are to be considered while giving feedback:

Make feedback specific

Ambiguity and vagueness will make feedback ineffective as the receiver might miss out the whole point.

It should be made sure that there is no personality clash between the giver and receiver. Both of them

should be comfortable with the way the feedback is being given and neither of them should feel

attacked or offended. To do away with these problems the feedback has to be specific.

Concentrate on behaviour and results

Feedback should concentrate on behaviour, results and future prospective and not on personality andattitudes so that the receiver gets the desired message in the desired manner.

Take responsibility


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The manager/employee should take the initiative of giving feedback rather than putting the blame on

others saying that it is not their job. Most often it is due to lack of skills and unwillingness to give

feedback. Employees should also be encouraged to take responsibility as there is lot of emphasis on

teamwork and empowerment in present days organisations which are becoming flat.

Balanced feedback

Feedback has to be balanced and accurate. Overstating or understating results

will lead to ineffectiveness of feedback.

Feedback on periodic basis

Feedback has to be on a periodic basis preferably on weekly basis. Delay in

giving feedback will render it ineffective.

11

Similarly while receiving feedback the receiver has to listen attentively to all what is

said, analyse the feedback and take remedial action.

Though difficult to establish, feedback culture promotes teamwork, job satisfaction, employeeempowerment, improvement in job performance and so is preferred by most of the employees.

3.4 Tangible rewards

It is important to understand how different groups of employees perceive the total reward package

offered by the organisation, particularly if the marketing adage 'Perception is Reality' were to be

recalled. If the employee doesn't understand the total reward package, how can employee value it? And

how can it motivate he employee to perform?

Therefore, there is a need to gain an understanding of how managers and employees perceive reward,

and, in the case of the Senior Management Team, where they think reward should focus? Perception ofreward can be researched using the following tool:

Senior Management Team Brainstorm

It is always important to involve the Senior Management Team (SMT) in Total Reward policy

development. It is best to involve them from the outset to ensure that they understand and contribute

to what you are doing. The key reason for conducting management interviews or focus groups is to gain


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buy-in from those who will be accountable for implementing the strategy. Interviews can help identify

the information that managers will find useful, and begin to develop an action plan. This should focus on

the 'big picture' and on priorities, not on detail. Top teams (or other senior groups) are likely to be

unenthusiastic about detailed level definitions. The specific organisation and style of the debate will

depend on the make-up of the team and the nature of the facilitator's relationship with it. The focus will

be on discovering either 'what really matters to people who work here?' or 'based on the kind of people

you want to work here, what do you think would really matter to them? The focus in each case will be

on discovering either 'what really matters to people who work here?' or 'based on the kind of people

you want to work here, what do you think would really matter to them?'

Cash vs. Tangible Rewards

Why Do Merchandise and other Tangible Rewards Motivate Better Than Cash?

Perks programs feature custom-designed rewards catalogues with highly desirable and attainable

merchandise as rewards. Our reward items are memorable and reinforce the relationship between the

reward earner and the reward provider. They keep on giving each time a merchandise reward is viewed

or noticed: recipients relive the special recognition and appreciate the organization that honoured

them.

Cash rewards on the other hand, often have fleeting impact and more often than not,

leave the recipient's mind as soon as they are spent. Cash - unfortunately for those

12

companies that attempt to motivate with it - is the least lasting type of reward, because it's typically

confused with other compensation and therefore forgotten. Additional reasons to use tangible rewardsrather than cash are summarized below.

Comparison between cash and tangible rewards.

Cash or Any Cash Equivalent

1. Purely an extrinsic motivator with little emotional involvement; does not

provide lasting satisfaction and long-term performance stimulation

2. Creates expectations, leads to entitlement and consequently looses its

motivating value

3. A dollar is a dollar; participant attaches no greater emotional or inspirational value to cash. Lacks

emotional impact of tangible rewards; thus quickly spent and forgotten

4. No "trophy" value to be a constant reminder and continue to motivate. It is


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difficult to show off; thus limits the lasting impact of the reward

5. Difficult to target a particular behaviour because of the lacking association

with a particular achievement

6. Recipients often can't recall what they purchased with cash reward which

further diminished its impact

7. Minimal association with Sponsor Company due to minimal trophy value

of reward which minimizes the potential of goodwill toward the company

8. Not cost-effective; requires three times the incentive investment compared

to non-cash, on average

9. Usually spent on necessities thus lacking a positive association with the

targeted accomplishment or behaviour

10. Participant feels guilty for not spending a cash award on necessities which

taints the reward with unpleasant feelings

Tangible Rewards

1. Carry a significant "trophy value" thus continue to reinforce the good

performance and behaviours

2. Provide tangible symbol of achievement and serve as an encouragement to

other employees

3. Reinforce the association with Sponsor Company and thus increase loyalty

4. Provide guilt-free enjoyment of reward thus increases the motivating

impact

5. Both extrinsic and intrinsic motivators; provide strong emotional appeal to

participants' personal wants and interests

6. Carry a higher perceived value because of the increased emotional

attachment; therefore, stimulate performance better than cold cash


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7. Can be attached to a particular behaviour thus stimulating a specific

response in a long term

8. Participants family is involved in selecting and sharing awards thus multiplying the emotional value of

the reward and its impact on the participant

13

9. Provide a 3-to-1 return on investment compared to cash. On average, cash programs cost 12 cents

per incremental dollar netted by increased performance, versus 4 cents per dollar for non-cash

programs

10. Do not become an expected part of an employee income or an entitlement;

always seen as a reward for a particular accomplishment or performance

Based upon the fore mentioned factors it can be observed that after the minimum level of monetarycompensation, employees are more and more interested in non-monetary incentives i.e., tangible

rewards rather than the cash rewards.

3.5 Work environment

Work environment has become a good non-monetary incentive for employees. Present day employees

are demanding workplace wherein they can balance the demands of their work and their family lives

instead of choosing one over the other. Organisations have also accepted that among many aspirations

of employees the demand for a good work environment is quite reasonable. In the era of IT revolution,

most of the IT companies are offering air-conditioned rooms and state-of-the-art furniture for the

employees. Restrooms, dormitories, good canteens, washrooms are provided by the organisations to

their employees. This increases the morale of the employees and thus motivates them.

3.6 Attentive Employers

Employees want their bosses to be attentive to their concerns, complaints and be proactive in

management rather than waiting for the event to occur. They want recognition for the work that they

do. Employee recognition programmes like Employee of the month, even a spontaneous or private

thank you and other widely publicised formal programs that encourage specific type of behaviour and

the procedure to attain recognition is clearly defined. In Nichol Foods Ltd., a British bottling company

there is a different kind of employee recognition programme known as bragging boards, where theaccomplishments of various individuals and teams are regularly updated. Monthly rewards are given on

the basis of peer evaluation. In another company Applebees restaurants, the president herself leaves

appreciation notes and voice messages on the employee desks if the employee performs well. Simple

things like sending personalised birthday cards, anniversary cards etc signed by the highest official can

work wonders in increasing the morale of the employees.

3.7 Autonomy


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Employees want to be able to work independently. They do not want someone constantly watching over

them and questioning their every move. They like to receive their assignments -preferable with the time

frame required for completion and then have the independence to complete the work given the

guidelines and framework you have set on their own merits.

3.8 Redesigning of jobs

This is designing of already existing routine jobs into more creative or at least

not a boring one. Various ways of redesigning the jobs are as follows

Job rotation

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It is the periodic shifting of an employee from one task to another. This ensures that the employee

doesnt do the same thing again and again for a considerably long period of time.

Job enlargement

It is the process of increasing the number and variety of tasks that an individual performs results in jobs

with more diversity. This increases the scope of the job and makes it more interesting.

Job enrichment

It is the vertical expansion of jobs, increasing the degree to which the worker

controls the planning, execution and evaluation of the work.

Job sharing

It is the arrangement that allows two or more individuals to split a traditional

40-hour-a-week job. This promotes co-operation amongst the employees.

Telecommuting


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It refers to employees who do their work at home at least two days a week on

a computer that is linked to their office.

There are other ways of redesigning the job which are very similar to the points in 3.1

to 3.7.

3.9 Retirement Planning

Companies are offering various options with regards to the retirement planning or retirement financial

planning. Retirement financial planning refers to a collection of systems, methods, and processes which,

in their aggregate, support a family unit's (employee's) desire to achieve a state of financial

independence, such that the need to be gainfully employed is optional. Retirement planning can be

considered a limited or simplified form of financial planning addressing only this one purpose, rather

than the attainment of multiple concurrent goals (e.g. college funding for children). Two often desired

outcomes of retirement planning efforts are:

1. To assess a employee's current state, here specifically to mean a probabilistic assessment ofreadiness-to-retire given a desired retirement age and lifestyle, and

2. To identify employee decisions or actions to improve readiness-to-retire.

In recent years, producers such as a financial planner or financial adviser have been available to help

employees develop retirement plans, where compensation is either fee-based or commissioned

contingent on product sale. Such arrangement is sometimes viewed as conflicting to a employee's

interest to have advice rendered without bias or at cost that justifies value. Employees can now elect a

do it yourself (DIY) approach, given the advent of a large, ever growing body of resources offered by the

organisation. For example, retirement software tools from the organisation in the form of simple

calculator, mathematical model or decision support system have appeared with greater frequency. With

these options, the employee can choose the one that is best suitable. Thus organisations are able to

motivate their employees by offering flexible retirement solutions instead of common plan which may

not be suitable for certain employees.

Besides the fore mentioned types of non-monetary incentives which are common to all the employees,

it is equally profitable to go further and offer other tailor-made incentives to employees for high

motivation and better job performance.

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4. CASE STUDIES

4.1 Motivation of healthcare workers for better service

The current human resources shortage in the health sector mainly of African countries threatens the

realisation of any plan for up-scaling interventions to control the spread of diseases like HIV/AIDS,

Malaria and Tuberculosis. The World Development Report 2004 states it clearly: Without improvements


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to the human resources situation, the health-related Millennium Development Goals cannot be

achieved. In this situation, migration of the highly skilled from the health sector of Sub-Saharan African

countries draws its significance from the fact that it is a drain on resources that are extremely scarce

already. Migration has its most serious effects where staff shortage is already worst, namely in the

remote areas. Low job satisfaction and low motivation do not only reduce performance of the health

system. At the same time, they constitute a serious push factor for migration of health workers, both

from rural areas to the cities, and to other countries. It is therefore an important goal of human

resources management in the health sector to strengthen the motivation of health workers, from heads

of health facilities to auxiliary staff. Highly motivated staff will not only perform better and provide a

higher quality of health services. Medical doctors or nurses who are motivated in their current job may

also be less inclined to leave their job or even their country behind in search of alternatives, such as a

higher salary as well as better working conditions and perspectives for career development. The

challenge most African countries face is hence how to improve staff performance and how to retain

staff. In most of the 18 African countries some kind of financial incentive was provided to retain health

staff in remote areas In- kind benefits like free housing or subsidised transport existed in most cases.

Some countries offered incentives in form of improved career opportunities like further training and

better promotion scores. Also, .release papers are provided after an agreed period of services in rural

areas. Among the successful measures to reduce staff shortages in rural areas, decentralisation of

training institutions, recruitment of retired staff and contracting of personnel were mentioned. Yet,

whereas some management tools are quite widespread, crucial human resources related QM tools, such

as feedback, staff satisfaction and clear organisational goals are applied in only few countries.

To strengthen the motivation of staff, the majority of respondents suggest that a mix of financial and

non-financial incentives be most effective. In particular, the importance of efforts-related payment

schemes, performance targets for individuals and groups, individual career development plans was

stressed. The introduction of

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some form of competition, for example by means of benchmarking or award schemes, was

recommended. Core aspects of quality management were frequently mentioned, in particular the

establishment of a quality culture, of quality circles for participatory problem assessment, teambuilding,

supportive supervision, and feedback. A number of good practices could be identified. For example, in

Zambia, the introduction of refresher training for medical staff seems to have led to a very high

retention rate. In Ethiopia a mix of continued medical education, the provision of housing, the

establishment of a clear career structure and a defined number of services in hospitals has led to

improved staff satisfaction and retention. An awards scheme, closer supervision and team building

efforts has improved both some service output indicators and the motivation to stay in rural districts of

Ghana, indicated by a higher antenatal care and EPI coverage and less applications for transfers. The

survey also asked about the difficulties with the implementation of incentive schemes. The introduction

of performance payment was considered a challenge: it is difficult to define the performance criteria

and even more difficult to implement and apply those performance criteria, given political interference

and lack of good governance, such as intransparency and corruption as well as nepotism. With respect


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to allowances and financial incentives, it was mentioned that their effect on the motivation of staff was

often temporary in nature because they are soon considered as part of the general benefit package.

Although training is seen as a good motivator, the high staff turnover quickly puts in question the

sustainability of staff training. Furthermore, it is very difficult to change old habits and long-term

institutionalised norms and rules foremost in a bureaucratic context, such as promotion schemes that

are based on age rather than merit. Some respondents mentioned the challenge to overcome cultural

norms that may sanction an outstanding individual who is willing to show initiative beyond ones duty.

4.2 How A UPS Manager Cut Turnover

In 1998, Jennifer Shroeger was promoted to district manager for UPSs operations in Buffalo, New York.

She was responsible for $225 million in revenue, 2,300 workers, and the processing of some 45,000

packages an hour. She faced a major problem when she took over in Buffalo: turnover was out of

control. Half of Buffalos work forces were part-time workers who load, unload, and sort packages who

were leaving at the rate of 50 percent a year. Cutting this turnover became her highest priority.

The entire UPS organisation relies heavily on part-time workers. In fact, it has historically been the

primary inroad to becoming a full-time employee. Most of the UPS s current executives, for instance,

began as part timers during their college years, then moved into full time positions. The part timers are

treated well by UPS. They are given substantial financial aid for college, high pay and full benefits.

Inspite of all these incentives UPS were not successful in retaining their workers.

Shroeger developed a comprehensive plan to reduce turnover. It focussed on improving

hiring.communication and intrinsic motivation at the work place. She bagan by modifying the hiring

process to screen out people who essentially wanted full time jobs.She reasoned that unfulfilled

expectations were frustrating those hires whose preference were for full time.

Next,Shroeger analyzed the large database of information which were with UPS. After studying the

database she found that her workers were diverse in age and the amount of work experience they had.

So these workers had different needs and interests. Shroeger modified the communication style and

motivation techniques she

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was using keeping the above mentioned diversity in view. For instance, Shroeger found that college

students are more interested in building skills that they can apply later in their career. As long as these

employees saw that they were learning new skills, they were content to keep working at UPS. So

Shroeger began offering them Saturday classes for computer skill development and career-planningdiscussions.

Many new UPS employees in Buffalo were intimidated by the huge warehouse in which they had to

work. To lessen that intimidation, Shroeger improved lighting throughout the building and upgraded

break rooms to make them more users friendly.


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To further help new employees adjust, she turned some of her best shift supervisors into trainers who

provided specific guidance during new hires first week. She also installed more personal computers on

the floor, which gave new employees easier access to training materials human resource information on

UPSs internal network. Finally, Shroeger expanded training so supervisors had the skills to handle

increased empowerment. Recognising that her supervisorsmost of them were part timers themselves

were the ones best equipped to understand the needs of part time employees, supervisors learned

how to access difficult management situations, how to communicate in different ways, and how to

identify the different needs of different people. Supervisors learned to demonstrate interest in their

workers as individuals. For instance they were taught to inquire about employees hobbies, where they

went to school, their likes.

By 2002, Shroegers program was showing impressive results. Her districts attrition rate had dropped

from 50 percent to 6 percent. During the first quarter of 2002,not one part timer left a night shift.

Annual savings attributed to reduced turnover, based largely on lower hiring costs, are estimated to be

around $1million.Additional benefits that the Buffalo district has gained from a more stable work force

include a 20 percent reduction in lost workdays due to work related injuries and a drop from 4 percentto 1 percent in packages delivered on the wrong day or the wrong time.

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5. CONCLUSION

Motivation at workplace is very important as it increases job performance. Motivation is of two types:

Extrinsic and Intrinsic. Intrinsic motivation is better than extrinsic motivation after a certain minimum

level of the latter. Intrinsic motivation is attained through various non-monetary incentives. These

incentives aid self- management whose rewards result in intrinsic motivation. Various theories of

motivation also support intrinsic motivation over extrinsic motivation. It is found that various non-monetary incentives given by various organisations motivate the employees intrinsically and improve

their performance.

In Economics and Sociology

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