THE STUDY ON THE EFFECT OF FINANCIAL AND NON FINANCIAL INCENTIVES ON STAFF PRODUCTIVITY

CHAPTER ONE

• BACKGROUND OF THE STUDY

Every organizational will have its end goal to be the maximization of profit. This can be achieved maximally by both the effort of the employer and employee of the organization. Due to human relations and efforts to maximize profit in an organization, some things motivate and demotivate employees.

One of the most important, complex and problematic issues in managing human resources in any organization is reward management. According to Banjoko (1996) hardly is any issue more relevant and crucial to an employee than his financial and non-financial remuneration, and scarcely has any matter led to strained labour and management relations or lead to strike action much more than wage – related issues as suggested by Fajana (2006). Considering the trends of great disparity between one’s expenditures and the income accruing into ones pocket due to the increasing inflation in our economy, it is therefore proper to say that reward management is a matter that is closest to the heart of every employee and their employers. It is a common saying that man does not live by bread alone yet he cannot live without it. In today’s competitive and global workplace, one of the strategies that successful companies use in having the ability to attract many qualified candidates, retain top talent, and maintain a highly motivated workforce is the use of rewards.

Reward management in an organization determines how job applicants will relate with such organization. The organization reward policy has an external influence on the source of labour supply.

Reward management is a system that deals with the strategies, policies and processes required to ensure that the contribution of people to the organization is recognized by both financial and non-financial means. It is about the design, implementation and maintenance of reward systems (reward processes, practices and procedures), which aim to meet the needs of both the organization and its stakeholders (Armstrong 2007).

The overall objective is to reward people fairly, equitably and consistently in accordance with their value to the organization in order to further the achievement of the organization’s strategic goals.

Reward management is not just about pay and employee benefits. It is equally concerned with non-financial rewards such as recognition, learning and development opportunities and increased job responsibility is the process of ensuring that people are rewarded fairly for the work they do and for contributing to the achievement of the organization’s purpose and aims.

Financial incentive is the monetary benefit offered to consumers, employees and organizations to encourage behavior or actions which otherwise would not take place. A financial incentive motivates actions which otherwise might not occur without the monetary benefit (Business directory, 2018).

Non-financial incentivesare the monetary types of rewards given to an employee as a means to appreciate the efforts of employees but are not a part of an employee’s pay. In organizations, the employer and employee may sit, to decide on whichever form of incentive is best and comfortable for both the employer and employee.Examples of non-financial incentives include; appreciation, competition, workers’ participation in management, opportunity for growth, suggestion system, job enrichment, etc.

STATEMENT OF THE PROBLEM

All organisations, whether public or private, need motivated employees to be effective and efficient in their functions in addition to the other factors of production.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 organisations is to ensure that their employees are highly motivated; and these incentives can come either financially or non-financially. Employees’ choice vary with their individual needs; some might prefer financial incentive while the others non-financial incentives.

1.3     OBJECTIVES OF THE STUDY

The central objectives of this study is to examine the effect of financial and non-financial incentive on staff productivity.

The objectives are:

1. To examine the kind of incentive used by organizations in motivating employee towards staff productivity.
2. To determine the kind of incentive preferred most by employees to motivate them.
3. To analyze if there is any significant difference in financial and non-financial incentive.

1.4     RESEARCH QUESTIONS

1. What kind of incentive is mostlyused by organizations in motivating employee towards staff productivity?
2. What kind of incentive is preferred by employees to motivate them?
3. Is there any significant difference and effect of financial and non-financial incentive on staff productivity?

1.5     SIGNIFICANCE OF THE STUDY        

This research will look critically into the effect of financial and non-financial incentives on staff productivity. It can be said that money will motivate some of the people all of the time and, perhaps, all of the people some of the time. But can it be relied on to motivate all of the people all of the time. Money has to be reinforced by non-financial rewards, especially those that provide intrinsic motivation likewise non-financial incentives has to be boosted with monetary reward. This research will point out the best method of incentive they can apply to maximize staff productivity.