HR HIGHS
Balance cash and non-monetary incentives
Money is an easy reward to give employees. But monetary incentives are no longer as effective as other kinds of motivators. This is more so if the aim is to inspire and encourage employees to work better. In fact, most experts opine that extensive use of monetary incentives may eventually turn into a disincentive. Over time, employees start looking at monetary incentives as a kind of entitlement. Let’s take the annual bonus for example. Most employees feel that they
are entitled to this reward, and very rarely do they feel motivated to do something exceptional to earn it.
Having said that, huge monetary rewards are often a necessity to woo and retain top talent, and big companies are willing to dig deep into their pockets to get dramatic turnaround results. For example, a cola giant provided its former CEO one of the most lucrative monetary incentive packages in history. He retired with approximately $700 million to his name, but the amount seemed miniscule when compared to the colossal 3800 per cent increase in the company’s stock value during his 16-year reign. This kind of package, however, is not for everyone. The economics of paying large numbers of employees means that companies can seldom afford to pay lavish monetary rewards to all employees. And even if the economics work out, one must keep in mind that it is easy to reward generous sums when the going is good, but much harder to keep at it when the profits slip economy trends downward. Any cost cutting or downgrading of monetary rewards will most likely have a serious negative impact because employees are more likely to feel resentful rather than be inclined to accept it as a result of economic necessity. Some experts also argue that monetary incentives encourage compliance rather than risk-taking because most rewards are based only on performance. And because employers use monetary incentives as an extrinsic rather than an intrinsic motivator, workers may be driven to do things just for the monetary reward versus doing something because it is the right thing to do. This kind of attitude can turn co-workers into competitors rather than cooperative teammates.
Monetary incentives do have their place in the reward system. They are easy to plan and implement. These rewards are however more effective for short-term goals, as they work like candy and provide an immediate boost to energy and have a profound impact on the productivity and morale of employees. Depending heavily on monetary incentives to motivate people can be dangerous. High monetary stakes can influence people to indulge in unethical behaviour.
There are recent shameful examples of how high monetary stakes can drive people to manipulate accounts and misreport factual information to reap rich, if unjust, rewards.
As a matter of interest, research suggests that the desirability of monetary incentives differ for employees based on career stage and generation. Older workers are more likely to appreciate non-monetary benefits such as flexible schedules, part-time hours, and temporary employment, while the younger workers prefer monetary rewards.
In conclusion, one may say that while monetary incentives have the capacity to bring about immediate spectacular change in productivity, their ability to encourage desirable behaviour in employees is open to question. Such incentives are most effective in bringing about a single-minded focus and dramatic, short-term results. It is a useful carrot to get people to achieve particular predetermined, deadline driven goals, say, sales targets or profit margins.
But if your goal is to promote team spirit, co-operation and pride in delivering value to the company, the shareholders, and the customers, then you may need to balance cash handouts with non-monetary incentives that are less cut throat, and more inclusive.
