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Types of Companies and Problems Associated with them

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Types of Companies and Problems Associated with them

Introduction

In the current business circumstances, employee motivation through incentives is crucial

due to rigorous competition and economic variability (topic sentence). The company's people can

uniquely identify it, be it a public or private entity and thus, human resource management

vigorously strive to have a stable workforce. Consequently, employee inspiration is critical and

is proportional to productivity. Motivation helps the workforce to generate impressive

performance that drives profits and also help the company withstand difficult periods in the

business. Therefore, currently, companies utilize incentives that motivate their employees. This

area has seen companies invest heavily to ensure their employees deliver their best at work to

boost productivity. While dealing with incentives, it is also vital to focus on motivation theories

whose understanding is critical for determining the impact of various incentives on job utility

and performance since motivation theories are the foundation of rewarding (background). Thus,

this paper aims to discuss the impact of incentives on employee motivation to boost their

productivity based on motivation theories (Purpose statement).

Motivation Theories as a Foundation of Incentives

Motivation theories include elements in a person that compel individual action (Locke,

2004). Typically, motivation falls under intrinsic and extrinsic motivation. Extrinsic motivation

is derived from desire triggered from outside an individual (Frey, 2017). Such desires might be

monetary or other kinds of gifts. Intrinsic motivation is when an individual has an inner sense of

competence and meaning that involves self-determination (Sprinkle, 2000). When an employee

is intrinsically motivated, they work for the work's value.

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In contrast, extrinsically motivated employees work for extrinsic purposes and will

continually work as long as the extrinsic motivation remains constant. One of the advantages of

intrinsic motivation to employees is that they work with creativity and make flexible decisions.

Also, they are usually more satisfied and experience both enhanced mental and physical

wellbeing than their extrinsically motivated counterparts. They also have curiosity towards their

job and exhibit enthusiasm for learning.

Some of the notable motivation theories are Deci and Ryan's cognitive evaluation theory

(CET), Maslow's hierarchy of needs, Latham and Locke's goal-directed theory, Herzberg's

motivation-hygiene theory, agency theory, Bandura's self-efficacy theory, and expectancy theory

(Pardee, 2018). Maslow's hierarchy of needs includes the five primary needs: social, esteem,

physiological, safety, and self-actualization. In this theory, the deprived need act as a primary

motivator, but low-level needs have to be quenched before an individual can satisfy the

following level needs. It means that, for instance, a person who is undergoing starvation cannot

motivate about the probabilities of gaining status, which is in the higher esteem needs. The

theory supposes that the lower hierarchy needs can be quenched by money. Herzberg's

motivation-hygiene theory places elements in two categories-those that enhance satisfaction

which is known as the motivation factors, and those that strengthen dissatisfaction at the

workplace, known as the hygiene factors. Some of the hygiene factors can be supervision,

personal relationships, status, and salary. Therefore, according to this theory, there exists no

extrinsic motivation. CET theory is bound on the view that a person's fundamental needs are the

psychological ones for independence and proficiency, which are the basis of intrinsic motivation.

The theory hypothesizes that the impact of reward on motivation relies on how it impacts

supposed self-determination and independence. Thus, extrinsic rewards like money can lower
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intrinsic motivation if the rewards are seen as control factors. For Locke and Latham's goal-

setting theory, the basic idea is that individual goals are the fundamental antecedent of effort.

Specific and challenging goals cultivate exemplary effort, unlike soft goals or their total absence.

According to this theory, expectancies like various rewards impact individual goals. The theory

supposes that longings and given personal goals have varying impacts on performance. Assigned

or given individual goals possess significant effects than the expectancies alone. The expectancy

theory proposes that individuals act in a manner to optimize expected utility with results. This

theory takes into account that people value different things. They, therefore, are prone to behave

in a way that produces rewards they love. According to this theory, motivation is composed of

two elements- expected interconnection between effort and results; and the attractiveness of the

reward. On the other hand, the agency theory suggests that individuals are satisfaction

optimizers, and motivation relies on self-interest, a function of leisure and wealth. Thus, this

theory supposes that individuals will put energy only on work which maximizes their economic

wellbeing. According to Bandura's self-efficacy theory, an individual's belief in their ability to

tackle a task is a critical determinant of effort. In this theory, self-efficacy is varying and impacts

effort. Self-efficacy has an indirect impact on action considering goal setting and commitment.

Thus, an individual focuses on estimating executing a given task given a particular level of

performance.

Connectivity of Motivation Theories and Incentives

From the motivation theories above, it is clear that they provide a foundation on which

the effect of incentives on effort and performance of the workforce is elaborated (Pardee, 2018).

Task complexity and individual skills are critical factors in every incentive scenario in

determining if the enhanced effort can initiate substantial performance levels (Pardee, 2018). If
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incentives enhance effort but do not possess the requisite skills, enhanced action shall not

improve performance (Pardee, 2018). For this case, the performance stagnates without

incentives. This theory is consistent with all the incentive types. In a case where the person's

skills and the job's demand are not in tandem and if the job is hard, then incentives have no

impact. In fact, in this case, incentives can deteriorate performance levels due to the employee's

frustration. The employee knows that they would have accessed the incentive if they had

accomplished the task, which they cannot. Therefore, it is expected that monetary incentives can

increase effort amongst the workforce but not necessarily enhance performance, especially when

the force lacks the necessary skillset (Pardee, 2018). Contrary, another study found that

incentives boost performance primarily for the decision-making tasks (Locke, 2004).

Incentive Theory and its Impact on Motivation

An incentive scheme is a proposal to motivate a person or group for performance (Wolf,

2018). It involves monetary rewards, general and also non-monetary. The incentive is a variable

benefit for the level of achievement of given results, and therefore it is payment for the achieved

result. Thus, the motivation should include characteristics of time-based and outcome-based

systems of income payments. It is estimated that the US organizations spend approximately

above $100 billion annual paying employees' incentives, but many business people question its

effectiveness (Wolf, 2018). Incentives fuel performance anywhere in business from twenty-five

to forty-four percent when conducted correctly and look humanly motivated. Thus, most

organizations lack the knowledge of the creation of this incentive that brings the needed results.

Many companies have come with compensation offers for additional income basing on personal

performance. The company wants each thinking of outcome in business competitiveness, and

every employee works hard to give results every day.

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Incentive incomes relate to earnings and individual productivity and use bonuses,

premiums or various rates to motivate good performance (Wolf, 2018). In incentive schemes,

employees have encouragement in producing more and being rewarded. There could be paid for

performance, referring to compensation like commission, merit pay, group incentive, individual

incentive, and gain sharing scheme (Wolf, 2018). The aim of pay for performance is to increase

results from employees and reduce costs of personnel. In this plan, the compensation paid is

depending on the effort of the employee and their results. Therefore, an activity that prompts

workers to increase outcomes is an incentive, and the income paid to improve results is an

incentive wage. The incentive should include characteristics of time-based and output-based

income payments. Therefore, wage incentive is payment for outcomes and attracts persons and

motivating them to work (Wolf, 2018). Incentives help employers know employee attitude to

company and pay them according to t performance. Incentives determine the living standard of

the employee. Incentive pay relies on personal or group output. Using incentives assumption for

people action concerning their skills and capability to reach the significant target.

According to National Commission on Labor, wage incentive is more financial motivate

for an employee at work (Banerjee & Khaitan, 2018). Incentive design encourages human effort

by rewarding the person above the time rated income for improving in present or targeting

results in future (Banerjee & Khaitan, 2018). Psychologists also support incentives as force

introducing for accomplishing goals and active to work more. Therefore, incentive plans should

have characteristics for use. First, it should consist of monetary and non-monetary programs

(Banerjee & Khaitan, 2018). Should be minimum guaranteed income to entire persons in

working of the organization. Also, incentives are adequately communicated to an organization's

whole people to encourage all individuals and groups. The employee is expected to do their work
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within standard time because it is constant and set after job analysis. Good incentive schemes

adhere to specific standards like have a direct link to the outcome of employees. Incentive pushes

employee to go from one level of performing to optimum level of functioning. Incentives help

improving technology levels and increase the level of outputs (Banerjee & Khaitan, 2018). The

incentives are measured in monetary ways. Successful incentive plans depend on time,

frequency, and accuracy. Hence incentives change from one person to another one because of

different performance. All incentives adhere that minimum wage for employees is constant.

To showing if incentive depends on the level of the performance, the plan has essential

features which consist of both monetary and non-monetary factors, which provide the necessary

diverse for employee needs (Agell & Bennmarker, 2017). The incentive will depend on its

timing, accuracy, and frequency for its effectiveness (Agell & Bennmarker, 2017). The scheme

also communicates to the employee to facilitate personal performance, give feedback, and

encourage redirection. Therefore, managers take various steps to motivating people at work to

improving their outcomes. The steps are called incentives which are financial and non-financial.

Financial measurable in monetary terms and help boost the performance of people in the

company. One financial incentive is profit sharing for workers for their high performance and

excellent profit margin. Another is co-partnership, where employees are given company shares at

lower prices than that of the market. The employees will then share capital and profit, and

management of the company. Another one is a bonus given at a given time for good performance

and can be cash or any form like a trip, prizes for top-performing. Another is the commission

which is outcome linkage and is relating to direct performance. Also, company give financial

incentive in pay and allowance increase when an employee does well. Some another financial
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incentive is the retirement benefit which motivates employees. Some others are like when

company give car allowance, housing, and additional help.

Non-financial incentives are not measured in monetary (Agell & Bennmarker, 2017).

They satisfy psychologically, socially, and emotionally. Some of them are status or proper

positioning in an organization which motivate employee. Also, another is job security, especially

in a country with unemployment which encourages employees also. Even when the final

decision, employee participation in organization issues is critical for motivation, employee

empower is essential as they will use skills and talent when given power. When an employee is

given recognition at work also motivate them and improve their attitude for good performance.

Therefore, an effective incentive scheme should rely on a direct proportion of increased

quality and productivity (Agell & Bennmarker, 2017). Standards of giving incentives should be

fair, transparent, and in line with company strategy and objectives. The workers and employees

should participate in the installation of the incentive scheme. It should be simple and easy to

operate with every employee knowing the link between pay and productivity (Agell &

Bennmarker, 2017). The plan should also be in line with the corporate culture. The time gap

between the incentive income and performance should be smallest as possible. To increase, sense

of security, the minimum wage is a guarantee when giving incentives to employees.

Conclusion

In conclusion, all the incentive categories are significant to employees but serve a distinct

purpose. Hence, different incentives possess a particular impact on job utility and performance. It

is clear that the award and establishment of incentives widely depend on the motivation theories,

which help identify the applicable incentive for each aspect at the workplace. Just as discussed in
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Herzberg's hygiene-motivation theory, the distinct aspects of reward are humanity and efficacy.

It points out that particular incentives impact specific elements in a particular manner. The

efficacy element points out the justification for the employees to receive monetary incentives due

to the extra effort. Hence it is clear that financial incentives are the most appropriate for efficacy

element. Another aspect is humanity which is critical and makes the employees feel that their

employer is interested in them, their work, and their wellbeing. Incentives such as feedback,

participation, benefits, recognition, and non-monetary help attain human wants. Both efficacy

and humanity elements or aspects seem vital for motivation and work utility. But the monetary

incentives are ideal for enhancing performance. At the same time, non-monetary incentives like

recognition and feedback are crucial for improving job utility. Also, benefits and non-financial

incentives serve to provide work utility and show humanity. Nonetheless, the two elements are

complementary, and so comprehensiveness in rewarding is reasonable.

References
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