THE IMPACT OF MONETARY INCENTIVE ON ORGANIZATIONAL PERFORMANCE
ABSTRACT
This study was intended to examine the impact of monetary incentive on organizational performance. This study was guided by the following objectives; to examine the extent monetary incentives has impacted on organizational performance, to ascertain the extent monetary incentives scheme lead to attainment of organizational performance and motivation of workers and to examine whether organizations and employees are reaping benefits from monetary incentives. The study employed the descriptive and explanatory design; questionnaires in addition to library research were applied in order to collect data. Primary and secondary data sources were used and data was analyzed using the chi square statistical tool at 5% level of significance which was presented in frequency tables and percentage. The respondents under the study were 100 staff of First Bank of Nigeria. The study findings revealed that monetary incentive has significant impact on organizational performance; based on the findings from the study, it was recommended that, having a well-articulated monetary rewards system to influence level of employees’ motivation in order to ensure commitment and enhanced productivity.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
All organizations, whether public or private, need motivated employees to be effective and efficient in their functioning and responsibilities. Employees who are motivated to work energetically and creatively toward the accomplishment of organizational goals are one of the most important inputs to organizational performance and success. Consequently, the challenge for organizations is to ensure that their employees are highly motivated. With regard to monetary incentives, it can be argued that some organizations have more financial resources to motivate their employees than the others. While many organizations have monetary incentives such as bonuses, commissions, cash rewards etc., it is quite challenging for some of the organizations to provide such incentives in adequate levels in a weak national economy. As a result, it is important to look for any possible alternative means that can be used to motivate employees to boost organizational performance (Ryan and Deci, 2000).
It is widely accepted by the organizational theorists that manpower is one of the most important assets of an organization because things are been done through employees. In other words, the performance and success of an organization in realizing its objectives heavily depends on the employees. Therefore, it is important to focus on the factors affecting the performance of the organization. Performance is considered to be related with the concepts of ability, opportunity and motivation (Ivancevich and Matteson, 2008).
The issue of organizational performance cannot be over emphasized - the general believe is that employees will not perform to the best of their ability unless they are motivated to do so. Various researchers have come up with various ways to motivate people at work, however, because human beings are different from one another in terms of needs, culture, religion etc. so does what motivate them also varies. Some employees are motivated by financial and other incentives and some non-financial incentives.
Recent studies have shown that monetary incentives can motivates employees to perform well on their job thus improving the overall performance and productivity of the organization. Managers continuously seek for ways to create a motivating environment where employees will work at their high levels to achieve the organizational objectives. The purpose of monetary incentives is to reward employees for excellent job performance through money. Since human resource is the most valuable resource of any organization, it must activate, train, develop and above all motivate in order to achieve individual and organizational goals.
Monetary incentives provide a spur or zeal in the employees for better performance. Jadallah [1997] defined monetary incentives as any form of payment based on increased and or improved productivity, as a result the employee earns more as they produce. While the fall in quantitative or qualitative production deny the worker from earning partial or total incentives, financial incentives on the other hand try to raise productivity and improve performance through encouraging employee to behave in a desired and prescribed manner in order to achieve organizational goal. The most influential factor that may raise the need of workers to work is financial incentives which may be in form of wages, are appropriate and capable of satisfying employees need. On the contrary, low payment that is not appropriate to his efforts of work may lead to the low efficiency of productivity [Al-Harthi, 1999].
The advantages of monetary incentives to an organization may include a rapid and immediate impact on the employees’ efforts that encourage him to do his work to the fullest, increase in production, increase in revenue as a result of increase in productivity and improvement in performance. According to Al-Jahni [1998] employees gain numerous psychological and social benefits as a result of enhancing his purchasing power to satisfy his needs of goods and services.
Rynes and Gerhand (1999)found that monetary incentives had many forms liketangible, paid vocations. The major attributes of financial incentives were that they price organization financial resources. Whereas awards draw their motivating latent from their actual content, and outcome benefits of money is draw eventually. Al-Aydi (2000) scrutinized the impact of incentives on the degree of performance in the textile industry of Iraq. He found that fragile relationship between incentives system and degree of organizational performance and between wages and degree of organizational performance and powerful correlation between prize and degree of organizational performance.
1.2 Statement of the Problem
The success and the survival of any organization are determined by the way the workers are remunerated and rewarded (Lawler, 2003). The reward system and motivating incentives will determine the level of employees’ commitment and their attitude to work. According to Kreitner and Kinicki (2007), incentives are the compensation for doing work well given to a worker in the form of both financial and nonfinancial incentives. However, for any organization to achieve its objective in any competitive society, employers of labour must have a thorough understanding of what drives the employees to perform efficiently and reward them accordingly.
Business organizations are facing significant challenges on internal and external work environment, so organizations cannot maintain institutional performance without providing incentives to their employees based on their efficient and effective work. Organizations are facing many challenges under globalization, so these organizations need to formulate an integrated system of incentives commensurate with the developments of work to serve general objectives of increasing productivity, cost reduction, provide high quality services, achieve competitive share in the market and customer satisfaction.
However, the economic and social development of Nigeria depends to a great extent on the ability of the public services to attract and retain the services of qualified man power. Therefore, the concept of monetary incentives has economic, social, behavioral and legal basis consequence.
Incentives are designed to encourage performance of individual's regardless of incentives' forms. Incentives play an active role in pushing forward individual's capacity and moving abilities, motivating them to develop their skills, and balance between organization requirements and the individuals' needs which enhance the organizational performance efficiently and effectively.
1.3 Objectives of the Study
The study sought to know the impact of monetary incentive on organizational performance. Specifically, the study sought to;
1. examine the extent monetary incentives has impacted on organizational performance.
2. ascertain the extent monetary incentives scheme lead to attainment of organizational performance and motivation of workers.
3. examine whether organizations and employees are reaping benefits from monetary incentives.
1.4 Research Questions
1. To what extent does a monetary incentive impact on organizational performance?
2. To what extent does monetary incentives scheme lead to attainment of organizational performance and motivation of workers?
3. Does organizations and employees reaping benefits from monetary incentives?
1.5 Research Hypothesis
Ho: Monetary incentive has no significant impact on organizational performance.
Hi: Monetary incentive has significant impact on organizational performance.
1.6 Significance of the Study
This study will throw more light into the effectiveness of the use of monetary incentives in motivating employees. It will also unravel the problems, frustrations, and anxieties that employees meet in their work environment, especially where incentives are emphasized. It will help industries, banks, companies, etc. to know the likely monetary incentives to put in place in motivating employees for greater organizational performance. In addition, it will assist management in the organization to engage in staff welfare development in order to better the output or productivity.
At the completion of this study, it is hope that it will assist business enterprises in their operations and enable then to employ more money incentive schemes and other motivational variables that would optimize the productivity and performance of their operations. It will also identify the motivational factors and incentive variables, if any that are currently militating against the smooth operations of organization in area of its performance and productivity, that management find useful for future planning.
This study will also be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.
1.7 Scope/Limitations of the Study
This study is on the impact of monetary incentive on organizational performance.
Limitations of study
The researcher faced the problems of confidentiality. The organization’s employees sometimes were not willing to give information. This problem was dealt with by the researcher assuring members of staff that the information given will be only for research purposes and was to be treated as confidential. Other limitations include:
Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
