Assessing The Impact Of Performance Based Reward Systems On Employees Motivation Essay

Question:

Research Proposal on Assessing the Impact of Performance Based Reward Systems on Employees’ Motivation.

Answer:

Section 1

Introduction

Employee motivation is vital for any business as it is directly linked with productivity and highly motivated employees enable the organization to achieve its long-term goals and objectives. Rewarding employees for their productivity has been the main method employed by business and industrial organizations to motivate its employees. Financial rewards are one of the easiest and most frequently used methods to manage employee performance (Shields et al., 2015).

Employee motivation refers to the various factors or elements that influence employees to undertake or perform their work in a certain manner that is required by the management or the organization. It has been postulated by previous researchers that employee motivation can be of two types – intrinsic motivation and extrinsic motivation.

Intrinsic motivation is inherent in the employees and comes from within. These employees need little external output and such employees are more productive, enjoy their work and have greater job satisfaction, as they tend to enjoy their work. Although intrinsic motivation is more effective it is hard to facilitate (Cerasoli et al., 2014).

Extrinsic motivation on the other hand, refers to external factors that influences or cause employees to act in a certain manner as desired by the organization. The management can facilitate these motivations by employing reward based or punishment based methods to motivate its employees. However, due to the adverse effect of punishment approach of motivation, the organization seldom employs it. In addition, performance based reward systems are vastly employed in organizations to motivate its employees. The best approach that an organization can adopt to motivate its employees is creating a work environment in which employees are motivated about their work and that involves both intrinsically satisfying and extrinsically encouraging factors (Cerasoli et al., 2014).

The purpose of this report is to develop a research proposal to analyze the impact of performance based reward systems on employee motivation. The structure of the report is divided into three sections. The section 1 of this report covers the introduction of the research topic followed by the problem statement, research objectives and research questions. Further, in this section, justification for undertaking the research and expected outcomes that the report aims to achieve are also discussed. The section 2 of this research proposal aims at developing a conceptual framework as well as research hypothesis for the research. In addition, this part also covers the research methodology. Finally, section 3 of this report comprises of organization of study, Gantt chart and budget requirement that would be required to successfully execute the research proposal.

Problem Statement

Performance based reward systems are increasingly employed by many organizations to motivate its employees. This is achieved by linking performance with compensation. However, the effectiveness of this performance based reward system on the employee motivation is highly debatable and more research is required to be undertaken in this field as both performance and motivation is dependent on many other factors. Therefore, it is important to formulate a proper strategy to link performance, remuneration, and employee motivation (Armstrong & Taylor, 2014).

Performance appraisal is one of the important tools that organizations employ to devise a link between performance based remuneration system and employee motivation. If the organization employs incorrect metrics to measure performance or its influence on employee motivation, the whole exercise would become futile and the organization would not be able to achieve its desired objectives (Ederer & Manso, 2013).

In this regard, it is important to analyse the effectiveness of performance based remuneration on employee motivation by understanding why some employees respond more positively to such reward systems and others do not. This can be understood by undertaking a research in a preferred organization by collecting empirical evidence on the level of motivation of the employees and its relation with the remuneration structure of the organization (Larkin et al., 2012).

Research Objectives

The objective of this report is to access the impact of performance based remuneration system on employee motivation and to enable business organizations to establish strategies. These strategies in turn will identify best strategies to be effectively implemented so as to motivate employees to increase productivity and to achieve organizational goals and objectives. More specifically, the study aims to address the following research questions –

  • RQ 1: How performance based reward system and motivation are related?
  • RQ 2: What metrics are employed by business organizations to link reward structure with motivation?
  • RQ 3: How effectiveness of performance based reward systems and its impact on the employee motivation are evaluated by the organization?
  • RQ 4: How can management align performance based reward system to employee motivation and productivity?

With the help of answers of these research questions the most important objective of the report i.e. to access the impact of performance based reward systems on employee motivation and what strategies or methods can be employed by the organizations to ensure effectiveness of this motivational strategy can be achieved (Eerde, 2014).

Justification of the Project

Performance based remuneration or reward systems are the most common method that is utilized by various organizations to increase productivity and to increase employee motivation. Monetary rewards have already been established by previous researchers as one of the most influential tool to motivate employees. However, to what level these performance based reward systems would motivate employees and how they would link performance with the reward systems is highly subjective to different organizations (Cummings & Worley, 2014). Therefore, it is important for an organization to have well formulated strategies before linking performance with rewards. Since, the aim of performance based reward system is to increase productivity and achieve employee motivation; it may be possible that organization would focus more on increasing productivity that may result in unhealthy competitions in the organization, unrealistic performance metrics to get the monetary rewards, and frustrated employees that would further result in de-motivation among the employees (Griffin, 2013).

Expected Research Outcome

The outcome of this study would provide an analytical framework in order to investigate various factors having influence on the performance indicators, its utility in analyzing effectiveness of devising performance based reward systems and its relationship with employee motivation. Although, every organization employs different techniques to formulate its performance based reward systems, and different criteria to evaluate its effectiveness on the employee motivation, the research outcome would be highly variable. It would also be dependent on the organization selected for studying the relation between performances based reward systems and employee motivation (Lazaroiu, 2015). However, this report would provide a holistic picture of the topic selected for the research proposal and provide guidelines or recommendations for business organizations that employ performance based reward systems as a tool to motivate employees. Various factors that affect the success of performance based reward system to motivate employees are the perceived value of benefits that employees associate with rewards. In addition, the research questions identified in the research proposal would be answered on the basis of collecting and analyzing data. The research output is the most important part of the research as it addresses the research questions identified in the proposal and would also enable the business organization to understand the relationship between employee motivation and performance based reward systems. (Cerasoli et al., 2014).

Section 2

Conceptual framework and Research Hypothesis

Performance based reward system aims at formulation and implementation of strategies that is based on the principle that rewards to employees are distributed fairly, consistently and in accordance with the employees value and contribution in the organization. As already discussed, motivation can be extrinsic or intrinsic. Intrinsic motivation comes from within and little push by the organization (Shields et al., 2015). The employees are self-motivated, take pride and derive satisfaction from their work. Organization can facilitate intrinsic motivation by providing more information or feedback, recognition and appreciation of employees and providing opportunities to perform tasks that involves more responsibility and authority (Gupta & Shaw, 2014).

Extrinsic motivation on the other hand comes from the outside sources and business organizations need to focus on various factors that motivate employees. Extrinsic motivation comes from extrinsic rewards such as – bonuses, increasing salary, promotions, gifts and other tangible rewards. These extrinsic rewards are linked with performance and productivity of the employees and the underlying principle is that employees are motivated to work more when presented with opportunities to get extra rewards and monetary benefits.

However, motivating employees by means of performance based reward systems has drawn a lot of criticisms as monetary and other tangible rewards have limited influence in motivating employees and after attaining a certain level of accomplishments these rewards do not motivate them. In spite of these limitations, organizations mostly employ this system of motivation as most people in the organization do not reach the point beyond which monetary benefits does not motivates them (Dysvik & Kuvaas, 2013).

This can be understood with the help of Maslow’s Hierarchy of Needs –

Maslow hierarchy of needs consist of five steps represented in the form of five distinct layers in the pyramid. The various layers of the need pyramids are – psychological, safety, social, esteem, and self-actualization. In organizational context, the employees belonging to the first three stages are motivated by monetary rewards. However, for the next two stages namely esteem and self-actualization, intrinsic motivations are more suitable as these individuals are self driven, have fulfilled their lower order needs and strive to excel in their field.

However, the numbers of people belonging to the first three layers in Maslow’s hierarchy pyramid is relatively high and require extrinsic motivators. In this regard, performance based reward system is most important in determining employee motivation. In order to establish an effective reward system that also aims at acting as a motivating factor for the employees, it is important to cultivate a system of continuous improvement and efficiency. Thus, link with the appropriate combinations of rewards can be reasonably achieved. However, there is no fixed approach that can be replicated in all the organizations. To link performance with the reward based systems, it must be based on fair assessment of the organizational objectives, employee motivational level, fair and transparent reward, and recognition structure that would not only increase productivity but also help in achieving employee motivation. However, it is also argued that extrinsic rewards may erode intrinsic motivations among the employees and employees may indulge in unhealthy competition among themselves to get more rewards. This may lead to undesirable circumstances in the company such as employees becoming dissatisfied from the current reward systems. This would further lead to de-motivation among them as they may feel that the current reward system is ineffective and aims only at increasing productivity.

The following diagram provides a conceptual framework to understand the relation between employee productivity, motivation level and the performance based reward system.

Figure: 1 Conceptual Framework

Based on research objective and problem, following research hypothesis can be proposed as –

  • H0 (Null hypothesis): Performance based reward system does not have any impact on employee motivation.
  • H1 (Alternate hypothesis): Performance based reward system has a direct impact on employee motivation.

Methodology

Research methodology provides a basic framework for successfully undertaking the research and helps in presenting the overview of the elements of the entire research. The various components of research methodology constitutes – research approach, research design and data collection method used for a particular research study (Matthews & Ross, 2014). Therefore, it can be said that research methodology is a method that is employed by researchers to get the desired conclusion and fulfill the research objectives. Therefore, research methodology can be defined as an outline of a research that provides a systematic structure to the research activities and provides direction to the research (Robson & McCartan, 2016).

The purpose of this research is to access the impact of performance based reward system on employee motivation. For this research proposal, various elements that influence the level of employee motivation, extent of monetary rewards that can effectively motivate employees and metrics that should be utilized to link performance, rewards, and employee motivation have been discussed. Therefore, to carry out the research successfully, the positivism theory is selected. Further, inductive methods of analysis and descriptive design for research study are selected. For data analysis, both qualitative and quantitative methods have been selected. The research further employs both primary and secondary data that utilizes review of available literature and uses the convenience sampling method to collect primary data (i.e. organization selected for the study) (Taylor et al., 2015).

Research philosophy and research approach

In order to access the impact of performance based reward system on employee motivation, it is important to select suitable research philosophy. The research aims at depicting the analysis of topic selected for the research study. The impact of performance based reward system on employee motivation can be analyzed by adopting the positivism philosophy. This allows the researcher to identify and distinguish genuine facts by recognizing the parameters of employee motivation (Panneerselvam, 2014).

Research approach on the other hand aims at conceptualizing the research approach that would be undertaken to achieve the desired research objective. Research studies usually employ two types of research – inductive and deductive. For this study, the research approach selected is the inductive research approach. The inductive research approach follows observation, collection of primary and secondary data, data analysis and establishment of relevant theories at the end of research (Blumberg et al., 2014).

Research design

Research design is dependent on the type of study undertaken by the researcher to study the research topic. The purpose of a research design is to restrict or narrow the scope to meet the research objectives or questions. There are three basic research designs that are employed to undertake a research such as exploratory, explanatory and descriptive (Lewis, 2015).

For this study, the aim of this research is to relate the findings of research with the research objectives. The research would provide a theoretical framework by relating the results or findings of the research with research objectives. Therefore, the descriptive research design would be followed for the proposed research (Flick, 2015).

Data collection method

There are two ways in which research data can be collected such as primary and secondary. For this research, both the methods of data collection would be used so that research objectives can be achieved. Primary data can be collected from relevant sources i.e. employees of the organization of study (Mitchell & Jolley, 2012). The data can be collected by directly interviewing the employees, or with the use of survey questionnaires. Further, secondary data can be collected by studying the works of past researchers and this includes journals, books, trusted websites, and academic papers, etc. (Neuman & Robson, 2012).

In addition, the report would employ the probabilistic sampling method as it is more accurate and an unbiased method of data collection and the proposed sample size for the research would be 100 respondents. Additionally, the quantitative research method is more suitable for the research as that would employ survey questionnaires to obtain the desired research objectives (Creswell, 2013).

Section 3

Organization of the Study

The organization of study for this research is as follows:

  • Chapter 1 would be research proposal as outlined in this assignment.
  • Chapter 2 would discuss the case study on the effect of performance based reward system on employee motivation.
  • Chapter 3 will include the details of research methodology that includes literature review, data collection methods, and identifying the indicators of employee motivation and data analysis methods.
  • Chapter 4 will present findings and analysis of the proposed report.
  • Chapter 5 will present a summary of the important findings and would discuss their implications on the employee motivation.

Gantt chart

Gantt chart is used to represent the timeframe for undertaking the entire research study (Baker & Trietsch, 2013). The entire research would take approximately 5 months time to complete successfully. This is represented as –

Activity name

Start day

End day

Duration (Days)

Project Proposal

15-05-2016

28-05-2016

14

Literature review

29-05-2016

06-08-2016

70

Data collection

07-08-2016

24-09-2016

49

Data analysis

25-08-2016

15-10-2016

21

Final report submission

16-10-2016

30-10-2016

15

Project Budget and Budget Justification

In order to successfully complete the entire research within the proposed time frame (30-10-2016) as represented in the table above, the estimated budget requirement is $3,000.

The budget for the proposed research is $3,000 that has been devised on the basis of various activities that has been performed to successfully complete the proposed research (Denscombe, 2014). The budget would be utilized for undertaking research related activities –

  • The literature review that has to be undertaken to complete the research would require textbooks, journal articles, academic papers, and online resources that are not available free of cost. Therefore, for this a budget of $800 is allocated.
  • Data collection is another research activity that would require some expenses such as printing, mailing, travelling and other expenses incurred in the process of data collection. Since data collection is an extensive activity, the budget of $1,000 is allocated for this research activity.
  • Lastly, for the analysis of data, a budget of $700 is allocated. This would be employed for getting access to data analysis tools and software (Chen et al., 2014).

References

Armstrong, M., & Taylor, S. (2014). Armstrong's handbook of human resource management practice. Kogan Page Publishers

Baker, K. R., & Trietsch, D. (2013). Principles of sequencing and scheduling. John Wiley & Sons.

Blumberg, B. F., Cooper, D. R., & Schindler, P. S. (2014). Business research methods. McGraw-hill education.

Cerasoli, C. P., Nicklin, J. M., & Ford, M. T. (2014). Intrinsic motivation and extrinsic incentives jointly predict performance: A 40-year meta-analysis.Psychological Bulletin, 140(4), 980.

Chen, G. G., Weikart, L. A., & Williams, D. W. (2014). Budget tools: Financial methods in the public sector. CQ Press.

Creswell, J. W. (2013). Research design: Qualitative, quantitative, and mixed methods approaches. Sage publications.

Cummings, T., & Worley, C. (2014). Organization development and change. Cengage learning

Denscombe, M. (2014). The good research guide: for small-scale social research projects. McGraw-Hill Education (UK).

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Ederer, F., & Manso, G. (2013). Is pay for performance detrimental to innovation?. Management Science, 59(7), 1496-1513.

Eerde, W. (2014). Motivation and Reward Systems. Wiley Encyclopedia of Management.

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Griffin, R. (2013). Fundamentals of management. Cengage Learning.

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