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CHAPTER-1

INTRODUCTION

1.1 INCENTIVES

“Incentive” plays the key role of motivator in any kind of organization be it

production or service sector. It can add to the efficiency level of any employee and

create a desire amongst the employees to give their best to the organization by putting

in more energy and working with better accuracy. These concepts of “incentive”,

“reward” and “recognition” can be aptly applied to any sector be it production or

service sector or otherwise banking as well.

Hence, Incentives could be classified under two core classes:

• Monetary Incentives

• Non – Montary Incentives

‘Monetary incentives’ as the name itself explains is the system of giving rewards

directly in the form of cash by giving away payments or additional benefits bonuses

etc. Whereas, the ‘Non - fiscal incentives’ use the method of rewarding the

employees with any kind of tangible or intangible benefits other than direct cash

payments, thus they are also called as ‘non-cash incentives’.

1.1.1 Importance of Incentives

The studies done by various renowned management institutes and the theories

of different management gurus explain the fact that human resource (manpower) is

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the most valuable asset of any organization to be cherished and groomed in order to

achieve the desired optimization by the firm. Hence, putting it in simpler terms the

success of any organization depends heavily on the performance of its employees.

Thus, any factors existing in the organization that could affect the performance

of the employees cannot be ignored. It is important for any organization to

concentrate on such factors like ability, opportunity and motivation which affect

employee performance.1

Here, these three factors can be explained as ‘Ability’ being the function of

improving educational qualifications of an employee, inculcating skills in him or

imparting training and experience to the employee. This will give an employee a

wider vision to expand his knowledge base. Similarly, ‘Opportunity’ basically refers

to the basic necessary resources and infrastructure like technology and data base

required in performing any particular job. Whereas, ‘Motivation’ is the reason behind

the performance of the human resource provided the rest of the conditions are

satisfied.

It’s a well proven fact in various famous management theories that Motivation

can enhance an employee’s performance though it also requires several other

conditions to be met. These other conditions could be prospect as well as capability

which have a propensity to be steadier and quite intricate to be altered for any

workforce of the organization whereas motivation is far more flexible and can be

personalized and altered as per the situation. Apparently, in case of nonexistence of

enthusiasm to carry out competence and opportunity would leave the problem

unsolved.

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Be it any kind of organization, whether private or public, requires a

functionally efficient and effective team working in favorable conditions to meet the

set targets within the time limits. It is quite evident that an organization’s employees

would work more energetically and put in their maximum efforts more creatively for

the accomplishments of set targets and to match the standards of their organization if

and only if they are motivated to do so. And that’s the reason why now employee

motivation has been given prime importance by all the organizations.

In any kind of Human Resources theory one would find the notions of

“incentive”, “reward”, “recognition” to be somewhat similar along with

complimenting each other and by far interrelated also. Hence, one may not be able to

easily draw a line between the three of them. Out of the above mentioned three

categories “incentive” is the broadest one which basically refers to the factor that

would make an employee desire to work harder in any task and perform with

maximum efficiency and energy.

As explained earlier in this chapter that incentives are of two types

“monetary” and “non – monetary”. Monetary incentives involve rewarding the

employees in terms of direct monetary benefits whereas the “non-monetary”

incentives would not include offering direct monetary rewards rather they are the non-

cash benefits like letters of appreciation, small gifts or else motivating them by giving

some key positions in projects or including them in the decision making process of the

organization. Organizing any kind of social activity in the workplace, giving

recognition for good work, improving the working conditions of the employees are

also some of the ways of motivating the employees for increasing their working

efficiency.

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The major difference between incentive and reward is that incentive basically

aims at encouraging certain kind of desired behavior amongst the employees in future

whereas the reward is the award given to an individual for his accomplishments or

achievements in the benefit of the organization. Here, it is important to specify that

‘Recognition’ may include both monetary and non-monetary benefits. So recognition

may be given in various ways to encourage and appreciate the teams or individuals

who have contributed to the success of a project or the organization in broader aspect.

It gives any individual of the organization a sense of being the valued member of the

entity and reinforces the importance of meeting the desired standards and

performance levels of the individuals of the organization. Here, Granting direct or

indirect cash benefits, appreciating the individuals or teams through public praises,

celebrating successes could be some forms of recognition.2

Thus, conclusively ‘Reward’ and ‘Recognition’ are both the means to

induce some kind of desired performance in the employee. But, yes they can be

classified under the broad category of “Incentives”. Therefore, throughout this

study we would be using this term “incentive” to refer to anything that tends to

increase the employee performance and also covers the terms ‘reward’ and

‘recognition’ under them.

Another major aspect of concern here is that when the public organizations are

providing compensations and entitlements to the public employees whether the need

of incentives still remains. Here, ‘Compensation’ is the monetary benefit provided to

an individual or team as a return for the work that has been performed being a part of

the individual’s or team’s job description. Whereas, ‘Fringe Benefits’ like paid

vacations, travel allowances, individual or family health insurance, reimbursements of

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specified kind of bills submitted by individuals, retirement plans etc. fall under

‘Entitlements’. In many cases the public employees have lower compensation levels

as compared to the private sector but they have other benefits like job security and

fringe benefits which are higher than private sector.

In the event many of us find the circumstance from the open public staff

members, the compensation level usually are decreased compared to the individual

field corporations regarding the majority of the jobs. Although, in the event of open

public staff members, these people get pleasure from a pair of important gains that

happen to be job protection and also edge gains thus generally there isn’t any

connection between performances of open public staff members and the economic

returns and gains. Thus, it can be said that as the public employees are always

guaranteed of getting timely salary and fringe benefits irrespective of their level of

performance or attitude towards the job thus this may make them even less motivated

to do their job. On the contrary, in a private sector firm if an employee is lacking in

performing up to the desired standards or not carrying the attitude or behavior

expected from him; he is sure to lose his desired increments and he also comes close

to losing his job. So the fear of losing increments and/or jobs is one factor in

organization which keeps the employees motivated to do their job in the required

manner. On the other hand, from the individual field, if a workforce ceases to have to

put out significant attempt in his/her job; he/she perhaps has to drop the job. Keep on

providing job protection to public sector employees, what else can be done to push

them to perform in excess of what exactly is expected from their store? The

importance of enticements is experienced at this stage as they help to encourage

particular actions or perhaps aims which are not really supported by the recent

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compensation. Most of these actions usually involve lowering the functioning costs,

resolving a specific business trouble, creating useful ideas, increased employees’

contentment, stopping a major destruction, supporting the colleagues, complying with

the set of laws and convention of work culture in the organization and many others.

Hence, it is important specifically for the open public field that some type of incentive

device must prevail there to promote staff members in order to bring about additional,

in comparison of what exactly is expected from their store.

1.1.2 Objective of Incentives

Representatives possess a key part and position in any association. They are in

charge of changing over inputs to gainful yields. Since they are the way to the gainful

yields, they should be adequately and satisfactorily made up for their work. Taking

signs first from the Biblical statement that a worker ought to have his wages; and also

remembering that the prize for labour - “an element of production” is "wages", it gets

to be intellectual that workers be satisfactorily and genuinely remunerated in the event

where they have to be propelled to expand efficiency in any association either the

sorted out private area or open division.

Drucker accepts that "the work of administration is to make individuals

gainful to accomplish predominant execution, and increase a focused periphery in the

vast stadium by viable pay bundles”. Drucker's conviction is tied down on

profitability, execution, inspiration quality and administration in overseeing

individuals in every association. This accentuation is frequently caught in

authoritative statements of purpose and objectives. Two noteworthy parts of pay are

interested in administration: the money related and the non-monetary segments.

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Motivating force plots as characterized by Graffin and Ebert (1993), are

extraordinary disburse projects intended to rouse elite. Motivating force plans,

endeavor to connect at any rate a segment of pay to employee execution to energize

higher profitability. Motivators, as regularly called, ought to be adjusted to the

practices that help to accomplish authoritative objectives or execution. Impetuses can

be personal or for cluster (association wide). Hartman, Kurtzand and Moser (1994)

states that “Incentive is the system by which employer completes their end of work

commitment that is, repaying workers for their endeavors”. As a rule, a motivating

force plan (installment or system) is any pay that has been intended to perceive some

particular achievement from a representative. It is normal that the possibility of the

motivation installment will trigger the craved execution conduct in the worker.

As per Milkovich and Newman (2008) impetus plans (transient and long haul)

constitute a piece of the budgetary parts of worker’s pay. Motivation plans attach

boost in compensation for execution and have been utilized by associations

worldwide with striking achievement. In present research, monetary impetuses are

intended to rouse workers to enhance their execution – to augment hard work.3

This budgetary pay gives additional cash for accomplishment as far as

commitment or yield is concerned. Impetus plans work to relate remuneration to

efficiency. A basic role of a motivating force plan is to energize more noteworthy

efficiency from people and work bunches. The suspicion generally made by

administration is that cash or money alone may not rouse representatives. In planning

impetus plans, yield guidelines ought to be created. Notwithstanding persuading

workers to build their level of profitability, impetus plans may lessen turnover among

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great entertainers or profitable specialists. Impetus plans are additionally practical in

light of reserve funds that frequently come about because of profitability

1.2 CLASSIFICATION OF INCENTIVES

Generally, enticement methods are classified under two categories:

Pecuniary (Monetary) enticements and non-pecuniary (Non- monetary)

enticements. According to Hongoro and Normand (2002), “material incentives are

those which are provided for specific group of workers to motivate them for a specific

behavior. Non-material (non-financial) incentive schemes on the other hand are

directed at moral motivation to serve in the interest of the community”. Paul & Marc

(2007) opined that “Non-financial enticements to workers in particular in the

government organizations draw particular sort of individual that more eagerly make

out with the mission of the organization”.3

Incentive swears for better accomplishment and known as a spur to better

accomplishment. Enticements are given in addition to wages. It means extra payment

or assistance made to the members of staff for acknowledging their triumph, enhanced

or hard work. Incentives endow with zeal in human resources to execute in a better

way. It is an innate process that no person performs devoid of a rationale behind;

consequently, an expectation for a reward is an influential inducement to encourage

the workforce. In addition to pecuniary incentives, some other stimuli are also there

which stimulate the employees to perform better, like “job satisfaction, job security,

job promotion, and pride for accomplishment”. Hence, inducements truly work to

accomplish the goals of any working organization. The requirement of incentives can

be many like:3

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• To augment production,

• To encourage to work hard,

• In increasing the commitment towards work performance,

• For psychological satisfaction of an employee.

Thus, organizations have to present the under mentioned two types of

inducements to encourage the workforce:

1.2.1 Monetary Incentives

Income has been accepted as a fundamental way to obtain enjoyable wants of

folks. Income can be helpful to satisfy the interpersonal requirements simply by

possessing different material objects. Thus, income besides paying subconscious

requirements also fulfills the particular safety measures and interpersonal

requirements. Thus, in various business establishments, different salary options and

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reward techniques are generally released to be able to motivate and stimulate the

people to function.

Pay incorporates both settled as well as variable pay, moreover ought to be

attached to the singular's intensity of execution.

Money related impetuses considered as to be the foundation of today's

representative inspiration and transforms administration agendas. The rationale is

basic as well as direct- alter the money related motivations and the craved conduct

will happen. The hypothetical premise for cash as a powerful inspiration is all around

investigated. By and large, a few studies have demonstrated that cash is compelling in

drawing in, rousing, and holding workers, and making a superior society.

Yet, solid and pervasive, budgetary impetuses likewise have genuine

impediments. Late discoveries in brain science recommend that fiscal impetuses

ought to be utilized with alert and supplemented by non monetary ones.

Money related motivators encompass an affinity to be supreme when there is a

reasonable plus swift causal bond among a person’s deed with the required result, and

when the preferred result is efficiently quantifiable. For instance, financial motivating

forces are powerful in promising improved agreement movements, for instance,

incentivizing security machinists (independently or like clusters) to tender safeguard

substances, or in speculation banks. At the same time, in different circumstances, they

may be counterproductive.

First and foremost, they have a tendency to attract regard for and concentrate

on exercises and results that are compensated, while different exercises, critical as

they may be for an association, may not get much consideration. For instance, when

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money related motivations advance the accomplishment of the year's financial plan,

numerous organizations watch fleeting focused conduct to the detriment of long haul

speculations.

Second, monetary motivators can likewise decrease wanted social conduct, for

example, cross-unit joint effort. In a study conducted in 2002, “Ernst Fehr of the

University of Zurich and Armin Falk of the University of Bonn” demonstrated that

financial motivators focused on advancing good conduct might accomplish the

inverse and, indeed, demoralize ethical conduct.

Third, financial motivators utilized improperly can change the desires of what

individuals consider good conduct. At the point when money related impetuses

supplant good motivating forces; this can prompt individuals changing the norms of

what they see to be correct or off-base.

Fourth, intemperate money related accolades be capable of prompting

individuals bamboozling, chiefly when controls are much casual.4

Types of Monetary Incentives:

The three primary sorts of Monetary Incentives are clarified in this part:

• Base pay.

• Variable pay.

• Indirect Monetary Incentives

Base pay is “the yearly pay which remains same throughout the year”. Yearly

base pay might likewise be alluded to as gross pay. On the other hand, variable pay,

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otherwise called motivations, is attached to point of execution or outcomes

accomplished; can be in view of personal, group or authoritative execution, and is re-

earned every execution period. Indirect monetary incentives include fringe benefits.

A. Base Pay:

Yearly base pay is decided by a number of aspects:

• Level / grade of the job / role

• Market pay range for the job / role

• Compensation philosophy of any company

Complete a vocation assessment of all occupations/ parts inside the

association. This will permit one to distinguish every employment inside the

organization by its occupation level or evaluation. There are a few occupation

assessment systems – the slightest straightforward is employment positioning – in this

process all occupations inside the association are stacked one over the other in a

various leveled request speaking to the hierarchy of leadership. One could likewise

utilize different routines like Hay's point variable technique which are more

perplexing.

After one has learned the compensation assortment for the arrangement and

distinguished the mid-point of the reach, can then choose in light of the remuneration

theory whether to direct the business sector, recompense to souk or slack the business

sector. One may even decide to pay a few employments distinctively in light of

accessibility of ability in the area. One can assemble the base pay system in

accordance with the organization's aggregate prizes methodology.

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Workers in a specific level or division can be gathered together to guarantee

their pay rates fall inside the extent one has made in view of the above. The activity

will guarantee the inner compensation ways are reasonable and there prevails an

insignificant divergence amid colleagues inside the equal rank and division. It

additionally aids in planning for upcoming requirements & aides in trade arranging

and setting up for progression arranging.

In many business associations, the salary statement or worker’s payment

shares a most important fraction of the total operating expenses. Therefore, it is

imperative to give consideration to salary increments. The majority of organizations

pursue twelve-monthly salary raise considerations; on the other hand others may

choose the semi-annual or ad-hoc time periods depending on why increases occur.

Salary augmentation may take place for numerous reasons:

1. Merit Pay

Legitimacy pay is broadly actualized in associations where the pay theory is

compensation for execution. Pay alone is a satisfier. Execution based pay, then again,

is planned to spur representatives to execute superior and achieve created objectives,

and it compensates workers for doing as such. It obliges that reasonable objectives

and actions be created towards the beginning of a predefined phase (e.g. in the

beginning of the year). Pay for execution replaces the notable system that remunerates

workers construct singularly in light of position (the timeframe in a position or the

association). Pay in view of status has a tendency to urge representatives to stay yet

does not so much backing the achievement of the association's vital objectives.

Consider the maxim "you get what you pay for." If you compensate for unremarkable

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activities, you will get more average quality. In the event that you remunerate position

over execution, you will get more status. In the event that you compensate results –

not just exertion or participation – you will get more results.

2. Market alteration

Market alteration alludes to a one-time base boost in salary to alter a worker's

base pay that is essentially lesser in comparison of the pay array for a particular post.

Now and again advertise modification is additionally provided to the people whose

base pay is fundamentally uneven while contrasted with associates performing

likewise work. One can set a procedure for the timing of business sector conformities.

Numerous organizations do their business sector modification alongside the yearly

pay build process. Note: When market modification increments are not planned, one

ought to secure a procedure for regard of impromptu market changes.

3. Advancement increment

Advancement increment is paid when a current worker is elevated to a larger

amount work inside an association. One can time the advancement choices to

harmonize with the yearly compensation build process. Recognize a support process

for advancement proposals.

4. Knot total pay

At the point when the representative's pay is at the top-end of the

compensation array, organizations possibly can decide to provide the worker a knot

total legitimacy pay rather than legitimacy increment to yearly base pay. This will

abstain from surpassing the secured pay runs and will keep inside equality.

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B. Variable pay - Incentives

The subsequent segment that comprises pay is variable pay. “Variable pay is

attached to stage of execution or consequences attained to; can be taken into account

by personal, group or authoritative execution, and is earned back at every execution

phase”. Transient motivators reward execution over a time of twelve months or lesser

than that. Long haul motivations then again remunerate execution over a period

longer than twelve months and they frequently incorporate investment opportunities,

confined stock, and execution offers.

Impetus remuneration is a typical practice in numerous associations,

particularly those with a conveyed field power. At the point when performed good, it

can viably compel a few practices as well as outcomes inside the association further

fortify the pay-for-execution technique.

C. Indirect Monetary Incentives

Indirect financial incentives include fringe benefits.5

• Fringe Benefits

Fringe benefits include automobile facilities or company car, paid holidays,

vacation trips and other perks , which can be enjoyed alone or with the loved ones.

Merits of Monetary Incentives

• Pecuniary motivation schemes have a propensity that they are simple to

comprehend for human resources; if any employee attains the set target then

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he/she is entitled to receive the monetary reward stipulated for the

accomplishment of that particular task.

• They can attract the workers at all levels of organization.

• Money is a worldwide and widespread incentive as the employee can spend the

reward in a way which suits them.

Demerits of Monetary incentives

• In the Fiscal services segment, additional pecuniary benefits have surprising

outcome of encouraging the risk-taking ability in those organizations, which may

contribute to the economic catastrophe. This is an extreme case but financial

impetus may work in opposition to the business.

• They are generally just remunerated as a fraction of a personnel’s salary that

means the recompense vanishes into the employee’s outgoings per month.

• Sometimes it becomes hard to uphold personnel’s concern by the means of

pecuniary motivation plans for a longer time period.

• Every person does not get aggravated by currency, for some associates (of young

age) of a team it might be regarding getting some free time to take a trip on the

other hand gift cards, leisure vouchers or earning a family holiday might be of

much importance for the employees who are having families.

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1.2.2 Non-monetary Incentives

In addition to the financial rewards, there prevails some non-pecuniary

enticements also which help to persuade the self-esteem and self- actualization desires

of human resources. All those rewards and awards which cannot be calculated in

terms of money can be categorized under “Non- monetary incentives”. Managers

always make use of non pecuniary rewards to satisfy the psychological needs of their

juniors or assistants.

Non-monetary enticement dissimilarities in Table 1.1 are affected by career

stage and proximity to retirement. With the associate getting older, more emphasis is

laid on retirement or adding-on the retirement earnings by means of part-time or

impermanent jobs on the contrary for younger associates, the extra emphasis is laid on

job satisfaction and the corporeal job environment. Culminating instead of using

"one-size-fits-all” approach, which is aloof and sometimes futile, incentives must be

modified according to the requirements of the workforce

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Table 1.1 Non-monetary incentives desired by different generations of associates.

Mature Workers Baby Boomers Generation

X'ers Generation Y'ers

Flexible schedules

Retirement

planning

Flexible work

schedules

Flexible work

schedules

Part-time hours

Flexible retirement

options

Professional

development

Professional

development

Temporary hours Job training Feedback Feedback

   Sabbaticals Tangible rewards Tangible rewards

     Work

environment Work environment

        Attentive

employers

Source: http://www2.inc.com/search/16431.html (Nelson, 1999).

Many state that world rolls around wealth. Conversely, it is not mandatory that

it is always true, particularly when then question is to motivate the workforce.6

According to Maslow’s hierarchy of needs “wages are highly important and usually

one of the common motivators, they satisfy the immediate necessities of men such as

food, clothing, and shelter”. However the things which are actuality vital are the

desires originate at superior stages, furthermore these are not money related.7

Types of Non-monetary Incentives:

Non- monetary incentives are of the following types:-

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A. Security of Service-

Job security gives immense motivation to human resources. If an employee

has a secured job, he will put utmost hard work to accomplish the aims and goals of

the organization. It also helps because he has a security of job hence he is away from

mental tension and can perform his best for his organization.7

B. Praise or Recognition-

The praise or recognition is also a form of non- financial incentive and

satisfies the ego needs of the workers. At times praise turns out to be more effectual

than any other incentive. In the response of praise or in the expectation of getting

praise and recognition employees will attempt to provide their best of abilities for the

organization.

C. Suggestion Scheme-

The managers/superiors have to gaze to the fore to ask for proposals as well as

invite idea and plans from the subordinates, which will induce a feeling of partaking

and contribution among the workforce. This task can be attained by- various articles

written by the workforce of an organization to improve the work culture and

surroundings which can be published in various magazines of the company. This will

surely motivate the employees and make them feel valued in the organization and

they keep on searching for different inventive ways which can be applied for

development of the firm. This eventually facilitates in growing of business and

adapting new means of working.

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D. Job Enrichment-

Job enrichment is another non- monetary reward wherein the work of an

employee can be enriched. This includes increase in responsibilities, giving away the

employee an important designation, increase in substance or type of the job. With the

help of this way of rewarding employees, capable workers can get demanding and

tough jobs in which they can show their value.5

E. Promotion opportunities-

Promotion is a very helpful and effectual device to boost the enthusiasm to

perform in any firm. If the recruits are offered with the prospects for the progression

as well as development, it will please and relax them and turn them into extra

dedicated towards their workplace. The non-pecuniary means mentioned above can be

structured successfully by paying proper attention towards the participation of

recruits. A blend of fiscal and non- fiscal rewards helps collectively in bringing

encouragement and eagerness to work in a firm.

F. Flexibility

It’s compulsory for recruits to abide by the superiors; however, if only

superiors get all the say, employees will straight away sense the restriction. Personnel

at any firm or organization need an area where they can discuss their viewpoints and

thoughts, and also the autonomy to be flexible with the approaches they have to use to

resolve divergence as well as tribulations.

Flexibility can also be viewed in terms of working hours. The majority of the

working populace has families or kids and bigger personal responsibilities. Liberty to

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perform their task at a pace in accordance with their convenience will let them handle

all their responsibilities in time (both at house as well as at the place of work).

G. Recognition

Every person on earth wants to get the recognition, but still a number of

personnel have not even given a pat on the back or a handshake by their superiors.

Recognition has various forms for example an unofficial admiration party for all the

employees who have excelled in their respective works for a given month, employee

of the month award, a letter or E-mail of appreciation, recognition for the work done

in front of colleagues etc.3

H. Training

Proper and timely training creates a room for the employees to rise and they

don’t feel trapped in a regular and sometimes monotonous work. The trained

employees can now take and combat easily with much bigger challenge. Trainings

provide a positive kind of strain, something that inspires personnel to force

themselves to the extent which makes them pretty aware about their own strong and

weak points.7

Trainings must always be in accordance with the job as well as career trail the

worker desires to acquire or else, they would not be able to utilize the knowledge to

the best. Hence before organizing training schedules skill assessment must be

conducted.

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I. Belongingness

Illness is just one of the smallest reasons for non-attendance in office. It is in

fact clashes and politics at the place of work are some of the main reasons which

generate a feeling of hatred in personnel about their workplace and restrict them

coming to office. However the majority of recruits value the superior-subordinate

relationship, it is also imperative to them that they can feel a sense of amity and

belongingness.

J. Chance to Contribute

Workers can be motivated to a great extent if they are made feel that they are

the reason for the success of the organization and it depends on them only. It can be

done by letting them to head various assignment as well as receiving their consent on

chief decisions that can have an effect on the business and organization.

Merits of Non-monetary Incentives

• These reward proposals can be related more to workers commitment as they can

be coupled with important as well as desired behaviors and incorporated with an

overall incentive matter.

• With non- pecuniary stimulus plans one can reward the employees almost in no

time and without even submitting any requests with the payroll panel and waiting

for the payment of monthly wages of the employee.

• Uncomplicated stuff such as a “thank you” well in time or little rewards in front of

everyone at office are able to generate a zealous, hard-working group that is very

much dedicated to rising and developing the corporation.

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• By conducting proper reward and recognition programs by means of third party

suppliers businesses will be able to preserve money on the cost of days out,

trophies and vouchers.

Demerits of Non-monetary Incentives

• If managers are trying to give presents as a reward then there are the possibilities

to confer some incorrect present which may imply that the corporation/supervisors

do not know the staff members well, which may result in the feeling of de-

motivation.

• Human resources may have unrealistic hopes in relation about the worth of the

gift, which may become a reason of dissatisfaction if the gift does not match up

with the expectations of the employees.

• Managers have to be careful while tailoring the presentation manners which go

well with all staff or team members as several workers don’t want to have the

limelight shined on them in an open ceremony.

1.3 EMPLOYEE PERFORMANCE

1.3.1 Employee Performance

The proficiency and productivity of an association, all things considered, is

chosen by the capacity of the association to create and use its HR viably. As a

consequence of globalization the nature and pace of rivalry experienced radical

changes. The globalization and liberalization procedure lifted the boundaries of

common limits which made ready for making rivalry universally. Accordingly every

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association is to be globally able to face the opposition. Keeping in mind the end goal

to be globally skillful, all the assets important for the working of the association are to

be created ideally. This requires the requirement for enhancing the level of execution

of the workers of the association. The expanded level of execution of the workers

guarantees successful use of assets and aversion of wastages. The association

enhances the level of execution, with a specific end goal to guarantee execution

fabulousness and to be conspicuous at the global level.

Definition: Performance

“Performance is about behavior or what employee do, not about what

employee produce or the outcomes of their work” (Herman Auguinis).

As indicated by Herman Auguinis, “Performance administration framework

generally incorporate measures of both practices (what a worker does) and result (the

result of a workers conduct)". This meaning of execution does exclude the

consequences of a representative's conduct, but rather just the conduct themselves.

Herman Auguinis mark execution by two attributes of the conduct to be specific,

evaluative and multidimensional. Evaluative implies that practices can be judged as

negative, unbiased and positive for individual and authoritative adequacy. As it was,

the estimation of these practices can differ in view of whether they make a

commitment towards the achievement of individual unit and hierarchical objectives.

Multidimensional highlight of conduct implies that there are various sorts of practices

that have the ability to progress or upset hierarchical objectives.

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In the expressions of T.V. Rao, execution of a person in a hierarchical setting

may be characterized as "the yield conveyed by a person in connection to a given role

during a specific time under the set of circumstances operating at that point of time"

Along these lines, execution is what is relied upon to be conveyed by an

individual or an arrangement of people inside a time period. What is relied upon to be

conveyed could be expressed regarding results, undertaking and quality, with details

of conditions under.

This eventually brings about the expanded productivity and efficiency which

at last prompts diminish cost and expanded benefit. Presently all the advanced

associations are arranging and actualizing different program which it is to be

conveyed. The definition brings up three measurements of execution estimation in

particular, result and yield, info measurement and time measurement.

Determinants of Execution

There are sure variables which cause a representative to perform well. A blend

of three variables permits a few individuals to perform at more elevated amounts than

others specifically: 1. Definitive learning, 2. Procedural information, and 3.

Inspiration.

Definitive learning is data about truths and things, including data in regards

to a given undertaking's necessities, names, standards and objectives.

Procedural information is a mix of comprehending what to do and how to do

it and incorporates cognitive, physical, perceptual, engine and interpersonal abilities.

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Inspiration includes three sorts of decision practices: Choice to grow

exertion, decision of level of exertion.

Each of the three determinants of execution must exhibit for execution to achieve

abnormal states. To put it plainly, the three determinants have a multiplicative

relationship, such that:

Performance = Declarative knowledge x procedural knowledge x motivation

1.3.2 Performance Management

Performance management represents a system of processes which is utilized

by associations to check and enhance their presentation. Performance management is

a complete frame work which is helpful for the organizations to craft valuable and

proficient exploitation of their workforce in the direction of accomplishing their

tactical ambitions by making available an inner loop deployment and feedback

mechanism. Performance management is a continuous procedure that includes

numerous mechanisms which are very much connected with one another and their bad

execution may affect the whole performance management system in a negative way.

1.3.3 Performance Management Process

Performance management process is the process by which a company

manages its performance in line with its corporate and functional strategies and

objectives. Performance management practice eloquent the organizations tactics as

well as the way it is linked to the organization’s structure, activities including

developing performance measures, linking the presentation to an incentive / reward

scheme along with personnel assessment. This procedure also incorporates a response

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mechanism to make certain that compulsory remedial step is taken once defensible.

The following are the steps involved in performance management process:8

A. Pre imperatives

There are two imperative essentials that are needed before an execution

administration framework is actualized:

(i). Information of the association's central goal and key objectives and

(ii). Learning of the occupation being referred to. Learning of the association’s

mission and vital objectives is an aftereffect of key arranging. Information of the

employment being referred to is done through occupation investigation. Work

investigation is a methodology of deciding the key segments of a specific

employment that incorporates exercises, undertakings, items, administrations and

techniques.

B. Performance Planning:

Employees ought to have intensive information of the execution

administration framework. Indeed, toward the start of every execution series, all the

director and the representative get together to converse about, and concur upon, what

should be prepared and how it has to be finished. This execution arranging talk

incorporates a thought of both results and practices, and additionally formative

arrangement.

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C. Performance execution:

Once the survey cycle starts, the representative endeavors to deliver the

outcomes and showcase the practices settled upon before and in addition to deal with

formative needs. The representative has essential obligation and responsibility for

methodology. Workers need to have dynamic information in the advancement of the

sets of expectations, execution gauges, and the production of the rating structure.

Likewise, at later stages, representatives are dynamic members in the assessment

process, in that they give a self appraisal and execution audit meet in a two-manner

correspondence process. The accompanying elements must be displayed at the

execution stage:

• Commitment to objective accomplishment

• Ongoing execution criticism and honing

• Communication with director

• Collecting and imparting execution information.

• Preparing for execution audits

Even though the representative is principally in charge of execution, chiefs are

fundamentally dependable over the issues like: Observation and documentation,

Updates, Feedback, Resources and Reinforcement.

D. Performance Assessment

At this phase, both the representative and the chief are liable of evaluating that

till what extent the fancied practices have been shown, and the results which have

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been accomplished are desirable or not. The manager needs to give the data and it

integrates an estimation of the level to which the goals and aims are articulated in the

advancement arrangement have been accomplished.

E. Performance Review:

Execution survey phase includes the conference involving the worker as well

as the chief to audit their evaluations. The assembly is typically assembled

examination conference or talk. Much of the time, the examination meeting is viewed

as an audit of the past that is, what was done and how it was finished. The

examination about past execution can be testing; especially when execution level has

not came to adequate levels.

F. Performance Renewal and Reconstructing:

The last stage in execution procedure is reestablishment and reconstructing. It

is indistinguishable to execution arranging part. The principle distinction is that the

reestablishment and reconstructing stage utilizes the experiences and data picked up

from alternate stages.

Employee Productivity

In financial aspects, efficiency can be explained as the proportion of amount

delivered to the amount supposed to be created. To the specialist; profitability implies

innovation, machinery as well as gear, estimation and checks. But for a business

chief, efficiency has different implications counting adequacy along with

effectiveness. Agoro (1991) made use of the word efficiency to imply “the yield every

unit of component information over a given period of time”. The proportion of the

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yield of riches delivered to the data of assets devoured for the duration of the time

spent generation. Adekoya (1991), concur accentuating that “efficiency is a measure

of how well work assets/aptitudes are united in a firm and used for finishing a set

result”. Productivity during the usage of work at any association includes getting the

most abnormal amount of execution by the workers with the slightest consumption of

labor compensation.3

Udo-Aka (1983) characterized “profitability as a measure of general creation

productivity, viability and execution of the individual association”. Nwasike's (1991)

defined profitability as: “The proficiency with which inputs is utilized to deliver the

fancied output”. Akerele (1991.) argues that profitability is, “the measure of how well

a nation's assets are used for fulfilling an arrangement of results coming to the largest

amount of execution with the slightest consumption of assets". It’s an integrated

meaning of efficiency. Akerele (1991) further looked after that: “Productivity is a

state of mind of the psyche”. Prokopenko (1992) characterized “profitability to be the

compelling and proficient use of all assets; capital, work, material, vitality, data and

time”. It is the mindset of advancement in addition to consistent change in the

situation which already exists. It is the assurance of having the capacity which can

bring a transformation in the status quo. It’s the spirit to improve current

circumstances, regardless of how great they possibly will appear. It’s nothing but the

steady adjustments in monetary state of affairs.3

1.4 INCENTIVES AND EMPLOYEE PERFORMANCE

According to Caruth, Middlebrook and Frank (1982) the rationale behind

reward schemes in business associations or organizations is, “to increase productivity

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in the organization”. By linking reparation to productivity, a job provider or manager

is endeavoring to provoke human resources for augmenting the degree of work, in that

way lessening the expenditure of manufacturing a single entity of production.

Idiosyncratically, the intention of inducements to both an association and the human

resources is to:3

• Improve motivation

• Tie pay to performance

• Recognize differences in employee performance

• Increase competition among employees

• Attract and retain productive employees

• Reduce absenteeism

• Reduce idle time

• Reduce or control costs

• Utilize equipment more effectively

• Relate increases in compensation to increases in productivity

• Avoid additions to employees

• Create uniform processing costs

This study explores the importance of monetary and non-monetary rewards for

development of employee engagement, and how this employee engagement affects

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firm’s overall performance. Most of the research studies have shown consistently that

the encouragement and appraisal or reward system for the employees resulted in

higher employee retention rates, productivity, and job satisfaction.

The bond between the employer and the employee is very important and

crucial. This relationship is based on the respect from the employer to the employee to

motivate him/her to a larger extent. The employer has to give respect to the employee

by different means such as symbolic rewards after observing the performance of the

employee. By these types of symbolic rewards, employee can get motivated and

connected to their work and the comfortable environment created by the authorities is

very helpful to make the employee devoted and committed to their job honestly and

faithfully.

Rewards embrace both pecuniary and non-pecuniary enticements. Pecuniary

enticements augment the straight happiness and fulfillment of workforce while non-

pecuniary enticements cooperates in the acknowledgment as well as appreciation of

personnel which are the inspirational device for the personnel in turn results into the

job commitment (Burgess &Ratto, 2003).9 Employee commitment depends on the

“attitudes, behaviors, and opinions” of the workers regarding the organization which

in turn originates in the personnel’s mind as a consequence of company’s or

manager’s actions towards the workforce. “The majority of literature reviewed

highlighted the current trend of workforce engagement and the importance of people

at different organizational levels, but it seemed to lose sight of the real people behind

the concept” (Ryan et al., 1986).10

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Monetary incentives can boost motivation, but non-monetary incentives are

more effective motivators because these incentives have an intrinsic motivational

impact on the workers.2

Instead of encouraging risk-taking ability, pecuniary incentives promote

worker’s obedience because the majority of financial awards think only about the

worker’s performance. Consequently, recruits in the lack of encouragement become

less imaginative and resourceful on the work. Kohn presents another argument that

“monetary incentives may be used incorrectly; for example, they may boost sales,

while masking an underlying problem of poor management. Additionally, employees

may be motivated to perform in certain ways to achieve monetary rewards, rather than

doing something because it is the right thing to do”. Such conduct may interrupt or

finish healthy professional dealings between colleagues, as they have turn into

contenders instead of co-workers, which eventually upsets the complete working

atmosphere.

Non-monetary incentives are effective to encourage workforce for their hard

work by facilitating them with new prospects for training, elastic job schedules,

improved work environments and sabbaticals. At the time of deciding incentives,

organizations have to think about the recruits for the one the enticements are

produced. Selecting a good equilibrium among non-monetary and monetary

incentives is supposed to produce a better agreeable curriculum to deal with the

assorted benefit as well as desires of human resources.

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Conditions for Effective Use of Incentive Schemes

Caruth (1986) stated that “incentive schemes are not a panacea for an

organization’s productivity problems, nor are they universally applicable to all types

of work organizations”. An effectual use of enticements depends on several states of

affairs like the type of job, managerial control and the employee reaction to

enticements. Explicitly, below mentioned are some of the situations compulsory for

the management of successful incentive plans3:

• Direct relationship between effort and output.

• Readily identified units of output

• Even and continuous work flow

• Standards of performance

• Quality standards

• Measurement systems

• Opportunity for cost reduction

• A good unit cost system

• Adequate pecuniary encouragement

• Balanced time periods for payment

• Trustworthy firm technology

• Assurance by the side of highest managerial level.

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Predominantly, money appears vital for procuring as well as withholding the

employees, and imperative for generating a positive trend of high performance.

Pecuniary enticements are supposed to be best suitable then, when they result into

considerable, straight outcomes that affect the end result (profit and loss statement) or

“key performance indicators” (KPI) visibly associated with preferred plus encouraged

activities.

Money furthermore performs so good when there is small scope for cheating,

that is, when there are no too much rewards and when controls are scrupulous. As

mentioned earlier, monetary incentives typically work well with sales jobs.

Though, money is not a big mode of motivation. When fundamental aspects

like just and adequate pay are in place, the additional improvement in performance by

providing with pecuniary spur is minimal, and non-pecuniary incentives subsequently

turn out to be superior stimulus. These may include- “achievement, recognition, the

intrinsic nature of the work itself, autonomy, opportunity for growth and

advancement”. As an example, 3M and Google offer free time to their human

resources in order to make the employees to use up the office time on particular

favorite assignment they are zealous to pursue.

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REFERENCES

1. Ivancevich, John M., & Matteson, et al, Worksite stress management

interventions. American Psychologist, Vol 45(2), Feb 1990, 252-

261.http://dx.doi.org/10.1037/0003-066X.45.2.252

2. Guide to Managing Human Resources” Recognition and Reward Program

http://hrweb.berkeley.edu/guide/appendg.html.

3. Ude U., Coker M. A, (2012), Incentive Schemes, Employee Motivation and

Productivity In Organizations In Nigeria: Analytical Linkages, Journal of

Business and Management, Vol. 1(4), PP. 32-39.

4. Fehr E., Falk A., (2002), Psychological foundations of incentives, European

Economic Review Vol. 46, PP. 687–724.

5. Aswathappa K., (2005), Human Resource and Personnel Management, 4th

edition, New Delhi, Tata McGraw-Hill Publishing Company Limited.

6. Nelson, (1999) Incentives for All Generation, retrieved August 10 2013, from

http://www2.inc.com/search/16431.html.

7. Francis B., (n.d.), The Impact of Motivation on Workers' Performance A Case

Study of Igara Growers' Tea Factory, retrieved September 11 2013 from

http://www.academia.edu/6995422/the_impact_of_motivation_on_workers_pe

rformance_a_case_study_of_igara_growers_tea_factory.

8. Performance Management Process, (n.d.), retrieved November 3 2013 from

https://faculty.unlv.edu/amiller/MGT%20494/Chapter%202.

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9. Burgess S., Ratto M., (n.d.), The Role of Incentives in the Public Sector:

Issues and Evidence, retrieved January 11 2014 from

http://oxrep.oxfordjournals.org/content/32/2.toc.

10. Waqas Z., & Saleem S.,(2014), The Effect of Monetary and Non-Monetary

Rewards on Employee Engagement and Firm Performance, European Journal

of Business Management, Vol. 6 (3).