Financial motivators

Pay
Pay can be given in two ways
Wages
Often paid every week, sometimes in cash or sometimes into a bank account. It is a common
way of remuneration for manual workers those who work in factories and warehouse. It can
be calculated in two ways:
 Piece Rate: this is where the workers are paid depending on the quantity of products
made. The more they make the more they get paid. This system of wages is followed where
the output can be counted.
 Time Rate: This payment by the hour. The longer you work the more you get paid.
This system of wages is followed where the output cannot be measured.
Salaries
Salaries are paid monthly. It is common for office and administrative staff.
Additional methods of financial motivation:
Commission: It is often paid to sales staff. The certain percentage of commission is paid to
sales person who exceed a certain level of sales. It motivates the sales staff to sell more.
Profit Sharing: Employees receive a share of the profits in addition to their basic salary.
Bonus: Extra amount is paid to workers once a year or at intervals during the year as an
appreciation of their hard work.
Performance related pay: Employee pay is linked to their performance in work.
An Appraisal is carried out for the employee and they get paid according to their appraisal.
Share ownership: As a gesture of appreciation for the hard work of the employees a
business might offer stock options to its employees. This motivates them to worker even
harder because they are also the owners of the company.

Bonus
A bonus payment is usually made to employees in addition to their base salary as part of
their wages or Salary. While the base salary usually is a fixed amount per month, bonus
payments more often than not vary depending on known criteria, such as the annual turnover,
or the net number of additional customers acquired, or the current value of the stock of a
public company. Thus bonus payments can act as incentives for managers attracting their
attention and their personal interest towards what is seen as gainful for their companies'
economic success.

Employee Stock Option Program

An ESOP is a type of employee benefit plan which is intended to encourage employees to
acquire stocks or ownership in the company.

Definition: An employee stock ownership plan (ESOP) is a type of employee benefit plan
which is intended to encourage employees to acquire stocks or ownership in the company.
Description: Under these plans, the employer gives certain stocks of the company to the
employee for negligible or less costs which remain in the ESOP trust fund, until the options
vests and the employee exercises them or the employee leaves/retires from the company or
institution.

These plans are aimed at improving the performance of the company and increasing the value
of the shares by involving stock holders, who are also the employees, in the working of the
company. The ESOPs help in minimizing problems related to incentives.

Incentive
The term ’incentive’ is not peculiar to economics alone, it is a general term used in many
spheres of life. However, in economics, it is a very important word. In fact you can never
study economics successfully without understanding what incentives are. One American
economist says that economics in its entirety is a study of people’s response to incentives.
Whether that statement is accurate or not is subject to one’s point of view, but what comes
out clearly is the fact that incentives are truly central to the study of economics.

A dictionary definition of an incentive is ‘something that motivates you to do something’. In

economics one can say that an incentive is a benefit, reward, or cost that motivates an
economic action. Human beings do things deliberately and purposefully, and, naturally,
people expect to benefit from their own decisions and actions. Before someone decides to
produce something and sell it to people, they should have taken time to think and decide that
doing this will help them earn something. Likewise, before a consumer buys anything, they
know (or at least they think) that they are going to benefit from the product. In strict sense, it
is more than just the usual concepts or trade and economics, it is about human nature. No one
does something for no reason. Not when they have to spend time and resources in doing so.
NON-FINANCIAL MOTIVATORS

Status:

Status means the position or rank of a person in the organisation; it can be high or low. The

rank of an employee is directly linked with his authority, responsibility and other facilities

(e.g., a separate cabin, costly furniture, car, peon, PA., etc.).

Organisational Climate:

Organisational climate means the working system within the organisation. This includes

individual freedom, receipt of awards, the importance of employees, etc. Every person likes

to work in a better organisational climate. The manager can motivate the employees by

providing a better organisational environment.

Career Advancement Opportunity:

Every employee of the organisation wants to advance his life. Promotion is an important

example of advancement. Training and development facilities have got to be provided for the

promotion of the employees. Therefore, the managers can clear their way to promotion by

providing these facilities. When the avenues for promotion are available, the employees

certainly get motivated.

(4) Job Enrichment:

Job enrichment means increasing the importance of work. Such a job should have (i)

authority, responsibility, and a wide scope for challenges, (ii) there should be a need of higher

knowledge and experience, (iii) the opportunities for personal development should be

available, and (iv) there should be absolute freedom to take decisions.

The employees feel proud of getting such a job. Thus, job enrichment enhances people’s

interest in their work and they start getting motivated automatically.

(5) Employee Recognition Programmes:

Every employee wishes to be considered as an important part of the organisation. It means

that he should have his own identity and he should appear to be distinctive. Some of the

examples are given below which help in the employee’s recognition:

(i) Congratulating the employee for good work performance;

(ii) Displaying employee’s achievements on the information board and publishing them in the

news magazine of the organisation;

(iii) Awarding certificates of merit at the ceremonial functions of the organisation for better

work performance;

(iv) Presenting mementos; and

(v) Honouring for offering valuable suggestions.

(6) Job Security:

Job security is an important non-monetary motivator. Security of job means a feeling of

permanence and stability. For example, if an employee has a sense of fear or insecurity in his

mind, that he can be removed from his job any time, he will never work wholeheartedly and

this worry continues troubling him.

On the other hand, if he has a feeling that his job is secure and permanent and he cannot be

removed from his job easily, he will work without any worry and with an easy mind.

Consequently, his efficiency increases. This is the reason why people prefer a permanent job

with less salary to a temporary job with more salary.

(7) Employees Participation:

Employees get encouraged to notice their participation in managerial works. Therefore, they

offer their full cooperation in making successful the policies prepared with their help.

(8) Employees Empowerment:

Employee’s empowerment means giving the employees more freedom to take decisions.

When the decision-making power of the employees increases, they consider that they are

doing some important work in the organisation. This feeling motivates them.
An article on role of Non-financial motivators in an Organization

Some non-financial motivators that are inevitable for your employees’ motivation and your

organization’s success.

1. Interesting Job Responsibilities - Job responsibilities define what an employee does

every day at his/her job. This is one of the major motivational factors. A study, published in

1999 by Kenneth Kovach of George Mason University, compared associates' ranking of what

they wanted from their jobs. As per the results of this study interesting work was on the top

of the list. I have seen so many people working happily on low salary just because of the

inspiring and challenging nature of their job. If employees are working in their favorite

technologies and getting tasks as per their talent, skills and abilities they will put their 100%

efforts to accomplish it.

2. Unbiased Performance Review - Measure your team members’ performance

systematically without favoritism. Individual goals and targets must be realistically defined

and discussed with team at the start of the year. Performance factors e.g. Quality of work,

target achievement, productivity, dedication, innovation, discipline, dependency of members

etc. must be considered. At the end of performance evaluation all successes and failures of
team member must be discussed with him/her to make a clear picture of his performance in

his/her mind. Also consider previous years’ performances while evaluating current year’s

performance.

3. Recognition and Appreciation - Recognize the efforts of your team and use positive

adjectives to highlight their good work to keep them motivated and productive. According to

Andrew (2004), commitment of all employees is based on rewards and recognition. Deeprose

(1994) argued that the motivation of employees and their productivity can be enhanced

through providing them effective recognition which ultimately results in improved

performance of organizations.

4. Working Environment - Employees spend 9-10 hours in their offices daily. A healthy,
disciplined and harassment free environment keeps them motivated. Spacious cabins,

comfortable furniture, open and airy halls with proper lighting do make a difference as well. I

can share an example of one of the local companies which is enjoying low turnover rate in IT

industry despite of paying low salaries. Certainly the reason is a healthy, productive and

harassment free environment with a professional ambiance.

5. Nature of Relationship with your Employees - If you develop a stronger relationship

with your employees, they will be more motivated to work for your organization as a result.

Try to get to know your team members, their children, wedding anniversaries, hobbies and

interests, favorite restaurants and food. Informal gatherings like trips, dinners, sports galas

and team building activities must be arranged. Celebrate their birthdays as well. Listen to and

act upon employees' ideas and suggestions. In the words of Roy E. Moody, a motivational

speaker; “The greatest motivational act one person can do for another is to LISTEN”.