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To what extent do you agree that financial remuneration is

the key motivating factor for employees?

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Effectively managing human resources in organizations has always been a gigantic
concern both for HR managers and policy makers of the world. To have a satisfied,
motivated, less stressed and high performing workforce, an organization must have to
keep all those factors in consideration, that are directly or indirectly associated with the
employee motivation and satisfaction.
A number of theories and models can be found on employee motivation and this topic
has long been the subject of debate amongst management experts. Some management
experts are of the view that financial rewards work well to attract, retain and motivate
workers (TeckHong and Waheed, 2011) while others take a different view and claim
that the interplay between compensation, motivation and performance is a complex
phenomenon. Inclination towards financial rewards vary from person to person based
on their demographic, geographic, psychographic and cultural association (TeckHong
and Waheed, 2011). Even the followers of the same school of thought reported that
financial rewards alone are not sufficient to motivate employees.
Nonetheless this essay will attempt to argue that although financial rewards motivate
employees, some other factors are relatively stronger and should be treated as key
motivating factors for employees. In order to demonstrate this, this essay will first focus
on the key motivational theories in relation to the financial and non-financial
remuneration or reward. Second, it will focus on, how organizational climate supports
and encourages employees to be more motivated and productive.
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Do motivational theories and organizational climate have any value in

the workplace?
It is interesting to note that no two employees are exactly alike; employees differs on
many dimensions, such as intelligence, personality, interests, hobbies, opinions,
preferences and desire for financial rewards (Lundberg, 2009). If managers are really
interested in comprehending the employee insights for developing and implementing
appropriate human resource strategies, it is important for them to understand different
theories of motivation (TeckHong and Waheed, 2011). Theories of motivation like
Herzbergs motivation-hygiene theory, Maslows hierarchy of needs theory, and Vrooms
expectancy model are very crucial to understanding the behavior and attitude of
employees (TeckHong and Waheed, 2011).
Maslows hierarchy of needs theory divides human motives into five different categories
that are arranged in a hierarchy. These categories are physiological, safety & security,
love & belongingness, self-esteem and self-actualization. Maslow believed higher
motives do not emerge until the more basic ones have been met (Berl, Williamson and
Powell, 1984). Recent research studies have highlighted some problems with Maslows
hierarchy of needs theory. In some societies, difficulty in meeting basic needs can
actually foster the satisfaction of higher motives and the same needs may cause
different behaviors in different individuals. According to Berl, Williamson and Powell
(1984), different academics (Hall and Nougaim in 1968, Lawler and Suttle in 1972,
Wahab and Bridwell in 1976, and Salancik and Pfeffer in 1977) attempted to validate
this popular theory but none of them were able to support the Maslows theory with
empirical research evidences. Considering the above stated discussion it can be
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interpreted that financial compensation and fringe benefits will not always work as
motivators or it is not necessary that without satisfying financial needs someone cannot
jump to higher levels of self-esteem and self-actualization.
Herzbergs Two-Factor Theory is another very popular theory of motivation, it describes
needs in terms of satisfaction and dissatisfaction. According to Frederick Herzbergs
motivation-hygiene theory, motivating employees is a two-step process, where
management first provide hygienic factors and then motivating factors. (Shipleya and
Kiely, 1986). Satisfaction comes from motivators that are intrinsic or job content, such
as achievement, recognition, advancement, responsibility, the work itself, and growth
possibilities. In addition these motivators Herzbergs two-factor theory also correspond









dissatisfaction occurs when the following hygiene factors, extrinsic or job context, are
not present on the job: pay, status, job security, working conditions, company policy,
peer relations, and supervision (Prather, 2009). Such explanation help us to understand
that the financial rewards and salary fall under the category of hygienic factors rather
than motivating factors.
Vrooms expectancy model suggests that people choose among alternative behaviors
because they anticipate that particular behaviors will lead to one or more desired
outcomes and that other behaviors will lead to undesirable outcomes. Briefly, the
expectancy theory states that motivation to behave or perform depends on three
variables: Expectancy, Instrumentality, and Valence (Renko, Kroeck and Bullough,
2012). Thus, expectancy refers to the linkage between effort and performance; it
represents the strength of ones belief that such-and-such effort will result in such-andPage 4 of 9

such performance outcome. Whereas Instrumentality refers to the linkage between

performance and reward; that is, the strength of ones belief that certain kind and level
of performance will lead to a particular reward and valence refers to the attractiveness
or utility of the reward to the individual (Renko, Kroeck and Bullough, 2012).
Vrooms expectancy model states that a person will be motivated to perform, if he
believes that his effort will result in the desired performance, which will get him a reward
that is important to him. For example, if someone thinks he or she is not getting enough
pay (output) for his or her work (input), he or she will try to get that pay increased or
reduce the amount of work he or she is doing.
Organizational climate has a major influence on human performance through its impact
on individual motivation and job satisfaction. Climate does this by creating expectations
about what consequences will follow from different actions. Employees expect certain
rewards and satisfaction on the basis of their perception of the organizations climate.
Individuals in the organization have certain expectations, and fulfillment of these
depends upon their perception whether organizational climate suits according to their
needs or not (Renko, Kroeck and Bullough, 2012). So, organizational climate is directly
related with the performance of employees working in any organization.
Considering the importance of organizational climate, and appropriate value proposition
to keep right people at the right place (Lawler, 2005), some studies focus on intrinsic
and extrinsic factors for workers motivation, but the others relate it with achievement,
recognition, work itself, responsibility, advancement, and growth at the workplace
(Prather, 2009). Similarly, remuneration, fair promotion system in the organization, job
autonomy, leadership behavior, social relations and the job itself are also among
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important factors of employee motivation and ultimately job satisfaction (Chandler et al.,
Considering all the above stated motivational theories we can understand that the
financial remuneration aspect has not been highlighted as a strong or key motivational
factor (Prather, 2009). Nobel Prize winners are an excellent example of it as they never
engage in work to win the Nobel Prize but their inner motivation keep them going.
Whereas it is stated that we can convert intrinsic motivation in extrinsic by paying for it
(Prather, 2009). Even there is a chance that higher pay some time considered as a
bribe for future performance and this reward replaces the next set goal (Prather, 2009).
Same is the case with majority of the famous cricketers and footballers, who usually no
longer play for their own countries but opt for the highest bidder.
A study conducted by TeckHong and Waheed (2011), in Malaysia has also proven that
motivational factors like working conditions, recognition and company policy are
relatively more significant than salary. This study stated that the salary is associated
with the lower level needs (physical and security) of Maslows hierarchy and once the
lower order needs met the higher order needs become more important.
Another example of Southwest, quoted by Prather (2009), highlighting the importance of
creative climate over financial rewards at work place. During takeoff, flight attendants
have the liberty to slide down the peanut packages through aisle and they enjoy their
work by singing their announcements to the tune of famous songs.
Furthermore Zweig (2014), in his very interesting article Managing the Invisibles have
strongly pointed the top performers of different fields who are not seeking status and

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financial rewards but prefer to do their work out of the limelight. He titled them invisibles
who wont toot their own horns but quietly make all the difference to their
organizations success (Zweig, 2014). He further reported that Invisibles, like just
about everyone, are glad to be well paid. But as numerous studies in business
psychology, particularly in the subspecialty of self-determination theory, have shown,
extrinsic rewards such as money and praise are of limited effectiveness and can even
be counterproductive. If you want to retain invisible stars and to embolden others to
emulate them, intrinsic rewards are critical (Zweig, 2014).

In conclusion, different individuals have different goals, and get different things out of
their working life, in other words they have different orientations to work. Not all the
incentives that an organization can offer to employees are directly related to monetary
rewards. Financial reward has always occupied a rather ambiguous position, but since
people need money to live, it will certainly be a part of the reward package an
individual gets from his work. But it can clearly be seen that there is substantial
evidence emphasizing a better match between the motivational traits of the individual
and the demands of the job, which in turn results in raised levels of performance and
motivation. Microsoft is a good example to quote over here, company that has profited
from a virtuous spiral relationship with its people for decades. Since the early 1980s, the
company has had an environment in which its employees have done well and company
has done well. Their employees have had challenging work and, of course, one of the

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most highly rewarding stock plans around. Microsoft has been an enormously attractive
place to work, especially for high performers (Lawler, 2005).
Therefore, instead of claiming financial remuneration as key motivating factor we can
only treat it as one of a motivational factors, as there is substantial evidence indicating
that individual differences in motivational dispositions are a key determinant of
employee performance.

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