Financial Rewards and Incentives in Organizational Behavior

ORGANIZATIONAL BEHAVIOR 0
Organizational Behavior
Financial rewards and incentives
8/11/2018

ORGANIZATIONAL BEHAVIOR 1
Introduction
An incentive is a something that gives positive encouragement and motivation to an
employee or an individual to perform better at workplace. Those incentives, which are given
in the form of money, are monetary incentives and those, which are given besides money
such as praise, recognition, job enrichment, promotion opportunities, and many more are non-
financial incentives. Monetary and financial rewards are basic and fundamental part of
employment. This can be used as a tool to motivate the employees at workplace and improve
their performances. However, these monetary incentives and rewards are subject to pros and
cons. It is not always necessary that money can lure the employee of an organization and
motivates him to perform better. There may be some negative impacts also associated with
these rewards. We shall discuss below how monetary incentives can motivate employees at
workplace and what can be the pros and cons of it (Aguinis, Joo and Gottfredson, 2013).
Financial rewards: A fundamental part of employment relationship
In order to attract and improve an employee’s performance at workplace financial rewards
always plays a vital role. Financial incentives are primary and universally used tool by every
organization in order to get their employees motivated. Financial rewards are fundamental
part of employment relationship. An employer rewards his employee by giving him financial
and monetary benefits to motivate him and encouraging him to improve his performance at
the organization. Financial rewards are given in the form of money. They generally includes
bonus, cash awards, employee stock options, profit sharing plans and many more. These
incentives motivate the employee of an organization and attract them to work more
efficiently, improve their performance, and give their best. In addition, it is said that money is
the main source of satisfying needs of people. In order to afford the basic amenities today
money plays a significant and vital role. Money can satisfy our psychological needs, social
needs and security needs. This can also lead to rise in living standard of the people and
improve their lifestyle. Therefore, in many organizations various monetary plans and
schemes are introduced time to time to stimulate the employee of the organization to work
efficiently. These kinds of rewards help to improve the productivity of an employee and give
them positive motivation to perform better and provide them with zeal and enthusiasm to
work better. However, it is not necessary that these financial rewards always serves positively
towards an organization there are some pros and cons of financial rewards which are
discussed below (Ariely, Bracha and Meier, 2009).

ORGANIZATIONAL BEHAVIOR 2
Pros of financial rewards
 Financial rewards helps to improve and enhances the productivity level of employees.
They try to improve the productivity levels of employee who compare their present
performance and make plans to enhance their productivity level.
 They also help in influencing the behavior of employee and enhance their
commitment in the organization so that they give their best to the organization
(Izuma, Saito and Sadato, 2008).
 These monetary incentives provide the employees with full zeal and enthusiasm so
that they can contribute positively towards the achievement of organizational goal.
 Encourages and motivates the employee to give their maximum efforts and utilize
their capacities maximally. It leads to optimum utilization of human resource
(Rehman and Ali, 2013).
 These incentives creates a positive work environment for the people working in an
organization as they give them with an opportunity to earn better so that they can
fulfill their personal needs and requirements.
 Gives psychological satisfaction to the employees and provides them with a sense of
job satisfaction. This creates a sense of belongingness among the employees as
employees feel that their job is safe (Marteau, Ashcroft and Oliver, 2009). People feel
safe and satisfy working with the organization.
 These financial rewards help in improving the living standard of an employee and
satisfy their social as well as security needs. People can afford expensive things and
luxury items from these financial incentives, this improves their lifestyle positively,
and they can build a high-class image in the society (Cimera, 2009).
 Gives an employee a feeling of attachment and belongingness with the organization
and helps to maintain loyalty on the part of employees. Incentives and rewards given
to an employee make an employee faithful towards an organization.
 Boost the morale of employees as these incentives not only serves the purpose of
employee but also of the employer as employee get motivated and perform with full
energy towards achieving the goal of the organization (Oluleye, 2011).
 Lucrative rewards and financial incentive policy of an organization helps in retention
of employee and organization do not have to engage in the long process of
recruitment and selection. This saves the training and hiring cost of an organization
(Anitha, 2014).