The Impact of Monetary Rewards on Employee Motivation and Retention
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This essay delves into the significant role of monetary and financial rewards in fostering employee motivation and building strong employer-employee relationships within organizations. It explores the application of organizational behavior theories, such as Maslow's Hierarchy of Needs, Herzberg's Two-Factor Theory, and Expectancy Theory, to understand how financial incentives can drive employee performance and job satisfaction. The essay examines the advantages of monetary rewards, including their effectiveness in attracting talent, creating a sense of value, and facilitating performance-based incentives. Conversely, it also addresses the drawbacks, such as the short-term impact, potential for a risk-taking culture, and the fact that not all employees are primarily motivated by money. The analysis highlights the importance of using organizational behavior theories to tailor reward strategies to individual employee needs and expectations. The essay concludes by emphasizing the crucial role of both monetary and non-monetary rewards in creating a positive work environment that supports long-term organizational growth and success, while also acknowledging the importance of continuous evaluation and adjustment of reward policies to maintain employee engagement and motivation.
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Role of money and other financial rewards in building relationship with
employees and motivating them
In today’s competitive business world, the importance of highly productive and motivated
employees has grown substantially. The competition in industries is considerably high, and
organisations focus on gaining a competitive advantage in order to sustain their future
growth in the market. As per Li and Cai (2012), the top-level management of companies
implements various organisational behaviour theories in order to increase the productivity
of employees and motivate them. It is referred to the study of individuals and groups
behaviour who are working in an organisation. The organisational behaviour theories enable
the management to evaluate the key aspects which include the job satisfaction of
employees and such information allow them to enact business strategies which are focused
on improving their overall performance. Motivated employees are highly productive, and
they work towards achieving organisational objectives. The human resource department of
corporations provides both monetary and non-monetary rewards to their employees in
order to motivate them to work at their highest capacity which benefits the company.
Monetary and other financial rewards assist the HR managers in building strong
relationships with employees which result in increasing their job satisfaction level (Miner,
2015). This essay will focus on the role of monetary rewards while building relationships
with employees. This essay will evaluate a number of organisational behaviour theories to
understand how financial rewards can enable corporations to motive their workforce.
Furthermore, pros and cons of monetary rewards will be discussed in the report by
evaluating various organisational behaviour theories.
Motivating employees is a vital step in every organisation because a motivated workforce
means highly productive staff members who work towards achieving corporate objectives.
In order to motivate employees, the management is required to understand what motivates
their employees. According to Miner (2015), they have to develop programs which are
focused towards both motivating and retaining talented employees. In this context, the
hierarchy of needs theory assists the management. The theory is developed by Abraham
Maslow which divides employee needs into five categories which include physiological,
safety, belonging, esteem and self-actualisation. Maslow provided that in order to motivate
Page 1
employees and motivating them
In today’s competitive business world, the importance of highly productive and motivated
employees has grown substantially. The competition in industries is considerably high, and
organisations focus on gaining a competitive advantage in order to sustain their future
growth in the market. As per Li and Cai (2012), the top-level management of companies
implements various organisational behaviour theories in order to increase the productivity
of employees and motivate them. It is referred to the study of individuals and groups
behaviour who are working in an organisation. The organisational behaviour theories enable
the management to evaluate the key aspects which include the job satisfaction of
employees and such information allow them to enact business strategies which are focused
on improving their overall performance. Motivated employees are highly productive, and
they work towards achieving organisational objectives. The human resource department of
corporations provides both monetary and non-monetary rewards to their employees in
order to motivate them to work at their highest capacity which benefits the company.
Monetary and other financial rewards assist the HR managers in building strong
relationships with employees which result in increasing their job satisfaction level (Miner,
2015). This essay will focus on the role of monetary rewards while building relationships
with employees. This essay will evaluate a number of organisational behaviour theories to
understand how financial rewards can enable corporations to motive their workforce.
Furthermore, pros and cons of monetary rewards will be discussed in the report by
evaluating various organisational behaviour theories.
Motivating employees is a vital step in every organisation because a motivated workforce
means highly productive staff members who work towards achieving corporate objectives.
In order to motivate employees, the management is required to understand what motivates
their employees. According to Miner (2015), they have to develop programs which are
focused towards both motivating and retaining talented employees. In this context, the
hierarchy of needs theory assists the management. The theory is developed by Abraham
Maslow which divides employee needs into five categories which include physiological,
safety, belonging, esteem and self-actualisation. Maslow provided that in order to motivate
Page 1

employees, the management is required to assess and fulfil their needs which increase their
job satisfaction level and motivate them to perform better. Lower level employees have
physiological and safety needs which can be fulfilled by extrinsic rewards such as money
increase in salary, bonus, fringe benefits, and others (Ozguner and Ozguner, 2014). On the
other hand, mid-level and top-level employees are motivated by intrinsic rewards such as
sense of achievement, recognition, works of praise, work freedom and others. Money is the
most obvious and effective way of motivating employees. Well paid employees are satisfied
with their job, and they have a positive relationship with their management. Many
organisations also introduce performance-based monetary rewards to motivate their
employees to perform better to achieve more rewards (Taormina and Geo, 2013).
Along with the development of countries, the living conditions of people have improved as
well. Studies have shown that although money is the easiest way of motivating employees,
however, it is effective in a short run. Generally, in the long run, employees look for factors
such as positive working environment and job satisfaction rather than high income. ‘Two
factors theory’ or ‘Motivation-Hygiene theory’ was developed by Frederick Herzberg. The
theory provides that job satisfaction is affected by motivators and dissatisfaction with
hygiene factors (Ali, 2013). It provides that the reasons for job dissatisfaction include factors
such as working conditions, salary, co-worker relationship, policies and rules. On the other
hand, job satisfaction is affected by recognition, achievement, responsibility, personal
growth and others. Herzberg argued that improving the satisfier factors result in increasing
job satisfaction, whereas, improvement in hygiene factors decreases job dissatisfaction.
Based on this theory, it can be concluded that lack of monetary rewards or basic pay results
in dissatisfying employees (Pegler, 2012). However, satisfier factors contribute to increasing
the job satisfaction of employees. Both these factors play crucial role in motivating
employees and retaining them in the organisation, but, it shows that monetary rewards are
not enough to motivate and retain talented employees.
While using monetary rewards, there are a number of benefits received by corporations.
Firstly, they are the fundamental part of an employer-employee relationship. The first step
in attracting talented employees is paying them the highest salary package than
competitors. People have basic needs which are fulfilled by money, thus, it is a good way of
motivate employees to the company (Park and Ryoo, 2013). Furthermore, well-paid
Page 2
job satisfaction level and motivate them to perform better. Lower level employees have
physiological and safety needs which can be fulfilled by extrinsic rewards such as money
increase in salary, bonus, fringe benefits, and others (Ozguner and Ozguner, 2014). On the
other hand, mid-level and top-level employees are motivated by intrinsic rewards such as
sense of achievement, recognition, works of praise, work freedom and others. Money is the
most obvious and effective way of motivating employees. Well paid employees are satisfied
with their job, and they have a positive relationship with their management. Many
organisations also introduce performance-based monetary rewards to motivate their
employees to perform better to achieve more rewards (Taormina and Geo, 2013).
Along with the development of countries, the living conditions of people have improved as
well. Studies have shown that although money is the easiest way of motivating employees,
however, it is effective in a short run. Generally, in the long run, employees look for factors
such as positive working environment and job satisfaction rather than high income. ‘Two
factors theory’ or ‘Motivation-Hygiene theory’ was developed by Frederick Herzberg. The
theory provides that job satisfaction is affected by motivators and dissatisfaction with
hygiene factors (Ali, 2013). It provides that the reasons for job dissatisfaction include factors
such as working conditions, salary, co-worker relationship, policies and rules. On the other
hand, job satisfaction is affected by recognition, achievement, responsibility, personal
growth and others. Herzberg argued that improving the satisfier factors result in increasing
job satisfaction, whereas, improvement in hygiene factors decreases job dissatisfaction.
Based on this theory, it can be concluded that lack of monetary rewards or basic pay results
in dissatisfying employees (Pegler, 2012). However, satisfier factors contribute to increasing
the job satisfaction of employees. Both these factors play crucial role in motivating
employees and retaining them in the organisation, but, it shows that monetary rewards are
not enough to motivate and retain talented employees.
While using monetary rewards, there are a number of benefits received by corporations.
Firstly, they are the fundamental part of an employer-employee relationship. The first step
in attracting talented employees is paying them the highest salary package than
competitors. People have basic needs which are fulfilled by money, thus, it is a good way of
motivate employees to the company (Park and Ryoo, 2013). Furthermore, well-paid
Page 2

employees are happy with their organisational, and they have a strong bond with the
management. They understand that the management knows their worth; therefore, they
are well paid. It creates a strong bond between employees and the management which is
crucial for them motivation. Studies have shown that performance-based rewards are good
way to motivate employees to perform better and achieve their targets. When employees
are paid monetary rewards based on their performance, then they are more likely to be
motivated to improve their performance (Latham, 2012). Furthermore, monetary schemes
are easy to understand by employees, therefore, when the management wanted to achieve
a target then they are more likely to offer a financial reward to employees. It is also a
universal reward and employees can choose how they wanted to spend it. It also appeals to
all levels of staff which include administrator to the CEO.
Along with various benefits of monetary rewards, there are various disadvantages as well. It
is a common saying that “Money cannot buy all happiness”. Similarly, not all people are
motivated by money, especially talented employees. It is easy for talented employees to get
high paying jobs in the industry, thus, they focus on other factors such as working
environment, corporate culture, co-workers relationship, employee-centric regulations and
others (Cho and Perry, 2012). Monetary rewards are ineffective in the long-term benefit.
Employees did not prefer to work in a hostile environment even if they are getting well paid.
Moreover, in a hostile environment, it is difficult to motivate employees even by monetary
rewards. On the contrary, financial incentives can have unexpected consequences which
establish a risk-taking culture in the company in which employees do whatever to achieve
their targets. It creates biases between employees which lead to discrimination between
employees. It is more likely to increase the retention rate at the corporation which affects
the productivity of the company (Ifinedo 2012). Furthermore, it is difficult for the
management to sustain participant interest by using financial incentive schemes over the
long term. Generally, people get frustrated by working continuously for money, and they
are more likely to focus on factors such as strong relationship, supporting culture, positive
environment and others.
Based on the above analysis, it can be seen that there are both negative and positive
influence of monetary rewards on employee motivation. In order to effectively use
monetary rewards, it is recommended that managers should use organisational behaviour
Page 3
management. They understand that the management knows their worth; therefore, they
are well paid. It creates a strong bond between employees and the management which is
crucial for them motivation. Studies have shown that performance-based rewards are good
way to motivate employees to perform better and achieve their targets. When employees
are paid monetary rewards based on their performance, then they are more likely to be
motivated to improve their performance (Latham, 2012). Furthermore, monetary schemes
are easy to understand by employees, therefore, when the management wanted to achieve
a target then they are more likely to offer a financial reward to employees. It is also a
universal reward and employees can choose how they wanted to spend it. It also appeals to
all levels of staff which include administrator to the CEO.
Along with various benefits of monetary rewards, there are various disadvantages as well. It
is a common saying that “Money cannot buy all happiness”. Similarly, not all people are
motivated by money, especially talented employees. It is easy for talented employees to get
high paying jobs in the industry, thus, they focus on other factors such as working
environment, corporate culture, co-workers relationship, employee-centric regulations and
others (Cho and Perry, 2012). Monetary rewards are ineffective in the long-term benefit.
Employees did not prefer to work in a hostile environment even if they are getting well paid.
Moreover, in a hostile environment, it is difficult to motivate employees even by monetary
rewards. On the contrary, financial incentives can have unexpected consequences which
establish a risk-taking culture in the company in which employees do whatever to achieve
their targets. It creates biases between employees which lead to discrimination between
employees. It is more likely to increase the retention rate at the corporation which affects
the productivity of the company (Ifinedo 2012). Furthermore, it is difficult for the
management to sustain participant interest by using financial incentive schemes over the
long term. Generally, people get frustrated by working continuously for money, and they
are more likely to focus on factors such as strong relationship, supporting culture, positive
environment and others.
Based on the above analysis, it can be seen that there are both negative and positive
influence of monetary rewards on employee motivation. In order to effectively use
monetary rewards, it is recommended that managers should use organisational behaviour
Page 3
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theories. For example, expectancy theory of motivation was given by Vroom which provides
that employees’ motivation depends on the fact which outcome would be like (Renko,
Kroeck and Bullough, 2012). If employees like the outcome, then they are more likely to put
extra efforts in order to achieve the desired results. Similarly, rather than establishing a
monetary scheme for the entire organisations, the managers should evaluate the needs of
employees working at different levels. Generally, needs of high-level employees are
different from requirements of low-level employees. Based on expectation theory, the
managers can provide either monetary or non-monetary rewards to employees based on
the expectations of employees (Nasri and Charfeddine, 2012). Furthermore, continuous
development and change in the reward policy are necessary because employees did not get
motivated by those needs which are already fulfilled (Yidong and Xinxin, 2013). Thus, use of
organisational behaviour theories and evaluation of employees needs is necessary to use
monetary rewards in the organisation effectively.
In conclusion, organisational behaviour theories are crucial for a corporation since it assists
in motivating and retaining talented employees. The management can use these theories to
evaluate the needs of employees in order to implement policies which are focused towards
motivating them. Monetary and other financial rewards are an effective way of motivating
employees and building strong relationship with them. However, as provided by various
organisational behaviour theories, they are effective for short-term targets. The benefits of
monetary rewards include a strong relationship with employees, easy to understand,
effective from both low to high-level management and universally applicable. On the other
hand, its disadvantages include lack of job satisfaction, encourage risk-taking culture, not
suitable for all employees, hostile working environment, increased retention rates and
effective for short-term targets. By using organisational behaviour theories, the
management can establish monetary rewards strategies which assist in fulfilling employees’
needs and motivating them to achieve organisational goals. Effective use of both monetary
and non-monetary rewards leads to creating a positive workforce environment which assists
in sustaining future growth of a company.
Page 4
that employees’ motivation depends on the fact which outcome would be like (Renko,
Kroeck and Bullough, 2012). If employees like the outcome, then they are more likely to put
extra efforts in order to achieve the desired results. Similarly, rather than establishing a
monetary scheme for the entire organisations, the managers should evaluate the needs of
employees working at different levels. Generally, needs of high-level employees are
different from requirements of low-level employees. Based on expectation theory, the
managers can provide either monetary or non-monetary rewards to employees based on
the expectations of employees (Nasri and Charfeddine, 2012). Furthermore, continuous
development and change in the reward policy are necessary because employees did not get
motivated by those needs which are already fulfilled (Yidong and Xinxin, 2013). Thus, use of
organisational behaviour theories and evaluation of employees needs is necessary to use
monetary rewards in the organisation effectively.
In conclusion, organisational behaviour theories are crucial for a corporation since it assists
in motivating and retaining talented employees. The management can use these theories to
evaluate the needs of employees in order to implement policies which are focused towards
motivating them. Monetary and other financial rewards are an effective way of motivating
employees and building strong relationship with them. However, as provided by various
organisational behaviour theories, they are effective for short-term targets. The benefits of
monetary rewards include a strong relationship with employees, easy to understand,
effective from both low to high-level management and universally applicable. On the other
hand, its disadvantages include lack of job satisfaction, encourage risk-taking culture, not
suitable for all employees, hostile working environment, increased retention rates and
effective for short-term targets. By using organisational behaviour theories, the
management can establish monetary rewards strategies which assist in fulfilling employees’
needs and motivating them to achieve organisational goals. Effective use of both monetary
and non-monetary rewards leads to creating a positive workforce environment which assists
in sustaining future growth of a company.
Page 4

References
Ali, N., 2013. Motivation-Hygiene Theory: Applicability on Teachers. Journal of Managerial
Sciences, 7(1), pp.87-104.
Cho, Y.J. and Perry, J.L., 2012. Intrinsic motivation and employee attitudes: Role of
managerial trustworthiness, goal directedness, and extrinsic reward expectancy. Review of
Public Personnel Administration, 32(4), pp.382-406.
Ifinedo, P., 2012. Understanding information systems security policy compliance: An
integration of the theory of planned behavior and the protection motivation
theory. Computers & Security, 31(1), pp.83-95.
Latham, G.P., 2012. Work motivation: History, theory, research, and practice. Sage.
Li, M. and Cai, L.A., 2012. The effects of personal values on travel motivation and behavioral
intention. Journal of Travel Research, 51(4), pp.473-487.
Miner, J.B., 2015. Organizational behavior 1: Essential theories of motivation and leadership.
Abingdon: Routledge.
Nasri, W. and Charfeddine, L., 2012. Motivating salespeople to contribute to marketing
intelligence activities: An expectancy theory approach. International Journal of Marketing
Studies, 4(1), p.168.
Ozguner, Z. and Ozguner, M., 2014. A managerial point of view on the relationship between
of Maslow's hierarchy of needs and Herzberg's dual factor theory. International Journal of
Business and Social Science, 5(7), pp.207-215.
Park, S.C. and Ryoo, S.Y., 2013. An empirical investigation of end-users’ switching toward
cloud computing: A two factor theory perspective. Computers in Human Behavior, 29(1),
pp.160-170.
Pegler, C., 2012. Herzberg, hygiene and the motivation to reuse: Towards a three-factor
theory to explain motivation to share and use OER. Journal of Interactive Media in
education.
Page 5
Ali, N., 2013. Motivation-Hygiene Theory: Applicability on Teachers. Journal of Managerial
Sciences, 7(1), pp.87-104.
Cho, Y.J. and Perry, J.L., 2012. Intrinsic motivation and employee attitudes: Role of
managerial trustworthiness, goal directedness, and extrinsic reward expectancy. Review of
Public Personnel Administration, 32(4), pp.382-406.
Ifinedo, P., 2012. Understanding information systems security policy compliance: An
integration of the theory of planned behavior and the protection motivation
theory. Computers & Security, 31(1), pp.83-95.
Latham, G.P., 2012. Work motivation: History, theory, research, and practice. Sage.
Li, M. and Cai, L.A., 2012. The effects of personal values on travel motivation and behavioral
intention. Journal of Travel Research, 51(4), pp.473-487.
Miner, J.B., 2015. Organizational behavior 1: Essential theories of motivation and leadership.
Abingdon: Routledge.
Nasri, W. and Charfeddine, L., 2012. Motivating salespeople to contribute to marketing
intelligence activities: An expectancy theory approach. International Journal of Marketing
Studies, 4(1), p.168.
Ozguner, Z. and Ozguner, M., 2014. A managerial point of view on the relationship between
of Maslow's hierarchy of needs and Herzberg's dual factor theory. International Journal of
Business and Social Science, 5(7), pp.207-215.
Park, S.C. and Ryoo, S.Y., 2013. An empirical investigation of end-users’ switching toward
cloud computing: A two factor theory perspective. Computers in Human Behavior, 29(1),
pp.160-170.
Pegler, C., 2012. Herzberg, hygiene and the motivation to reuse: Towards a three-factor
theory to explain motivation to share and use OER. Journal of Interactive Media in
education.
Page 5

Renko, M., Kroeck, K.G. and Bullough, A., 2012. Expectancy theory and nascent
entrepreneurship. Small Business Economics, 39(3), pp.667-684.
Taormina, R.J. and Gao, J.H., 2013. Maslow and the motivation hierarchy: Measuring
satisfaction of the needs. The American journal of psychology, 126(2), pp.155-177.
Yidong, T. and Xinxin, L., 2013. How ethical leadership influence employees’ innovative work
behavior: A perspective of intrinsic motivation. Journal of business ethics, 116(2), pp.441-
455.
Page 6
entrepreneurship. Small Business Economics, 39(3), pp.667-684.
Taormina, R.J. and Gao, J.H., 2013. Maslow and the motivation hierarchy: Measuring
satisfaction of the needs. The American journal of psychology, 126(2), pp.155-177.
Yidong, T. and Xinxin, L., 2013. How ethical leadership influence employees’ innovative work
behavior: A perspective of intrinsic motivation. Journal of business ethics, 116(2), pp.441-
455.
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