The Impact of Pay on Employee Motivation: An MGTP102 Essay Analysis

This essay examines the multifaceted nature of employee motivation, particularly focusing on the role of monetary compensation. It begins by defining employee motivation and its importance in achieving organizational goals, contrasting the views of whether pay alone can effectively motivate employees. The essay delves into various theories, including equity theory, reinforcement theory, and expectancy theory, to support the impact of pay on performance. It also references studies by Edwin Locke, highlighting the comparative effectiveness of different motivational methods. However, the essay also acknowledges the limitations of pay as a sole motivator, discussing the conditions under which money is effective and the significance of intrinsic factors. It then explores Herzberg's two-factor theory, differentiating between intrinsic and extrinsic motivators, with examples such as Google. The essay concludes by emphasizing the need for organizations to address both extrinsic and intrinsic motivators, tailoring approaches to individual employee needs for long-term success. The essay also emphasizes that management should combine both monetary and non-monetary incentives to motivate the employees. It concludes by stating that monetary motivators are not sufficient and the management should focus on the intrinsic and extrinsic factors.

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The only thing that affects employee motivation is the level of pay
Introduction
The motivation of employee can be defined as the commitment, energy, and creativity
that a worker portrays in his job. Employee motivation is a concern of the management to ensure
the employee is focused on their job at all time. Employee satisfaction is considered as one of the
key drivers for the continuous improvement of the total quality control. The two main mentioned
motivators towards employee job satisfaction are money or level of pay and job satisfaction.
Some proponents say that better pay makes the employee be productive while others retaliate
that happy employees are more productive. However, the level of pay alone cannot motivate
employees. Apart from compensation, employees need other factors to achieve job satisfaction.
Additionally, workers want their efforts acknowledged as contributing to the achievement of the
objectives of the organization. Interestingly, if an organization pays its workforce more than the
average salary in the region, it would still be able to sustain the motivation of the employees on a
long-term level.
Monetary compensation is a key incentive to work motivation because it helps the
employees to meet their needs and wants. Employees also use money as a scorecard to ascertain
the value the organization is placing on them. According to the equity theory by John Adams,
workers measures equity between the input they give to the job and the outcomes they receive
from the same job (Shahzadi, et al., 2014, pp.160). This is then compared to the perceived inputs
and outputs of their colleagues in the organization structure. According to the theory, employees
perceive they are well treated if the ratio between their inputs and outcomes correlate with those
of their colleagues. The reinforcement and expectancy theory also supports the motivation effect

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of the level of pay. Reinforcement theory explain that pay relies on performance and encourages
the workers to put more effort on their job. On the other hand, expectancy theory states that
compensation will motivate an employee to the extent that he views it as satisfying his personal
goal and to the extent that it is dependent on performance criteria. According to a study carried
out by psychologist Edwin Locke, he compared four factors of motivating employees (Gupta and
Shaw, 2014, pp.3). These methods include money, goal setting, participation and decision
making. Locke established that money improved performance by 30 percent while goal setting
by 16 percent (Dar, Bashir, Ghazanfar and Abrar, 2014, pp.229). Participation in decision
making improved performance by 17 percent, same as redesigning job models. From Locke
studies, he established that when level of pay is used as a work motivator, it improved the
performance of the employees.
It is apparent that money is one of the motivators of employee performance. However,
money can motivate some employees under some condition and it is not the same for all
employees. The following are some of the conditions that must be met for money to act as a
motivator. First, the employee must perceive money as a reward for performance. Additionally,
the management must be in the position to offer money as a performance incentive. The third
step is that money must be important to the employee. Finally, the worker must perceive the
marginal increase in money as significant for the performance (Eisele, Grohnert, Beausaert and
Segers, 2013, pp.538). It is very rare for all the above conditions to occur simultaneously.
Additionally, not all employees are motivated by the level of pay. Some of the employees are
more motivated by intrinsic factors and are very much unlikely to be influenced by money. For
example, using the Maslow hierarchy of needs model, money may likely be a strong
performance motivator for those employees who want to achieve basic needs such as food and

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shelter (Kaur, 2013, pp.1062). Those employees that have already achieved those needs may not
be motivated by money. Such employees are motivated by other factors such as recognition and
the need to self-actualize. In the contemporary organization setting, there are no much salary
increases in workplaces and the amount becomes insignificant after the deduction of taxes
(Achim, Dragolea and Balan, 2013, pp.685). Additionally, managers have little discretion in the
amount of money they can add to employees. It is therefore very unlikely for organizations to
meet the stipulated conditions to make money a motivator of high performance.
Lack of money can be viewed as a de-motivator for performance but it is not necessarily
a motivator. This can be best explained in the work by behaviorist Frederick Herzberg. In his
study, Herzberg established that those factors that result in job satisfaction are different from the
ones that lead to workplace dissatisfaction. In other words, satisfaction in job is not the opposite
of job dissatisfaction. Herzberg named the factors that results in job satisfaction as intrinsic
motivators and the ones that result in dissatisfaction as extrinsic motivators (Malik and Naeem,
2013, pp.1032). Money is categorized as an extrinsic motivator. From this, poor compensation
may result in job dissatisfaction, but a reasonable wage may not necessarily achieve job
satisfaction. It may somehow facilitate a neutral position between the intrinsic and extrinsic
motivators. According to Herzberg, after the management has offered a fair wage to employees,
they have to go above and beyond and introduce intrinsic motivators for a long term success.
Some of the intrinsic motivators identified include; recognition for achievement, career
advancement. Growth, job responsibility, the work itself, and personal achievement. Extrinsic
factors included unpleasant working conditions, bureaucracy, poor working relationships, poor
leadership, money, job status, job security, and poor decision making (Yusoff, Kian and Idris,
2013, pp.20). An example of a company that has effectively applied the approach of Herzberg is

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Google. The company was named ‘Best Company to Work For’ the fifth time by Fortune
Magazine. Google Corporation has over 50,000 employees spread across the globe and it is a
model for motivating the employees well. Apart from amazing salary perks and benefits, Google
offers other extrinsic motivators such as maternity benefits, free lunch and dinner, no-cost health,
vacation package, and insurance, flex spending accounts, and tuition reimbursements. Google
also fosters intrinsic motivation by encouraging transparency and encouraging interpersonal
relationships. The employees are also encouraged to explore their ideas and the company is more
than ready to support them. This is achieved through the 80/20 rule, whereby the employee is
encouraged to spend 20 percent of their time working on their own ideas. This rule has helped
Google to be innovative and resulted in milestone products such as Gmail and AdSense
(Zámečník, 2014, pp.854). The management of an organization should first address extrinsic
factors and then focus on the intrinsic wants. When it comes to motivating employees, the
management should not generalize but rather focus on the individual needs of each employee.
The two top intrinsic motivators are recognition for achievement and the sense of achievement.
Recognition for achievement entails noticing the efforts of the employee and rewarding them
either through incentives or bonus or just a simple ‘thank you’ or open commendation in
meetings. A sense of achievement often comes when the employee is able to successfully take a
task from start to finish. The management should empower the employee through training and
developments to increase their skills and competencies for efficient production. If an
organization has uninspired and apathetic employees, offering more cash incentives through pay
rises or bonuses cannot address the issue. Even though the employees cannot turn down money,
but if an organization is seeking to develop a high performing and motivated workforce the
management ought to focus on other motivators for long term gain (Lăzăroiu, 2015, pp.68). It is

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essential for the organization to remove extrinsic de-motivators from the work environment and
amplify individual intrinsic motivators.
Conclusion
Money is an important extrinsic motivator. However, the modern employees need more
than compensation to achieve workplace productivity. It is important for an organization to focus
on other wants such as the intrinsic and extrinsic motivators. Money is perhaps the most used
motivator but studies indicate that the prospect of receiving money in the near future is the only
drive for motivation and once the employee has received money, motivation fades so fast.
Monetary motivators have therefore been found to be insufficient motivators. This is mostly
because the expectations of the employees more often than not exceed the results. Additionally,
the disparity between salaries in colleagues may cause a division between the employees.
Employee wants to be recognized for their input into the organization. Monetary recognition is
one of those ways but also appreciating the employee when they have done a good job goes high
in motivating the employee intrinsically. The management should not only focus on guiding and
correcting employees, but also acknowledge and praise their good performance. Sincere
acknowledgment and leadership gestures are more economical and effective than monetary
incentives. Organizations that combine both the level of pay and non-monetary incentives such
as intrinsic and self-actualization needs while addressing extrinsic factors are the most successful
in motivating the employees.

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Bibliography
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