Effect of Rewards on Employee Motivation

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“Motivation is the art of getting people to do what you want them to do because they want to do it.”

–Dwight D. Eisenhower

Like a little kid being given a chocolate on standing first in his class or a big hug for doing something good like helping someone, or cleaning the place after playing, rewards whether monetary or non-monetary can be significant tools for the motivation of employee and a positive step towards the improvement of his performance an boosting his morale. Jack Zigon (1998) defines rewards as “something than increases the frequency of an employee action”.

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It’s a common observation that most of us don’t perform our tasks completely, not because they are difficult but because of low interest or motivation to perform that task. The desire or motivation is necessary for the performance of an activity. Kleinginna and Kleinginna (1981a) defines motivation as, “internal state or condition that activates behavior and gives it direction; desire or want that energizes and directs goal-oriented behavior; influence of needs and desires on the intensity and direction of behavior.”


Gatlin, Rebecca (1997), says that a good and attractive reward program is necessary the employees in order to motivated them otherwise the unmotivated employees will not perform their tasks properly and will ultimately affect the company in a negative way i.e. decrease in profitability. Organization’s performance is dependent on the employees who work for it, so in order to get the better and quality output, rewards contribute a lot in this part, so it is essential for organization’s managers to make effective and attractive reward programs to motivate their employees, Deeprose (1994).

Gregory P. Smith, author of book ‘Dynamic Ways to Reward, Energize & Motivate Your Teams’, states in his book that rewarding and recognizing the work of the employees makes them happy, provide them job security and they contribute more towards the organization.

Edward E. Lawler III (2003), “With the right combination of reward system practices, people will be motivated to excel, and those who do excel will be motivated to stay because they will be highly rewarded. This is the foundation of the virtuous spiral, in which both sides win and create success for each other”.

In Pakistan human resource departments are seen only in those organizations where technology is rigorously applicable or which are highly knowledge organizations. The telecommunication sector of Pakistan has shown tremendous growth in recent years and its all because of using up to date technology and the adoption of competitive and innovative human resource practices. Becker and Huselid (1998) supports that for having the competitive advantage for any business Human resource is basic source to get it.

The organizations in the telecommunication sector of Pakistan are the structures that provide their services supported by the human resources. The most important factor in the delivery of the best quality service is the motivation of the employees; on the individual level as well as on the group level. In today’s world of competition to deliver best service in order to satisfy customers it has become very difficult; in fact organizations take it as a challenge to motivate employees in order to get best output from them. The telecommunication sector of Pakistan plays a powerful role in its economy. Excellent professional services delivered by the employees of the telecom sector of Pakistan can create a positive and everlasting image in the eyes of their customers.

Several studies show that rewards have a huge impact on the job satisfaction and motivation of the employees. Beer (1984) says that for top management it is the top most responsibility to develop a strong positive relationship between the organization and its employees in order to carry out the continuous needs of both i.e. organizations and employees. Organizations want their employees to follow the organization’s rules and regulations i.e. work according to the standards that are being set for them, and as a result of it employees want from the organization good working environment, good salary, good behavior, job security, delegation of authority. For organizations understanding to deal with these expectations of employees is required.

Nel (2001), argues that those employees that are motivated and are fully aware of the organizations goals, that provide the organizations benefit, will divert their all hard work and devotion towards those goals.

According to Flynn (1998), that these days organizations understand the great gains derived by linking rewards whether monetary or non monetary to their business strategy. The telecommunication sector of Pakistan is offering several benefits and rewards to its employees; so that employees feel motivated and remain satisfied with their jobs and improve their performance in order to achieve organizational goals.


The basic objective for carrying out this research is to measure the impact of rewards in the most fast growing sector of Pakistan i.e. Telecommunication sector Pakistan on the motivation of its employees.


The significance for carrying out this research is that whether the employees in the telecommunication sector of Pakistan are satisfied with their organizational reward system or not. And which reward type they appreciate the most whether the monetary rewards or the non monetary rewards.

Review of Literature


Jack Zigon (1998) defines rewards as “something than increases the frequency of an employee action”.

In order to treating the employees of the organization right, rewarding them properly is one of the important components. Organization which is growing healthier provides its employees the opportunity to grow and prosper. In today’s highly business competitive environment win-win relationship is important that forms the right treatment of employees by the organizations. Strategy of rewarding employees when performance is not good cannot prevail for long, hence rewarding for good performance encourages employees to continue their performance and improve their skills and knowledge day by day to contribute positively towards organization, Edward E. Lawler III (2003).

ACCEL team development says that for improved and better output from the employees rewards act as ‘catalyst’. Rewards are part of the organization and management should pay especial attention towards them; rewards should be quick, significant, related to performance, compatible with job measurement and irrevocable. Rewards should be given fairly, if there is some factor of unrealistic distribution of rewards like giving promotion of the favoritism basis, it will have a negative impact on the motivation of the rest of the employees.

Searle, John G. (1990), getting the satisfaction of the employees over the rewards that are being offered to them id a difficult task, organization has to learn to manage those things which creates feeling of dissatisfaction among employees; Employee’s satisfaction towards reward in comparison of what he expected and how much he received secondly is comparing his rewards with other people of same jobs in the organization, overestimating his own performance as compare to his colleagues. So rewards should be designed in full justice by the management of what they are taking from employee and what they are giving to him for his input, and they should be fully defined to the employees so that there may not remain any chance of misconception. This plays important role in creating feeling of satisfaction or dissatisfaction.

Cameron & Pierce (1977), states that every business use rewards like salary, promotion, and other types of bonuses to encourage employees towards high level of performances.

Types of Rewards

According to Syedain (1995), there are two schools of thought for rewards at the workplace, one is to say THANK YOU in any way, verbal, non-verbal, via certificate etc other is to give a concrete rewards that create an impact.

There are two types of rewards monetary rewards and non-monetary rewards. Employee reward programs design requires a balance between monetary rewards and non-monetary rewards to provide incentives and benefits to the employees.

Monetary rewards

Marcia Moore, M.S.S.W.(2010), says that monetary rewards are those rewards that are being given by the organization in the form of cash, or through cheque or some other way of financial transaction for achieving the sales goals, providing best quality, providing outstanding performance in a difficult situation or delivering a project report in the best way.

Gratton (2004), states that “motivation is determined by both monetary and non-monetary factors, money has come to play an overly important role in our thinking about the causes of behavior. In most companies very limited time and effort are spent on considering non-monetary sources of motivation.”

Money is an important factor in motivating people as we live in a money motivated world. According to Peter Drucker (1974), ” there is not one shred of evidence for the allege turning away from material rewards. Antimaterialism is a myth, no matter how much it is extolled.” Monetary rewards have so much importance that if no proper attention is paid to them or ignoring them will act as demotivator. He further says, “Economic incentives are becoming rights rather than rewards.”

ACCEL team development argues that monetary rewards cannot be remunerated by the non-monetary rewards (human relations). Famous companies like Microsoft, IBM are to some level a result of monetary motivation. Financially rewarding employees’ increases their motivation levels, which results in increase in the output, creating more profits and those profits should be circulated back to the employees who are actually responsible for it.

Non-Monetary Rewards

Marcia Moore, M.S.S.W., (2010), non-monetary awards includes certificate, a word of thanks from supervisor or manager, flexible schedules, a day off, acknowledgment of birthdays, and free lunches or dinners to celebrate team work success.

Pfeffer (1998), “People do work for money – but they work even more for meaning in their lives… Companies that ignore this fact are essentially bribing their employees and will pay the price in a lack of loyalty and commitment”.

Sherry Ryan (Training Specialist, Weyerhaeuser Company), says that non-monetary rewards play important role in improving employee performance. Using proper attractive and communicative method of non-monetary rewards leaves a positive impact on the employees and improves employees’ performances in different dimensions. Such types of awards are inexpensive to give to employees but worth a lot when employees receive them.

Bob Nelson (2004), saying thank you to your employees or appreciating their performances when something good is done, is extremely important factor that should be recognized by the managers. According to him 78% employees said that they feel more motivated and happy when their manager appreciates them.

According to research conducted by, Allen and Helms’ (2002), expressions of appreciation and praise by the managers give employees encouragement. American Society for Training and Development’s (ASTD) research proves that non-monetary awards work as an important factor for keeping hold of top performing employees.


Motivation is derived from a Latin word, ‘movere’, which means to move.

The author of book ‘Motivation, beliefs, and organizational transformation’ (1999), Dr. Green and Butkus (1999), says that motivation is derived from a word “motivate”, which means to move, push or persuade to act for satisfying a need. Further motivation can be explained as acting of such forces within a person that cause a stimulation of effort, direction and goal direction.

‘Motivation’ is the total involvement of a person in his tasks to carry out with dedication, devotion, happiness, excitements, and voluntarily, Mol (1992).

Theories on Motivation

There are two classes of theory of motivation;

Content Theories: Content also called as need theories of motivation basically emphasis on internal factors of an individual that strengthen and gives the direction to the behavior.

Maslow’s Hierarchy of needs:

Abraham Maslow (1943, 1954), unsatisfied needs creates demotivation, there are following needs that must be satisfied, these are called as ‘deficiency needs’. As these needs are fulfilled the person is satisfied and move towards growth and self actualization.

Physiological needs: These are the basic needs for example food, water, air, and all other things that are necessary for the survival. In order to enhance workplace motivation by achieving the target of fulfilling the needs of employee give proper breaks for lunch, and offer such salary to employees that enable them to buy basic needs of life. Provide ample breaks for lunch and recuperation and pay salaries that allow workers to buy life’s essentials.

Security needs: it includes security regarding the physical environment, living in a safe area, medical insurance, job security. These needs can simply be fulfilled by giving all these securities to employees.

Belongingness needs: it includes friendship’s trust and satisfaction, feeling right in a group, giving and receiving care and love. It can be achieved by generating a feeling of acceptance.

Esteem needs: It includes recognition, attention, social status, accomplishment, self-respect. It can be achieved by recognizing the achievements of the employee, by assigning them some projects, make them feel important and valued asset for organization.

Self-actualization needs: it includes one’s own potential, creative capabilities etc, it can be achieved by offering challenging and meaningful work assignments which enable innovation, creativity, and progress according to long-term goals.

Alderfer’s ERG Theory:

The Alderfer’s ERG theory (1969), is an extension of Maslow’s theory of needs. He suggested that needs can be divided into three components; existence (similar to physiological needs and security needs), relatedness (similar to belongingness needs and esteem needs) and growth (similar to self-actualization).

It differs from Maslow hierarchy of needs theory in a way that according to Alderfers it may happen that more than one need may be motivated at the same time, lower motivators is not necessary to be  significantly fulfilled before moving towards higher motivators, the order of needs may differ from person to person, there is a ‘frustration- regression principle’ and according to it if high order need is frustrated a person may regress to increase the satisfaction of a lower need which appears easier to satisfy.

Frederick Herzberg’s Motivator hygiene theory:

Herzberg’s motivator hygiene theory (1959), is closely related to Maslow’s theory but it is more closely related to how to motivate individuals at their workplace. According to him individuals are influenced by two sets of factors;

  • Hygiene factors: These are said to be lower level of needs by Herzberg.
  • Motivator factors: These are said to high level of needs by Herzberg.

According to him meeting hygiene factors will not motivate individuals to put their effort or to improve their performance, it will just help them from being getting dissatisfied, but if motivator factors will be combined with this it will help individuals to motivate.

McClelland’s Learned needs theory: acquire

McClelland’s theory states that individuals learn needs from their culture and life experiences. There are three basic needs of an individual;

  • Need for affiliation (n Aff): It is the need of establishing social relationships with the people, communities, getting accepted by them.
  • Need for power (n Pow): It is divided in two parts, desire to control one’s environment and second to influence others.
  • Need for achievement (n Ach): It involves the aspiration to take accountability, set challenging goals and get feedback of their performance.

McClelland states that a person has full strong capability in any one of the above categories, thus it has prospective to motivated people that leads to satisfaction. Management should understand these needs of the individuals and then structure their jobs to satisfy them. Those who have high n Aff such people perform well in customer service jobs or where customer interaction is involved. Those who have high n Pow management should provide them the opportunity to manage others. Those who have high n Ach such people should be given challenging but achievable goals.

Process Theories: These theories of motivation focus on known human decision behaviors for the explanation if motivation. These theories determine that how an individual’s behavior can be energized, maintained in willed and self directed cognitive process.

Victor Vroom’s Expectancy Theory:

Victor Vroom (1964), theory is based on three beliefs;

  • Valence: is the extend of the expected outcomes of an individual are attractive or unattractive.
  • Expectancy: is the extend to which employees believe that they are giving enough effort that they will achieve the target of given level of performance.
  • Instrumentality: is the level to which employees believe that achieving a given performance level result in the form of certain reward.

Motivation = Valence x Expectancy (Instrumentality)

If even one of these is zero the employee will have not motivation for the task, so managers ensure increase in effort will improve performance and improved performance will result in high rewards.

The theory says employees have different goals to achieve and can be motivated if they believe that; there exists a positive correlation between efforts and performance, good performance will result in a reward, and this reward will satisfy an important need, and the wish for satisfying that need is powerful enough to make effort valuable.

Equity Theory:

Equity theory was first time developed by John Stacey Adams in 1963. Individuals in the society make comparison of their efforts (inputs) and rewards (outputs) that they get. The fairness regarding the rewards influences the level of motivation of individuals a lot. Equity exists when individuals identify that the ratio between there efforts and rewards is similar to whom they are comparing.

Individual’s Rewards (output) / Individual’s Efforts (Input) = Other person’s Rewards (output) / Other person’s Efforts (Input)

Similarly inequity occurs when there is difference in ratio in comparison to others. Inequity has two types;

  • Under-Reward: this type occurs when an individual starts believing that he is putting more efforts as compare to others, but receiving the same rewards that others are getting for relatively less effort.
  • Over-Reward: this type occurs when an individual starts believing that his equity ratio is higher other individuals. Thus getting more rewards by putting less efforts.

Under-Rewarded individual may get motivate to do more work to meet his performance level while on the other hand he may get dis-hearted from this. Over-Reward individual start putting less efforts as he may assume that he is getting much more rewards from little effort. For managers equity theory states that rewards should be fair to all employees.

Gary Latham and Edwin Locke’s goal setting theory:

E. Locke and G. Latham (1990), states that goals are important factors in affecting the behaviors and motivation levels of employees. Motivated behavior of employees can be achieved by setting challenging goals for them that usually involve the quantitative targets. Such goals of performance are more good than those in which you just say, ‘you did a great job, well done’. Researches have shown that challenging goals are more motivational than any other goals that are easily achievable. The more the dedicated is employee the more he will put his effort to achieve those goals. Researchers show that individuals that perform in goal setting have increases goal commitment. If an individual has high self-efficiency he will respond more positively to achieve goals rather than those who are low-efficient.

B.F. Skinner’s Reinforcement Theory:

In Reinforcement theory B.F. Skinner (1957), considered a motivation theory along with learning theory. The theory state that motivated behavior is the outcome of reinforces which are actually the resultants from the behavior that cause it more likely to occur again. It further says that it is essential to measure the consequences of behavior rather than to understand cognitive or processes motivation. Such behavior that was previously rewarded will be continued in future as well from an individual rather than that behavior which was not rewarded or for which he was being punished. The theory suggests to managers that they can handle the behavior modifications by reinforce desired behaviors and punish undesired behaviors.

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Need for motivation

The satisfaction or the dissatisfaction levels of an employee are directly proportional to his good or bad performance. Employee dissatisfaction may lead to poor performance. Petcharak (2004), it is the responsibility of the human resource management of the organization that employee may not dissatisfy from his job, so HR management should take steps to motivate employees otherwise employees will not perform up to expected standards of the organization. Cheng (1995), says that it is one of the larges test challenge for service providing organizations to motivate their employees in order to satisfy their customers. The HR department’s major task is to develop strategies to motivate its employees.

Human capital rather than financial capital plays a significant role in meeting the goals of the organization. It is the responsibility of the top executives to motivate the employees of the organization. Human capital is the basic source of competitive advandage for any service providing organization these days. Organizations which actually pay attention towards the motivation of its employees assures its success, Dale Carnige (1985). This shows that employees who are motivated are best for the organizations to attain its goals, it is the duty of managers and supervisors to motivate them, Roberts (2005).

According to La Motta (1995), motivational arousal causes an employee’s interest to complete its project, achieve all those goals that are being set for him. Different people are motivated by different ways, one thing that is creating motivation to one person might not create to other, because there is difference in motivation levels of every individual.

Baron (1983), agrees with Maslow’s hierarchy of needs, that there are some natural factors of motivation that if provided to an individual will motivate him like security needs, esteem needs and self actualization needs.

Importance of Rewards and Motivation

Searle, John G. (1990), rewards are basically to motivate the behaviors of employees towards their work. Rewards should be given as a result to effective performance. Following are some conditions that are necessary for the creation of motivation among employees;

  • Employees must have faith that their effective performance will surely be appreciated and rewarded.
  • The rewards that will be being offered by management are attractive.
  • The believe of employees that their effort is really contributing worthwhile to attain the organization’s goals.

Organizations must pay attention towards the Monetary as well as Non-Monetary rewards, because the balanced combination of both creates motivation. An individual’s goals and organization’s goals are independent goals that are linked by the work motivation. Individuals provide their services to organizations to attain organization’s goals in order to meet their personal goals. So, we can say that an individual’s goals are directly proportional to the organizational goals.

Robert (2005), while studying the Baron’s work (1983) reports that motivation not only can influence the performance but the performance can also be influenced by rewards, i.e. direct rewards to true performance. ‘Total reward system’ is the system in which salaries and other rewards are given to the employees on the basis of their performance. Therefore, ‘total reward system’ is one of the important element, Wilson (1994).

Mosley, Megginson, Pietri (2001), reports that the there are three levels of employee motivation;

  • Behavior: the direction of those behaviors of an employee that he selects to perform.
  • Effort: the level of willingness of an employee to put their effort on their work.
  • Persistence: the level of willingness to work regardless of difficult situations.

In Pakistan telecommunication sector is facing big changes for last few years, not only their customers are increasing but also the services are increasing. They reported from a research conducted by them that employees in telecommunication sector give more importance to pay and promotion than training, and pay and promotion gives a positive impact on their job satisfaction and motivation, . Kashif u Rehman et al., (2007).

Theoretical Framework

Problem Statement

Hypothesis # 1:

There is a positive relationship between rewards and motivation in the employees of Telecommunication sector of Pakistan.


Rewards are things that boost some one’s morale to do something; it is observed in our daily life that whenever an individual or a team is being given reward for their good work the motivation of the employee increases to do more good work in order to get more rewards.

Hypothesis # 2:

Monetary rewards cause more employee motivation than the non-monetary rewards in the telecommunication sector of Pakistan.


Reward in the form of money attracts people more rather than any other reward in form of just appreciation or a certificated. This hypothesis will test that whether it is true or not in the telecom sector of Pakistan.

Hypothesis # 3:

There are significant differences in effects of biological variables on employee work motivation in the telecom sector of Pakistan.


This research hypothesis will find answers to such questions as;

  • Who were more motivated male or female?
  • Which age group people were more motivated?
  • Who were more motivated new or old employees?
  • Married people had more motivation towards work or unmarried?
  • Sales people are more motivated as compare to rest of the people at different designations?

Research Methodology

Tool for data collection

The tool for data collection for this research is survey. And for the purpose of doing surveys mail questionnaire is designed. This method of data collection is chosen because it has geographical flexibility, easy sample accessibility, saves time, and cost, anonymity and respondent convenience to reply.

Design of Questionnaire

The research questionnaire consists of three parts;

Part I: It consists of personal information of the subject, such as gender, age, designation, working experience, marital status and education.

Part II: It is designed for the collection of data about the independent variable i.e. Rewards (Monetary Rewards/Non- Monetary Rewards).

Part III: It is designed for the collection of data about the dependent variable i.e. employee motivation.

Units of observation

The units of observation are the employees of different companies of telecom sector of Pakistan;

  • Mobilink
  • Ufone
  • Telenor
  • Warid
  • Zong
  • Wateen
  • World Call
  • Wi-Tribe
  • Pakistan telecommunication Limited

The sample includes all categories of employees.

Sample Size

The sample size for data collection is 1000.

Time Dimension

This study is a cross sectional study.

Scale / Scoring of questionnaire

Te Likert scale is used for the collection of data. Likert scale is basically a 5-point scale which consists from 5 to 1.

For positive statements scoring is;

Strongly Agree = 5

Agree = 4

Neutral = 3

Disagree = 2

Strongly Disagree = 1

For positive statements scoring is;

Strongly Agree = 1

Agree = 2

Neutral = 3

Disagree = 4

Strongly Disagree = 5


Questionnaire will be spread out among the employees of telecommunication sector of Pakistan via mail questionnaire in their workplace. Instructions and grantee of confidentiality of the personal information will be ensured.

Data analysis

For the descriptive analysis SPSS (Statistical Package for Social Sciences) version 16 or simply Microsoft Excel 2010 will be used.

For finding out the correlation between the Rewards (independent variable) and employee motivation (dependent variable) Pearson Correlation Coefficient will be used.

For finding out the correlation between the Financial Rewards and employee motivation; and Non-Financial Rewards and employee motivation Pearson Correlation Coefficient will be used.

For the analysis of the differences in employees work motivation based on the personal characteristics (biographical) ANOVA will be used which is used to measure the significant differences between the variances.

Expected Results

The various researches that have been carried out in various sector in different countries of the world reports that rewards have a positive impact on employee motivation.

In 1997, Carolyn Wiley compared the result of previously held four surveys that were conducted on motivation of employees in year 1946, year 1980, year 1986 and year 1992.

The survey that was conducted in 1992 resulted that in today’s world employees are motivated by monetary rewards. Employees chosen ‘salary’ as the top most motivating element. The research said that salary is a monetary reward with a natural influence.


Low response rate

Low completion rate

Cannot catch verbal behavior

Cannot use lengthy questionnaire


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