What motivates our employees?
19th December 2018 | Warren Colby
This 2016 Masters project asks: Do employee motivation schemes have to be financially focused to improve engagement and output?
Do employee motivation schemes have to be financially focused to improve engagement and output? During previous employee appraisal meetings within my organisation, a number of our employees asked if the company would consider introducing a financially focused bonus scheme; a majority of the employees who made this request were key individuals within the organisation and appreciated by management. I therefore felt it was important to investigate various employee bonus schemes and feed back my findings.
My research project initially was to investigate the types of bonus scheme that businesses were introducing to employees as a means of improving employee engagement and output. However, my findings after surveying and interviewing employees led me to investigate whether engaging with employees using reward and recognition methods was more effective to improve employee motivation and output. I wanted to explore if using reward and recognition could be a more effective motivator than the traditional financially focused bonus schemes which many of the UK’s businesses have been using for a number of years.
We feel it is an essential element to our growth that we can motivate and develop our own employees by introducing a scheme or mechanism which will assist us to improve employee engagement and employee output throughout the organisation.
Personal and company background
I am a director and shareholder in a company that specialises in the sales and service of office machinery to end-user businesses. The company has been established for over 30 years and I have been in my current position as a company director and shareholder since 1996. My role has developed over time from a sales-driven individual to now a strategic operations director; however, due to my knowledge of our own internal systems and processes I am involved in all areas of the business.
The company today is a small to medium enterprise (SME) employing just over 110 employees across three offices in the North of England (head office near Newcastle upon Tyne). During my time in the business, turnover, employee numbers and profit have grown year on year – this growth has been through organic growth rather than by acquisition.
The project aim is to understand what motivates employees and establish if introducing a reward scheme would improve employee engagement and output within an organisation. The purpose of my research project is to understand within my organisation what motivates some employees to go beyond the call of duty and why others simply do enough to just get by.
I hope that by understanding what motivates employees I am able to introduce changes that will increase motivation in those employees who just do enough to get by and, at the same time maintain and if possible, increase the motivation in those employees who already go that extra yard.
I hope that by engaging with employees in this manner it will encourage employees to accept more responsibility. This acceptance of more responsibility will assist the business in developing employees, challenging them to produce greater output and produce stars who could in the future become employees with middle management potential. The development of a middle management structure will assist the business with our company growth plans.
I investigated the link between incentive schemes and improvements in staff motivation, engagement and output. I also investigated the types of reward scheme that are commonly used by businesses and the impact that these schemes have on businesses and their employees.
My main project objective was to understand first if employees feel motivated and engaged and, if not, how we could motivate them further to improve productivity, output and profitability for the business.
Research suggests that fewer than 30% of employees are actively engaged in their jobs (Seijts, 2006). Research also suggests that, when employees are motivated, they are prepared to put in extra effort to accomplish tasks that are central to the goals of the organisation (Wiley, 2012). It therefore could be argued that increasing staff engagement will provide businesses with better results.
My initial observations, including evidence from my own business practice, have suggested this to be the case as intrinsic motivation is now more evident within my organisation after introducing a few simple schemes to improve staff engagement. Simple changes included regular meetings with employees, improving communication and simply listening to their suggestions.
I was aware that introducing a reward scheme isn’t as simple as it sounds: research has found that reward schemes have some drawbacks, such as, increases in pay and training costs not being guaranteed to outweigh the increased productivity of the employee or group (Armstrong and Murlis, 1998). Therefore, my main project objective was to understand first if employees feel motivated and engaged and if not, how we could motivate them further to improve productivity, output and profitability for the business.
I investigated incentive schemes, which include financial and non-financial as well as other methods of improving employee engagement and motivation. I researched what motivates individuals, as I am not convinced through my experience of over 20 years in employee management that incentive schemes which have only a financial motivation are best placed in today’s world, and I have elaborated further on financial motivation during my research project.
Intrinsic motivation – This is about what comes from inside: the feeling of being in control; using your own skills to the maximum; relying on your own judgement rather than on the judgement of others. Typically, not reward-related.
Extrinsic motivation – Is created by offering rewards such as money, status, cars, praise from others and prizes. In other words, it’s about reward that comes from external sources.
- Are employees motivated?
- Are employees intrinsically motivated?
- Are intrinsic motivators enough by themselves to improve employee output?
- Are extrinsic motivators required to improve employee output?
- Incentives – Incentives, rewards, recognition, perks and benefits. Are these all the same thing?
- Measures. How will we measure success? How will we determine the different KPIs for each department?
- Administration – How administrative will any reward scheme be?
In order to ascertain answers to these various questions, I carried out surveys, various interviews with employees, as well as external meetings with organisations that have implemented reward schemes.
Literature research into incentive schemes
It is noted by many that these schemes need to be focused on individual achievement, recognition and incentives based on agreed performance goals rather than adjusting salary and benefits levels. The research also shows in fact that 70% or more of motivation programmes are revenue-related in some way (Fisher, 2015).
Incentives – What does incentive mean? There are a number terms used in the context of an incentive scheme.
Reward – Tangible, non-monetary items received in a motivation programme: for example, reward cards, gifts and vouchers.
Recognition – Formal programme of congratulation for going beyond the call of duty; it does not necessarily include reward, but could do: for example, formal recognition for contribution during awards, meetings or in one-to-one situations.
Bonus – A monetary value applied to specific task or time period: for example, commission and a profit-related pay scheme.
Perks/benefits – These are neither reward nor recognition but form part of an employee’s remuneration package: for example, car, healthcare, gym membership. Most perks and benefits are offered to retain employees or attract new employees.
I have read many studies on the success and failure of schemes but one in particular struck a chord for me due to its unparalleled success in turning around a struggling airline.
Continental Airlines in 1995 introduced an incentive scheme that promised monthly bonuses to all 35,000 hourly paid employees if the company achieved a company-wide performance goal. Continental Airlines prior to the incentive scheme launch was consistently one of the worst-performing airlines in the industry and averaged last among ten other major domestic airlines in on-time arrival, baggage handling and customer complaints.
In 1994 a new management team was brought in to address these problems and in 1995 introduced a new timetable and incentive scheme which promised $65 to every hourly employee in every month that Continental performed in the top five airlines in the industry. This target was hit within months and the scheme was modified less than a year later to pay $100 to each employee when it finished first out of all the domestic airlines (Knez, 2001).
Firm-wide incentive schemes are common at large firms. A 1987 US government accounting office survey of 326 Fortune 1000 firms reported that 54% of non-union and 39% of unionised firms had profit-sharing schemes for hourly employees (cited in Cooke, 1994); their use appears to be increasing (Blasi, Conte and Kruse, 1991) and the introduction of such schemes is now becoming more common in SMEs as business management understand how key employees are to the success of the organisation.
There have been schemes, however, where there is no association between a profit-sharing scheme and a measure of financial performance as research carried out amongst a large amount of UK establishments (Blanchflower and Oswald, 1988). Therefore, it is not a foregone conclusion that all reward schemes are successful; in fact research shows that the success of a scheme will be determined by its nature, the key measures and the types of rewards.
In summary, the volume of literature researched on this topic is considerable, and the majority of the research concluded that most of the reward schemes which have been implemented by businesses claim that reward delivers performance (CIPD, 2005). Research suggests that most organisations which have implemented a reward scheme have improved productivity which in turn has increased company productivity and, in some cases, profit.
Many of the failings of schemes have been due to external forces such as company take-overs, financial downturn within a company and/or changes in the market sector. Evidence also pointed to bad management of schemes and, in a number of cases, an incorrect focus on the measures and the rewards provided. This incorrect focus majorly contributed to scheme failures (Kohn, 1993).
Our own organisation
From my research into my own organisations it is obvious that the success of any scheme is determined by the quality of research into the organisation where you intend to implement a scheme. It is essential that you highlight the operational areas that require improvement, and you establish rewards which represent the interests of the majority of your employees.
My research has provided the stakeholders within my organisation the belief that, in order to improve productivity, we need to find a mechanism to improve motivation. Employees need to be motivated, as motivated employees engage better with their employers.
Our major task was to select a scheme which appealed to employees and that continues to keep employees engaged and motivated. Any scheme considered would be introduced with a view to improving all goals.
In order to understand what would motivate employees I held a department heads meeting where we discussed motivational topics. This isn’t an uncommon topic in these meetings – we have previously discussed motivational items and rewards schemes but they have been just that, a discussion. I wanted to understand areas in their departments where we could improve but more importantly where we could measure the improvement.
We together brain-stormed and produced a list of topics which were appreciative inquiry-based. We posted these topic questions in the form of a survey and emailed to all employees to complete. The purpose of the survey was to understand how employees felt and also to provoke conversations for a string of interviews which would take place shortly after.
The quantitative data we received from the survey was a small sample given the time frames afforded during this project; however, they provided significant evidence to establish that there was a need to pursue matters further and there was a thirst from all to engage further with management and a willingness from employees to improve their practice. A second survey was designed which was more focused on providing a greater depth of responses on the issues that were attributing to a low level of motivation. This survey was also designed on extracting information that could be recorded from each department, as well as age ranges and the gender of the respondent.
I conducted a number of group interviews with the various departments to gather feedback on motivational topics, which was followed up with one-to-one meeting with employees. I wanted to fully understand things from their personal point of view in a one-to-one environment and not when they could potentially be swayed by others in larger meetings. I also carried out my own observations by working for periods in each of the departments to see areas of improvement and where we could make positive change.
I met with two external businesses outside of our business sector. The first ran a scheme that was truly successful and had seen an increase in motivation across the business which was reflected in their increase in profitability. The second was a company similar in size to my own business; the organiser of their scheme admitted that their research of a scheme, implementation and focus on individual employees was missing and, as a result, did not provide the benefits to employees, and motivation suffered as a result – and the scheme was scrapped. I learnt a number of lessons from both external businesses: the first lesson is that understanding the scheme’s purpose is crucial; relaying this purpose to employees is essential. The scheme also needs to be simple, transparent and be aligned to the organisation’s values and to the reward tailored to the individual needs.
I initially thought when beginning this project that I would simply be investigating incentive schemes as this was the focus of employees following the previous year’s employee appraisals. I anticipated that I would be considering the merits of one scheme versus another, or trying to establish what scheme would be most suited to my organisation and our employees. However, this could not be further from the truth, and this revelation was a result of my study.
I previously would most definitely have opted for a scheme where I did little research and one which was easy to implement and provided employees with more bonus. As a result of my learning and the utilisation of mixed method data collections, I now realise that employees were more interested in being recognised and engaged within the business rather than it simply being a financial motivation.
I established very early in my investigation that salary and reward weren’t the only focus for employees – job satisfaction, recognition, career prospects and inter-personnel relationship in the business were just as important for most. These findings made me reconsider if the employee’s initial request for a reward scheme was simply a smoke screen: perhaps their way of wanting to be heard, engaged, appreciated and part of the organisation. This was further reinforced as the project continued – I found that the further I engaged with employees about the businesses plans and how they were very much part of that plan, the talk of incentive and money-based schemes reduced. The conversations pivoted to more around their job satisfaction and being recognised for going that extra yard.
The results also demonstrated that each department had its own items that held importance to them, although there were a number of similarities in that employees from all but one department had “salary and reward” as one of their top two very important factors. The other stand-out factor was job satisfaction, which appeared in all departments’ top two responses. It would also be remiss of me not to consider the impact of the other factors: both relationships with colleagues and management were valued as important, as was recognition.
Semi-structured group interviews and one-to-ones
Interviews were split into departmental meetings because I felt employees would feel more at ease in smaller well-known groups. I also realised that as a department they were likely to have similar issues and motivations and therefore likely to share these with me and their colleagues.
I focused on what motivated employees and asked them to think about items in their past, happy times when they felt more motivated. Nearly all employees could recall a moment when they felt more motivated: most of the recalled times where when the business was smaller in size; they all said they knew what was going on as their link to management was far greater than it is today. Nearly all employees felt that they have now become less involved with other parts of the business and that their interaction with stakeholder is less than it was previously.
Understanding the scheme’s purpose is crucial; relaying this purpose to employees is essential. The scheme also needs to be simple, transparent and be aligned to the organisation’s values and to the reward tailored to the individual needs.
We discussed in depth the results from the surveys and it became obvious within all departments that recognition and reward were the key motivators in each department.
I asked them all to go away and think about areas within their department which they felt could be improved and areas where they as individuals could change and improve their output.
It’s fair to say that the responses I received during these meetings re-affirmed the responses I received from the survey: employees wanted to feel involved, appreciated and part of the organisation and this was the case for nearly each department. In addition, the one-to-one interviews provided me with honest answers from employees from all the departments. All employees wanted to be recognised more, empowered to make decisions and included within company strategy for future growth.
Conclusions from my research and my own personal findings
My use of multiple research methods and sources of data has allowed me to triangulate my conclusions. The conclusions have been formulated as a result of the quantitative and qualitative data received and analysed, and triangulated by comparing the results and using my own personal experiences, self-reflection and interviews with external parties.
Do employee motivation schemes have to be financially focused to improvement engagement and output? My research suggests that improvements in engagement do not require a financial focus and this can be achieved by an organisation appreciating employees, recognising their contribution and sharing with employees their company vision and strategy.
The success of any scheme is determined by the quality of research into the organisation where you intend to implement a scheme. It is essential that you highlight the operational areas that require improvement, and you establish rewards which represent the interests of the majority of your employees.
I feel it is important to ensure the relationship between employees and management remains solid and open and that a collaborative culture is developed within an organisation. Research also suggests that, in order for employees to improve output this is only possible in the long term by introducing a reward scheme that is: tailored to an individual’s needs and contains intrinsic and extrinsic motivators; reflects the company’s culture; is aligned with company goals; and the recipients perceive a clear link between improved performance and reward – this is the case for my organisation and others.
I conclude that, within my organisation, employees demonstrate greater levels of motivation when they feel appreciated, an integral part of an organisation, and where necessary they are empowered to make decisions. Harrison, Virick and William (1996) found that recognition programmes produce greater job satisfaction. I feel from my research that motivation doesn’t need to be part of a reward scheme and displaying higher levels of motivation can be achieved by improving recognition and by making employees more central and important to the organisation (Armstrong, 2002).
I do believe that, as a result of better motivation, output will increase naturally as was demonstrated within my organisation. However, research also suggests that performance will only increase in the short term (Bowen, 2000) with recognition alone.
Mottaz (1985) indicates that the job level may serve as a moderating variable between reward and motivation: intrinsic reward showed a stronger relationship with job satisfaction in upper-level occupations, whilst extrinsic reward was related positively to motivation and job satisfaction in lower-level occupations.
I am therefore in agreement with Bowen (2000) that successful reward schemes incorporate both extrinsic and intrinsic motivators and it is also important for these reward schemes to be aligned with corporate goals (Benardin, 2003; Bowen, 2000). I also concur with Mottaz (1985) that extrinsic motivation is more prevalent in lower-level occupations than it is in upper-level occupations, as lower-level occupations tend to be less intrinsically motivated due to their position, importance, involvement in key decision and salary within an organisation. The levels of engagement will vary from one organisation to another based on their proportion of upper- and lower-level occupations.
Summary of conclusions
An effective reward and recognition scheme identified from the literature reviewed is one where:
- The reward is tailored to individual needs.
- It contains intrinsic and extrinsic motivators.
- It reflects the company’s culture.
- It is aligned with its goals.
- The employees perceive a clear link between improved performance and reward.
It is also essential that performance indicators should be measurable, clear, unambiguous, achievable, challenging and relevant to every person participating in the reward programme. (Jensen et al, 2007; Zenger, 1992).
I would recommend a scheme which is individually focused as well as either company-wide or departmentally focused to achieve the greatest results, and one which is simple to administrate (Fisher, 2015). It is also essential that any measurable improvement is agreed by the employee before implementation.
I conclude that within my organisation that motivation and engagement has increased by recognition: involving and empowering employees in the first instance. However, improvements in output and employees going that extra yard will need to be linked to a reward scheme and this should be carried out on a department-by-department basis looking at key areas of improvement. Vroom (1964) suggests employees must believe that an increase in performance will lead to a valued reward (Bernardino, 2003; Zachary & Fukuhara, 2005).
I am currently considering a number of schemes that will best motivate each employee and department, but I am mindful that any scheme that is implemented will need to be administratively simple for both the employee and employer to work efficiently. I am in the process of investigating a points system per employee; this will be linked to performance and KPIs for each department where each employee will be able to cash in points for a reward. Rewards may possibly include gifts, additional holiday entitlement and a charge card for purchasing goods.