Employee Motivation between financial and nonfinancial rewards.

The relationship between employee motivation and performance enhancement has been extensively studied, revealing both positive impacts and potential drawbacks. Financial incentives, for instance, have been shown to influence both individual (Stajkovic & Luthans, 1997; Kluger & DeNisi, 1996; Mitchell & Mickel, 1999) and group performance(Bowie-McCoy, Wendt, & Chope, 1993), provided they are administered fairly and effectively (Lawler, 2000; Heneman et al., 2001).

However, relying solely on financial rewards has limitations. Gupta & Mitra (1998) found that while financial incentives can increase productivity, shape behavior, and complement intrinsic motivation, they do not necessarily improve work quality. While financial rewards positively impact organizational performance, their effectiveness varies depending on implementation strategies (Andrew, 2004). This underscores the need for complementary non-financial incentives.

The Role of Non-Financial Rewards

Research supports the effectiveness of non-financial incentives in enhancing motivation. Baltes et al. (1999) found that flexible work arrangements positively impact productivity, job satisfaction, and absenteeism. Additionally, fair treatment in pay distribution has been identified as a key factor in employee satisfaction (Folger & Konovsky, 1989). Their study of 217 line employees revealed that fair pay raises significantly increased job satisfaction.

The nature of work itself also influences motivation. Hackman (1971) argued that jobs characterized by variety, autonomy, task identity, and feedback lead to higher motivation, job satisfaction, and work quality, while reducing absenteeism. Buckman (1991) further emphasized that while financial rewards play a supporting role, intrinsic rewards are the true drivers of sustained performance improvement.

A Holistic Reward Strategy

Although financial incentives positively impact employee performance, relying on them alone is insufficient. A comprehensive reward strategy that incorporates both financial and non-financial rewards is essential for sustained motivation and performance enhancement (Pilbeam & Corbridge, 2010).