Motivational Theories and Incentives Approaches

Volume 16, Number 4 Article by Sumita Rai December, 2004

Motivational Theories and Incentives Approaches :

Retaining talent in the restructured organisation has become a challenge for every firm.Motivation is crucial in this regard,and hence it is important to study what motivates employees.Thus,the construct of motivation has drawn the attention of organisational theorists and practitioners in a major way,resulting in a considerable body of theoretical treatments and empirical studies.The literature indicates that good wages as well as appreciation of work done are important in the modern context.Sumita Rai reviews the literature in this field and investigates the Indian scenario.

The concept of motivation is invariably linked with the notion of reinforcement or reward,which could be either monetary or non-monetary.Incentive schemes are established with the objective of improving performance through fulfilling the needs of the employees.There are many methods of relating the performance of employees directly to their remuneration.Payment by results,profit sharing,gain sharing,commission,and ESOPs are some of the commonly used forms of PRR.While ESOPs and other equity-related programmes are believed to improve the productivity of the firm and employee retention, findings on the efficacy of ESOPs as employee incentive plans are divided.In an effort to ascertain if offering ESOPs improves employee performance,Sumita Rai examines the data for a select list of ten Indian companies across sectors that offered ESOPs.The study reveals that there is apparently no convincing relationship between employee performance and the worth of ESOPs.

While there does not seem to be a clear-cut linkage between any particular method of financial incentive and employee performance (and organisational performance),it is clear that financial incentives do have a significant influence on the motivation level, from worker to CEO.

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