A Project Report on

Investigating relationship between reward and motivation among

employees.

Submittied in partial fulfillment of the requirement for the degree of

Master in Personnel Management
(Affiliated to SavitribaiPhulePune University)

By
Apurva Likhite
Under the guidance of
Hod.
At
Institute Of Management And Career Courses
Kothrud, Pune 411038
Batch: 2016-17

Acknowledgement
Every project big or small is successful largely due to the effort of a
number of wonderful people.I am using this opportunity to express
my gratitude to everyone who supported me throughout the course
of this MPM project. I am thankful for their aspiring guidance,
invaluably constructive criticism and friendy advice during the
project work. I am sincerely grateful to them for sharing their
truthful and illuminating views on a number of issues related to the
project.
I take this opportunity to express my profound gratitude and deep
regards to my guide Hod. _______ for his exemplary guidance,
monitoring and constant encouragement throughout the course of
this summer internship.
Lastly, I thank almighty, my parents, brother, sisters and friends for
their constant encouragement without which this assignment would
not be possible.

CERTIFICATE
This is to certify that Miss APURVA POPHALE, MPM (3RD
semester,) of IMCC college, PUNE has completed her project under
supervision. She has taken proper care and show utmost sincerity in
completion of the project.
I certify that the project completed is as per the guidelines.

Head Department of MPM

Executive Summary
Increasingly, organizations are realizing that they have to establish
an equitable balance between the employees contribution to the
organization and the organizationscontribution to the employee.
Establishing this balance is one of the main reasons to
rewardemployees. Organizations that follow a strategic approach to
creating this balance focus on thethree main components of a reward
system, which includes, compensation, benefits andrecognition.
Studies that have been conducted on the topic indicates that the most
commonproblem in organizations today is that they miss the
important component of Reward, which isthe low-cost, high-return
ingredient to a well-balanced reward system. A key focus of
recognitionis to make employees feel appreciated and valued.
Research has proven that employees whoget recognized tend to have
higher self-esteem, more confidence, more willingness to take
onnew challenges and more eagerness to be innovative.
This report is prepared as a requirement of MPM program.Which
represents a study that analyses relationship between reward and
motivation among employee.The purpose of this report is to
understand how reward is related to employee motivation, what is
the impact of reward on employee motivation how does it help an
employee as well as organization in reducing the attrition rate as
well as to ensure the employee commitment and job satisfaction.It
also investigates different types of rewards which has impact on
employee motivation such as intrinsic ,extrinsic rewards. It explain
employees perception of extrinsic and intrinsic rewards and its

impact on employees motivation. The study will also explore

managers perception of rewards and to which extent employees
receive the rewards that motivate them.
A brief introduction is given on what was the purpose of selecting
the topic and the details on which the project is all about. The
theoretical chapter is firstly presenting description of rewards and
motivations .Theories describe how reward systems are constructed.
Subsequently, different motivational theories are presented.
Reward management is a combination of both financial as well as
non financial rewards which have become very much essential from
organizations as well as from employees point of view now a days
as each and every employee in todays era of business is very much
vigilant to think for as well to fulfill the said need. In the modern
business world,the employer are also very much aware on the issue
and initiate necessary steps to meet therequirement of the employees
to set up various provisions from time to time for obtainingtheir
goals as well as for safe guarding the interest of the employees.
This report includes the various industry where relationship between
reward and motivation is studied which include profit as well as non
profit organization where the difference is identified .
Literature review gives the output from the research, which is
already conducted so as to understand the trends which are followed
from years, research methodology describes the method used to
carry out this research and Data analysis briefly describes the

process that company follow. In the quest of above, the researcher

reviewed the literature for finding the scope of further research in
the area of employee rewards management practices. for the
purpose, seven variables such as motivation, job satisfaction,
performance, attitudes, retention,strategies/structures/practices in
general and total rewards were identified and analyzed to find the
relationship between employees rewards and these variables.
This report covers the overall reward management process and
details on how and why rewards are given.What role reward
management system plays in employee motivation.
This research discusses some of the strategies that organizations can
and do employ to ensure the employee motivation.Due to which
employee can retain and stay commited to the organization for
longer duration.It will identify the advantages of each of the
strategies, highlight the drawbacks of its use and offer suggestions
for ensuring its utility. Finally, the report allows focusing on theories
and concepts used various companies and give various conclusions.

Index / Table of Contents

SN

Contents

Introduction

Objectives

Literature Review

Methodology

Data Analysis , Results and

Interpretation

Conclusion

Learnings

References / Bibliography

Pg No

CHAPTER 1:
INTRODUCTION

Introduction
In todays competitive business environment companies are facing
many challenges and among those challenges acquiring right
workforce and retaining it, is of utmost importance. Nowadays,
human asset is considered to be the most important asset of any
organization. In order to get the efficient and effective result from
human resource,employee motivation is necessary. organizations
result is highly dependent on the employees work motivation.
Employee will give their maximum when they have a feeling or
trust that their efforts will be rewarded by the management. There
are many motivation factors that effect employee performance like
working conditions, worker and employer relationship, training and
development opportunities, job security, and companys over all
policies and procedures for rewarding employees, etc. Among all
those factors which affect employee performance, motivation that
comes with rewards is of utmost importance. Motivation is an
accumulation of different processes which influence and direct our
behavior to achieve some specific goal.
Rewards can be extrinsic or intrinsic, extrinsic rewards are tangible
rewards and these rewards are external to the job or task performed
by the employee. External rewards can be in terms of salary/pay,
incentives, bonuses, promotions,job security, etc. Intrinsic rewards
are intangible rewards or psychological rewards like appreciation,
meeting the new challenges, positive and caring attitude from
employer, and job rotation after attaining the goal.
Desired performance can only be achieved efficiently and
effectively, if employee gets a sense of mutual gain of organization
as well as of himself, with the attainment of that defined target or
goal. An organization must carefully set the reward system to

evaluate the employees performance at all levels and then

rewarding them whether visible pay for performance or invisible
satisfaction. The concept of performance management has given a
reward system which contains; needs and goals alignment between
organization and employees, rewarding employees both extrinsically
and intrinsically. The system also suggests where training and
development is needed by the employee in order to complete the
defined goals. This training or development need assessment of
employee gives them an intrinsic motivation.
This study will examine the employees motivation of an
organization(profit and non profit) with the rewards (both extrinsic
and intrinsic) given to them.
The significance of the study would be an idea about relative
importance of extrinsic and intrinsic rewards and its impact on
employee motivation. Management can get a better idea while
preparing its reward system that what kind of reward would be
given the most importance and at what stage through such a type of
study.
This research is constructed in the following way. In the theory part,
the it represents the different reward and incentive types and
introduces what motivation is. The process of motivation is
introduced together with intrinsic and extrinsic motivation.
However,the main emphasis is put on the different reward systems.
Also different theories of motivation are presented; some of these
are Maslow's hierarchy of Needs and the goal setting theory. The
Maslow's hierarchy of needs and the goal setting theory is used in
order to examine the effect of the reward systems on employee
motivation. In order to determine what rewards the employees
perceive the most motivating and to what extent the employees are
ready to increase their work effort, the total reward system is used.

The information to the study was gathered through a research . With

the help of the information that was gathered, the compararision of
different reward systems and conclusion is made to increase the
employees work motivation. The questionnaire also included some
open questions where the respondents could give own suggestions
on how to improve the reward system or recommend other rewards
that would motivate them.
Significance of the project on Investigating relationship between
reward and motivation among employees.

It helps in understanding importance of extrinsic and intrinsic

rewards and its impact on employee motivation.

It helps in retention of employees.

It helps in understanding the job satisfaction level of an

employee.

It helps to motivate employee.

Chapter 2: Objectives

Objectives
This research is intended to achieve the following objectives: To determine if there is a relationship between reward and
employee motivation.
To determine the impact of extrinsic and intrinsic rewards on
employees motivation

 To determine relationship of reward and employee motivation

in profit and non profit oganization.Theoretical Background
The structure of the theoretical chapter is presented in the following
scheme. Firstly,it is describing how reward systems are constructed
and further discuss different forms of rewards as well as aspects of
what should be rewarded.Subsequently after the discussion
concerning reward systems, the chapter continues with different
motivation theories. Researchers have earlier pointed out different
factors, which improve motivation. The most relevant theories from
this essays point of view are presented, which include relevant
aspects concerning the interrelationship between motivation and
rewards. The theory of expectancy describes the correlation between
rewards and motivation.

Definition of Motivation
Motivation is the act of stimulating someone or oneself to get a
desired course of action or to push the right bottom to get a desired
reaction. Michal, J. Jucius Motivation is a process of inducing,
inspiring and energizing people to work willingly with zeal,
initiative, confidence, satisfaction and an integrated manner to
achieve desired goals. It is a moral boosting activity. A man cannot
be pulled from the front or pushed from behind. He can only be
moved from within. The why of behavior, motivation is a
hypothetical construct that intervenes between stimulus and a
response Process of Motivation:
It involves four steps:
1. Motive
2. Behaviour
3. Goal
4. Feedback
Motive: It indicates the inner state of mind that energizes, activates
or moves a person and directs his behavior towards goals.
Behaviour: Behaviour is the sum of various activities and attitudes
of a person
Goals: Motives generally create a state of disequilibrium
physiological or psychological imbalances within the individual.
Attaining the goal restores this balance.

Feedback: the system of feedback is important to understand and

analyze the motives, behavior, goals and incentives for motivation
Types of Motivation: There are two types- Intrinsic and Extrinsic
Extrinsic Motivation is geared toward external rewards and rein
forcer's. Some examples of external rewards are money, praise,
awards, etc. Some examples of external rein forcer's are policy and
procedures, disciplinary action, speeding tickets, boundary-setting,
etc
Intrinsic Motivation is geared toward internal rewards and
reinforcer's. Some examples of internal rewards are enjoyment,
achievement, a sense of competence. Some examples of internal
reinforcer's are "Shoulds", "Musts", & "Oughts", a guilty
conscience, and Toxic Shame.
Types of Extrinsic Rewards
Pay
The organizations normally raise the wages of the employees to
reward their contributions to the company. Incentive pay is another
type of pay, which means a bonus paid when specified performance
objectives are met (Folgeman 2001). This pay may inspire
employees to work and motivate them to attain tremendous result in
the same time accomplish their organization's goals.
Bonuses
Sometimes some of the companies will give the gifts to remunerate
for those who have the excellent performance. These bonuses
present the appreciation of the employer towards the employees. For

example, the employer will give away the hampers to the workers
who did a great job in the supermarket every end of the year.
Spot Awards
The purpose of this program is to acknowledge the impulsive
appreciation for the contributions of individuals (Deadrick 2009).
For example, excellent performance on a project in
AmericaCompany might obtain a "spot award", such as point-based
award card that allowed employees to redeem some value gift item
with the points given based on their performance level (Incentive
America 2010).
Promotions
Promotions less occurs in someone career because it acquired the
decision of the employer to pick the right person with certain criteria
such as experiences or abilities based on seniority(Ganesan&Weitz
2001).For example, senior employee who works longer in the
company is capable to be elected for better position ,like senior
project manager.
Recognition
The recognition refers to managerial acknowledgement of employee
achievement that could result in improve status like public praise,
expressions of a job well done, or special attention (Head, Sorensen
& Baum 1994). It depends on the perceived value and the
individual's behavior. For example, LifeScan employees'
achievement will be featured in a LifeScan Monitor article if they
did a great job in their company.

Read more: http://www.ukessays.com/essays/business/the-impactof-intrinsic-and-extrinsic-rewards-businessessay.php#ixzz41fzMJJBi

2 THEORY
2.1 Definition of Motivation
Motivation is the desire to achieve beyond expectations, being
driven by internal rather than external factors, and to be involved in
a continuous striving for improvement.
(Torrington, Hall, Taylor & Atkinson, 2009, p. 276).
Motivation, in the context of work, is a psychological process that
results from the interaction
between an employee and the work environment and it is
characterized by a certain level of willingness. The employees are
willing to increase their work effort in order to obtain a specific
need or desire that they hold (Beardwell & Claydon, 2007, p.491).
According to Arnold (1991), motivation consists of three
components:
direction what a person is trying to do
effort how hard a person is trying
persistence how long a person keeps on trying
Motivation theory tries to explain why people at work behave the
way they do in terms of their efforts and strive for achievement. The
process of motivation can be shown as following;

In this model motivation is initiated by the conscious or unconscious

recognition of unsatisfied
needs. These needs create wants, which in turn become desire to
achieve or obtain something. In order to satisfy the needs and wants,
goals are created and a behavior selected in order to achieve these
goals. If the goal is achieved, the behavior is likely to be repeated
when a similar need emerges. If the goal is not achieved, the same
action is less likely to be repeated. (Armstrong 1988, p. 106-107).
Managers can motivate employees through methods such as pay,
promotion and praise.Employees can also motivate themselves by
seeking work where individual goals, needs
and wants will be achieved. These two types of motivation are
called intrinsic and extrinsic
motivation and are more closely described as follows: (Armstrong
1988, p. 109).
Intrinsic motivation refers to the motivation that comes from inside
an individual. The motivation is generated trough satisfaction or
pleasure that one gets in completing or even working on a task.
Factors that influence on intrinsic motivation include
responsibility,freedom to act, scope to use and develop skills and

abilities, interesting work and opportunities for advancement. These

motivators, which are concerned with the quality of work life, tend
to have a long-term effect since they are inherent in individuals and
not imposed from outside. (Armstrong 1988, p. 109-110).
Extrinsic motivation is something that is done to or for people to
motivate them. It arises from factors outside an individual, such as
money, grades, criticism or punishments.
These rewards provide satisfaction and pleasure that the task itself
might not provide.
An extrinsically motivated person might work on a task even when
they have little interest in it. This type of motivation usually has an
immediate and powerful effect, however it does not tend to last for
long. (Armstrong 1988, p. 109-110).

Classical Theories of Motivation

Fear and Punishment Theory
Monetary Reward Theory
Carrot and Stick Theory

Fear and Punishment Theory: This theory takes negative view of

human behavior. This theory states that a man can be made to work
by creating fear and punishment.
Monetary Reward Theory: According to this theory, there is a
positive relationship between monetary rewards and execution of
work.
Carrot and Stick Theory: This theory takes in to consideration
both reward and punishment and takes in to consideration both
positive and negative measures for motivation.
Modern Theories of Motivation
Maslow Need Hierarchy
ERG Theory of Motivation
Theory X and Y
Herzbergs two factor theory of motivation
Vrooms Valence Expectancy Theory
1. Maslow Need Hierarchy:

Physiological needs- These are the basic needs of air, water, food,
clothing and shelter. In other words, physiological needs are the
needs for basic amenities of life.

Safety needs- Safety needs include physical, environmental and

emotional safety and protection. For instance- Job security, financial
security, protection from animals, family security, health security,
etc.
Social needs- Social needs include the need for love, affection, care,
belongingness, and friendship.
Esteem needs- Esteem needs are of two types: internal esteem
needs (self- respect, confidence, competence, achievement and
freedom) and external esteem needs (recognition, power, status,
attention and admiration).
Self-actualization need- This include the urge to become what you
are capable of becoming / what you have the potential to become. It
includes the need for growth and self-contentment. It also includes
desire for gaining more knowledge, social- service, creativity and
being aesthetic. The self- actualization needs are never fully
satiable. As an individual grows psychologically, opportunities keep
cropping up to continue growing.
1 2. ERG Theory of Motivation:
To bring Maslows need hierarchy theory of motivation in
synchronization with empirical research, Clayton Alderfer redefined
it in his own terms. His rework is called as ERG theory of
motivation. He recategorized Maslows hierarchy of needs into three
simpler and broader classes of needs:
1 a) Existence needs- These include need for basic material
necessities. In short, it includes an individuals physiological
and physical safety needs.
2 b) Relatedness needs- These include the aspiration
individuals have for maintaining significant interpersonal
relationships (be it with family, peers or superiors), getting
public fame and recognition. Maslows social needs and
external component of esteem needs fall under this class of
need.

3 c) Growth needs- These include need for self-development

and personal growth and advancement. Maslows selfactualization needs and intrinsic component of esteem needs
fall under this category of need.

3. Theory X and Y
Theory X and Y : Douglas McGregors Theory X and Theory Y,
first published in 1957 in his book Human side of enterprise.
These two theories clearly distinguished traditional autocratic
assumptions about the nature of people (Theory X) from more
behaviourally based assumptions (Theory Y). The usefulness of the
McGregor theories is his convincing arguments that most
management actions flow directly from whatever theory of human
behaviour managers hold.
Theory X Assumptions: The average human being is inherently
lazy by nature and desires to work as little as possible. He dislikes
the work and will like to avoid it, if he can.
1 He avoids accepting responsibility and prefers to be led or
directed by some other.
2 He is self- centered and indifferent to organizational needs.
3 He has little ambition, dislikes responsibility, prefers to be led
but wants security.
4 He is not very intelligent and lacks creativity in solving
organizational problems.
5 He by nature resists to change of any type.
Theory Y Assumptions: Work is as natural as play, provided the
work environment is favourable. Work may act as a source of
satisfaction or punishment. An average man is not really against
doing work.
1 People can be self-directed and creative at work if they are
motivated properly.
2 Self-control on the part of people is useful for achieving
organizational goal. External control and threats of punishment
alone do not bring out efforts towards organizational
objectives.
3 People have capacity to exercise imagination and creativity.

4 People are not by nature passive or resistant to organizational

needs. They have become so as a result of experience in
organisations.
5 4. Herzbergs two factor theory of motivation: Herzberg
extended work of Maslow and developed a specific content
theory of work motivation. Herzberg interviewed 203
engineers and accountants. They were asked to recall a time
when they felt exceptionally good for their work and the
feeling associated.
Hygiene factors- Hygiene factors are those job factors which are
essential for existence of motivation at workplace. These do not lead
to positive satisfaction for long-term. But if these factors are absent /
if these factors are non-existant at workplace, then they lead to
dissatisfaction. In other words, hygiene factors are those factors
which when adequate / reasonable in a job, pacify the employees
and do not make them dissatisfied. These factors are extrinsic to
work. Hygiene factors are also called as dissatisfiers or
maintenance factors as they are required to avoid dissatisfaction.
These factors describe the job
environment / scenario. The hygiene factors symbolized the
physiological needs which the individuals wanted and expected to
be fulfilled. Hygiene factors include:
1 a. Pay- The pay or salary structure should be appropriate and
reasonable. It must be equal and competitive to those in the
same industry in the same domain.
2 b. Company Policies and administrative policies- The
company policies should not be too rigid. They should be
fair and clear. It should include flexible working hours, dress
code, breaks, vacation, etc.

3 c. Fringe benefits- The employees should be offered health

care plans (mediclaim), benefits for the family members,
employee help programmes, etc.
4 d. Physical Working conditions- The working conditions
should be safe, clean and hygienic. The work equipments
should be updated and well-maintained.
5 e. Status- The employees status within the organization
should be familiar and retained.
6 f. Interpersonal relations-The relationship of the employees
with his peers, superiors and subordinates should be
appropriate and acceptable. There should be no conflict or
humiliation element present.
7 g. Job Security- The organization must provide job security
to the employees.
Motivational factors- According to Herzberg, the hygiene factors
cannot be regarded as motivators. The motivational factors yield
positive satisfaction. These factors are inherent to work. These
factors motivate the employees for a superior performance. These
factors are called satisfiers. These are factors involved in performing
the job. Employees find these factors intrinsically rewarding. The
motivators symbolized the psychological needs that were perceived
as an additional benefit. Motivational factors include:
1 h. Recognition- The employees should be praised and
recognized for their accomplishments by the managers.
2 i. Sense of achievement- The employees must have a sense
of achievement. This depends on the job. There must be a
fruit of some sort in the job.
3 j. Growth and promotional opportunities- There must be
growth and advancement opportunities in an organization to
motivate the employees to perform well.
4 k. Responsibility- The employees must hold themselves
responsible for the work. The managers should give them

ownership of the work. They should minimize control but

retain accountability.
5 l. Meaningfulness of the work- The work itself should be
meaningful, interesting and challenging for the employee to
perform and to get motivated.
1 5. The result to two category:
A) Job Satisfiers (Motivators)
B) Job dissatisfier (Hygiene Factors)
Motivators are things that create positive feelings; hygiene factors
were associated with work context and environment.

1 5. Vrooms Valence Expectancy Theory : Victor vroom

presented an Expectancy theory (1964) for understanding the
human behavior and motivation.
Vrooms Motivation Formula:
Force(motivation)=Valence(value) x Expectancy (probability) x
Instrumentality(relationship between performance and reward)
The Expectancy theory is based on three important propositions,
these are: valence, expectancy and instrumentality.

1 Valence: Valence refers to the emotional orientations people

hold with respect to outcomes [rewards]. Management must
discover what employees value.
2
3 Expectancy: Employees have different expectations and
levels of confidence about what they are capable of doing.
Management must discover what resources, training, or
supervision employees need.
4 Instrumentality: The perception of employees as to whether
they will actually get what they desire even if it has been
promised by a manager. Management must ensure that
promises of rewards are fulfilled and that employees are aware
of that.

Chapter 3:

Literature Review

Organizations in todays environment seek to determine the

reasonable balance between employee commitment and
performance of the organization. The reward and recognition
programs serve as the most contingent factor in keeping employees
self esteem high and passionate. La Motta (1995) is of the view that
performance at job is the result of ability and motivation. Ability
formulated through education, equipment, training, experience, ease
in task and two types of capacities i.e. mental and physical.
According to Wilson (1994), the process of performance
management is one among the key elements of total reward system.
According to Sufyan Mehmood (2013) any organizations
performance system should take into consideration the level of the
service, which directly affects by employee benefits policy and the
sustainability of the service.
Vroom (1964), supported the assumption that workers tend to
perform more effectively if their wages are related to performance
which is not based on personal bias or prejudice, but on objective
evaluation of an employees merit. According to Bahaudin G
Mujtaba, (Coaching and Performance management: developing and
inspiring leaders, pp 261, Para 2), Reward system should be linked
with goal-setting,employee development, competency measures,
and team performance. This will decentralized the decision-making
down the hierarchy to empower those performing the tasks.
Flynn (1998) argued that rewards and recognition programs keep
high spirits among employees, boosts up their morale and create a
linkage between performance and motivation of the employees. The
basic purpose of recognition and reward program is to define a
system to pay and communicate it to the employees so that they can
link their reward to their performance which ultimately leads to
employees job satisfaction. Ali and Ahmed (2009) confirmed that
there is a statistically significant relationship between reward and

recognition respectively, also motivation and satisfaction. The study

revealed that if rewards or recognition offered to employees were to
be altered, then there would be a corresponding change in work
motivation and satisfaction.

Pennebaker and Sanders (1976) conducted a research and presented

a theory called the reactance theory which said that people often do
tasks that they are forbidden to just to prove that they posses
freedom of choice. In case an organization tries to coerce employees
in complying or achieving a certain goal, the result may be opposite
to what is expected and may lead to employee de motivation.
Some researchers have found that extrinsic motivation is not very
effective and in some cases even corrosive and damaging to the
employees. Excessive use of extrinsic rewards can lead to unhealthy
competition and the employees, instead of focusing on enjoying the
task at hand start focusing too much on the reward and as a result
the performance is negatively affected in the log run and this decline
in performance is permanent rather than temporary as it brings about
a modification of behavior (Kohn, 1992).
Some researchers have investigates the importance of extrinsic
factors, specifically pay and found that there exists a discrepancy
between what employees say and do regarding the importance of
pay. Even though employees may rate pay as being of a very high
importance but in reality it is not equally important for all
employees and in certain situations, the importance given to a good
salary may also decline (Rynes, Gerhart and Minette, 2004).

Pfeffer and Sutton (2000) adds another perspective to the study of

motivation and employee performance and says that employees
should not be labeled into groups such as good and bad performance
because once the have been branders as bad, their motivation to
work will be reduced and as a result, there will be a decrease in the
performance of employees therefore a rewards system needs to treat
employees fairly and not judge them on preconceptions.
The level of performance of employees in an organization is a
function of three interrelated factors namely employee skills,
motivation and strategic focus of the employees. Employee skills
and strategic focus are of no use unless employees are motivated to
apply these skills and focus on the job (Becker, Huselid and Ulrich,
2001). Schwartz (2006) believes that while devising reward systems
for your employees, there can never be a one size fits all approach
and the factors that motivate one employee may not be able to
motivate another one as motivation comes from within and an
organization can only do so much to provide and environment and
reward system that encourages the process of motivation in an
employee.
A study asked the employees to point out the ways in which the
organization could help make the work more meaningful for them
and the results revealed that the factors that employees mentioned
were both extrinsic as well as intrinsic and therefore a total reward
system needs to focus on and address both these issues (Podmoroff,
2005). Another research study carried out to study the factors that
lead to employee motivation revealed similar results that employees
rated exciting work and excellent pay as keys to higher levels of

employee motivation and based on these findings, the researchers

suggested designing reward systems which cater to factors such as
job enlargement, job enrichment and promotions (Lindner, 1998).
A study was conducted to test the employee motivational factors in
European employees over a period of time. This longitudinal study
examined the researches done in the years 1946, 1980, 1986 and
1992 and revealed that the factors that motivate employees have
changed over time and the latest studies show that employees have
become more extrinsically motivated than they were in the initial
survey and they rated high wages as the most important motivating
factor (Wiley, 1997).
Ross Gardner (2010) argues that even though over the years, the
reward systems and categories have expanded the reward types have
boiled down to tow basic types; transactional and relational.
Transactional rewards are the tangible or extrinsic rewards such as
compensation and benefits that are given to the employees while
relational rewards are the ones that deal with prsonal development.
These rewadrs can be given directly or indirectly to the employees.
For example direct transactional rewards are pay and incentives
while indirect transactional rewards can include retirement benefits
and health benefits. Direct relational rewards could be offering a
training program while indirect relational reward can be culture and
climate of the organization.
Another effort was made to link employee's career motivation with
the rewards system and even though rewards may be able to
improve the performance and motivation of a few employees, to
make this improvement organization wide a broader approach is

needed so that even the average employees can realize their full
potential. The key is to foster and encourage such an environment
that people to become more goal directed and policies should be
developed keeping in mind organizational needs (McNaughton,
Carlson and Dietz, 1992).
A survey was conducted in the year 2009 in which 763
organizations were studied across 66 countries of the world. This
survey showed the only 40 % of the organizations were considering
measures of employee engagement as performance measurement
tools and 57% of the organizations showed a commitment to plans
to evaluate the total remuneration system holistically rather than
focusing on individual components. This showed the increased
focus on organizations on taking a holistic approach towards reward
systems (GBN, 2009).
According to another study, banks have started to focus more on
employee motivation and view rewards by taking a holistic
approach. Banks have now stated to view rewards as an investment
rather than a liability and the performance of employees as a return
on the human capital. The goal therefore is to leverage this
investment in rewards in way to achieve employee motivation
(Bush, 2003).
A study was conducted to study the impact of Reward and
recognition programs on the level of motivation and job satisfaction
among employees. The research studied employees from Unilever
Company and comprised of 80 respondents. The study identified
that factor such as promotion and working conditions have a

significant and positive impact on employee motivation (Ali and

Ahmed, 2009).
Various studies have been conducted to study the factors that have
an impact on employee motivation. One such study revealed that
employee motivation can be enhanced by creating a fostering
culture and that the most important factors that affect it are
recognition and feedback and just offering more money does not
necessarily increase productivity. Another important factor is
helping employees focus on a goal which only works when
employees have the proper skills and training to achieve those goals
(Fuhrmann, 2006).
Public sector organizations are large and employ a large number of
employees and studies have been conducted to investigate how
public sector employees are motivated tow work. The study showed
that there is a positive relationship between employee motivation
and the rewards offered but there exist differences between the
levels of influence as compared to the private sector employees. In
addition to this, the study also showed that this level of motivation is
also related to commitment to the organization in the public sector
(Crewsen, P. E, 2010).
Another study that was constructed along similar lines studied the
differences between motivating factors between public and private
sector employees. The study had a sample of 629 organizations and
it revealed that at the managerial level, the same factors motivate
employees' but at the lower levels of the hierarchy, motivating
factors become entirely different and ethic is ranked as a very high

motivating factor by the private sector employees (Jurkiewicz,

Massey, Jr. and Brown, 1998).
Locke and Latham (1990) have developed a model called the high
performance cycle that incorporates the findings of all these
theories. According to them, when the employees face a challenging
and difficult task and they are able o achieve that goal because of
high level of efficacy, internal locus of control and the related
concepts which leads them to deliver a high level of performance.
The mechanisms employed to achieve this performance level are
focusing attention in the right direction, hard work, perseverance
and coining strategies and plans for achieving tasks. Such high
performance if turns out to be rewarding for the employees results in
increase in job satisfaction as well as motivation.
A review of the literature has established the importance of rewards
in the motivation of employees. Rewards systems have gradually
evolved form being one dimensional financial reward to an
integrated system that encompasses all tangible and intangible
aspects in the form of a total rewards system. Motivation is
influenced more by intangible rewards such as recognition. Total
reward systems play an important role in determining the level of
motivation of employees.

Chapter 4:

Research
Methodology

Research Methodologies
This chapter focuses on research methodology which is used in the
study. It provides a detailed description of the research approach
adopted in this study. Desk Research was done to do the project.
Desk research refers to the collection of data which has already
been collected in order to solve a problem. This type of data is also
known as secondary data.
Secondary data are used for thepresent study. Primary data are
collected through theqestionnaire. Secondary data are collected
fromannual reports, journals, internet, books and etc.

Chapter 5:
Data Analysis and
Interpretation

In this competitive environment nowadays, organisations are

predicted to be more aggressive on empowering the employees
because the employees' job satisfactions are important for the whole
organizational performance. Because of this reason, in order to
achieve the organization's missions and goals, the effectiveness on
managing the motivation of employees should not be excluded. The
motivation such as employees' satisfaction on their works or the
rewards given to them leads to better performance in their
organization.
Rewards are the performance incentives that given by the company
to the individuals due to their good work performance. There are
two types of rewards that normally implemented by the
organizations to motivate the employees, extrinsic rewards and
intrinsic rewards. Based on the expectancy theory of Vroom
research, it adapted that extrinsic rewards are positively valued work
outcomes that the individual receives from some other person in the
work setting, include such things as pay, financial incentives,
security, recognition and promotion; intrinsic rewards are positively
valued work outcomes that the individual receives directly as a
result of task performance, such as feeling of accomplishment,
personal growth, and self-worth (French et.al 2008). Each type of
the rewards' demands has different functions and meaning within
itself that can be applied by depending on the situations and
requirements of the organizations. It is very important for a manager
to aware the differences between extrinsic and intrinsic rewards
because both of them are intent to increase motivation of employees.
Rewards are classified into two categories which are extrinsic and
intrinsic.Everyone has different needs and perception on their job.
Therefore, outcomes such as pay, promotion have different values
for different people. The examples of extrinsic rewards are such as
pay, bonuses, spot awards, promotion and recognition. Each of the
rewards shows different methods of motivation strategies depends

on the business structure and performance. Likewise, extrinsic

rewards are useful if employees are able to satisfy their needs
indirectly through financial rewards and incentives for past
performances. Intrinsic reward is the form of motivation an
employee has within himself that comes from a passion or interest in
doing a job well done. In other words, intrinsic rewards come from
inside an individual rather than from any external rewards, such as
monetary incentives. Examples of intrinsic rewards are completion,
achievement, autonomy, personal growth, challenge, responsibility,
praise,
and
feels
of
self-esteem.

1. Public praise/recognition
2. Opportunity to show off a winning call
3. Shared customer feedback that theyve made a difference
4. Earned extra paid time off
5. Available re-training; personal development
6. Respect as viable part of organization
7. Requested to mentor new hire
8. Requested for special project work
9. Top notch info systems
10. Bright, comfortable surroundings
As you can see, the number one motivator is public praise and
recognition. However, in most organizations employee recognition
is limited.
Furthermore, Gallup concluded that disengaged workers miss more
days of work and are less loyal to employers.

So how do you motivate? Lets distinguish between intrinsic and

extrinsic motivation.
Intrinsic motivation is when you want to do something. Extrinsic
motivation is when somebody else tries to make you do something.
There are positives and negatives to both.
Some people believe employees will be their most creative when
they feel motivated primarily by the interest, enjoyment,
satisfaction, and challenge of the work itself, and not by external
pressures or inducements.
Further,extrinsic

motivation

has

drawbacks:

1. Its not sustainable; if you withdraw the reward, the motivation

disappears.
2. You get diminishing returns; if the reward stays at the same level,
motivation slowly drops off. To get the same motivation next time
thus requires a bigger reward.
3. It hurts intrinsic motivation; rewarding people for doing
something removes their innate desire to do it on their own.
However, Incentives 2008 Gift Card IQ Survey reported that 80.2
percent of companies use gift certificates/gift cards in their
incentive, recognition, and reward programs. The top three types of
cards are dining/restaurant, retail store, and entertainment.
Participants used these gift cards to recognize performance (more
than 70 percent), as a sales incentive (60 percent), and as spot
rewards (32 percent).
Factors that create and sustain intrinsic motivation include:
1. Being able to challenge yourself and accomplish new tasks.
2. Having choices over what you do.

3. Work with and help others.

4. Happy at work, liking your job.
In the best scenario, intrinsic and extrinsic should be combined into
a complimentary fashion to promote motivation.
We are strong believers in investing in employees the better care
you take of your employees the better care they take of your
customers. It is actually a win-win for you, your employees, your
company, your customers, and your shareholders. Customer service,
skills training reduces turnover, absenteeism, job tension, and
increases communication skills, empathetic responsiveness,
customer satisfaction and ultimately the bottom line.
Impact of extrinsic rewards on individual and organization
performance
When talking about extrinsic rewards, individuals are said to be
sensitively concerned on the pay and bonuses. They will be more
motivated by pay than any other type of reward. Based on the
research, the financial incentives have larger impact on motivation
than other outcomes. This is because money is very important for an
individual's multiple needs in daily life. Extrinsic motivation can be
used to coordinate resources by linking employees' monetary motive
to the goal of the organization (Osterloh and Frey, 2000).However,
people who pursue goals for extrinsic reasons such as money, status
or other benefits are less likely to attain their goals and are less
happy even they do achieve them because they feel that the goals
are less meaningful for them (Robbins 2009).This means that people
are stressed on attaining the goals by completing some complicated
tasks in order to achieve their bonuses, status or promotion.

Although the goals of organizations might achieved perfectly, but

the feelings or satisfaction of employees would be decreasing due to
uncomfortable with the jobs. This situation will lead the extrinsic
rewards become less effective in the organizations if they do not
manage the rewards systems carefully.
Impact of intrinsic rewards on individual and organization
performance
The intrinsic rewards have an effect on both individual and
organizational performance. For example, the employees in an
organization have reached the esteem stage of development and
possibly the self-actualization phase through the impact of intrinsic
rewards. The intrinsic rewards encourage and enhance both
employees and employer to be able to challenge themselves and
accomplish new tasks and cooperate with others to work in a
harmony environment. Apart from that, intrinsic rewards enable the
employees to have greater concentration and keep them in
energizing and self-managing. By having the high levels of intrinsic
rewards, employees become the informal recruiters and marketers
for their organization in which they recommend their friends to
work in the organization and recommend product and services to
potential customers. According to Thomas (2009), intrinsic rewards
create a win-win situation for organization and its employees. The
employees feel happy and satisfy as they experience feelings of
achievement and self-worth, which create job satisfaction. At the
same time, the organization increases its profit because of the
increase in employee job satisfaction. The intrinsic rewards
facilitated greater levels of satisfaction and competency. Employees
have more interest, excitement, fun and confidence in performing
tasks which leads to enhanced organizational performance. The
research suggested that organizations pay employees equitable
salaries, not tied to performance, so as to attract and ensure

participation, and to rely more on intrinsic motivational techniques

to improve performance (Uco 1992).
Advantages of Extrinsic rewards
Based on the research, extrinsic rewards can be motivating in short
term period effectively (Vanderbuilt University, 2009). Moreover,
the result of the performance on the individual can be expected
easily and investigated in a quick review. Nevertheless, it is also
increases the competitive advantages of the firms in the industry.
Advantages of Intrinsic rewards
Increasing job satisfaction is an advantage of intrinsic rewards. Job
satisfaction is considered as a great motivator in having employees
and employer(s) work hard in order to produce quality results
(Alexandrou 2011). In turn, it improves the organizational
performance. Intrinsic rewards tend to be effective in the long run
because an intrinsically motivated employee performs tasks given to
him willingly, because he finds the task is either challenging or
interesting and satisfies to get it done, rather than trying to escape
from it once the task is done.
Disadvantages of Extrinsic rewards
Most of the researchers found out that offering extrinsic rewards to a
person for performing a task can diminish the person's intrinsic
motivation (Galia 2007). This means it will decrease the personal
desire on their job which caused low satisfaction and build up
stresses if the organization is too relying on the extrinsic rewards.
Besidessome of the psychologists argue that may be pay is not
the best motivator for all performance rewards situations. According
to the journal, the crowding out effect on intrinsic motivation by

using extrinsic rewards is especially significant when the pricedependent, monetary compensation is perceived as controlling and
hence creates the feeling of being stressed from outside (Osterloh
and Frey, 2000). Once they found out that their job is exciting and
challenging, they are less likely to be attracted by extrinsic rewards
such as higher pay offered by other firms. Janssen and MendysKamphorst (2004)also concluded similarly that introducing financial
incentives to agents to contribute to a socially desirable outcome
tends to decrease the number of contribution.
Disadvantages of Intrinsic rewards
Somehow, job satisfaction can be a weakness of intrinsic rewards as
if an employee is not satisfied from what he does, his performance
gets affected thus damaging the performance of whole team and in
turn, the organization. It is difficult to achieve intrinsic rewards.
Besides, short-term goals are difficult to achieve as intrinsic rewards
take a long period of time.

Recommendations
Organizations can consider that extrinsic rewards and intrinsic
rewards are accessible to both and influence situational motivation
in both the short and long term period.
For example, that individual might be highly motivated to do well
on an interesting task and receive some bonuses (extrinsic
motivation) so that they can gain some knowledge and experiences
from that particular task (Intrinsic motivation). However, there are
some factors that can influence the motivations of individual instead
of extrinsic and intrinsic rewards, such as individual's personality,
behavior, culture, values and perception. The organizations should

aware those factors on the employees in order to satisfy them and

improve the organizations performance in the same time.

Chapter 6:
Conclusion

Conclusion
Human resource is considered to be the most important resource of
an organization to remain competitive in todays competitive
business world. Acquiring the right workforce and then retaining
that force is one of the challenges faced by organizations and their
management. The results from this study reveal that there is a
significant and positive relationship between extrinsic rewards and
employee motivation but it has been observed that organizations are
not offering right amount of financial rewards (extrinsic rewards) to
their employees in this sector. Pay is a significant factor which
affects employee motivation but the results moderately supports the
hypothesis due to difference between the pay packages of three
different organizations.Fringe benefits are very important in
motivating employees according to this study, so organizations must
have to provide all the essential fringe benefits to their employees, it
also increase their job efficiency.
On the other hand, intrinsic rewards have a weaker impact on
employee motivation. Empowerment has negative effect on
employee motivation, due to the lack of trust between employee and
his/her boss through which employee thinks that his/her boss has
over burden him instead of thinking himself empowered. There is an
indirect relationship between appreciation and employee motivation
as employees of the organizations are not satisfied with their pay
packages. So in the absence of extrinsic rewards which is the basic
source of motivation for employee, intrinsic rewards like
recognition, appreciation and empowerment is of little importance.
Pay is potentially powerful tool to employee motivation so the
employees can only be intrinsically motivated to perform an activity
when they are fully satisfied with the pay they are getting.

There are individual differences in response to reward type. Some

employees will be more motivated by social rewards (e.g. praise and
recognition) than cash rewards. It is therefore important to
understand the motivational factors of each individual employee and
distribute rewards based on employee preference and their resulting
degree of motivation.
Research on individual differences can shed light on employee
preferences for reward types. The majority of employees prefer cash
rewards; however, many employees will perform better in pursuit of
non-cash rewards of similar value [1]. Thus, balancing cash rewards
with non-cash rewards can be an effective workplace reward system
strategy.

Effective employee reward systems can motivate employees,

increase their work performance and encourage them to align their
performance with the companys objectives. It is therefore critical
that managers understand what constitutes an excellent employee
rewards program, how to implement it and when to make necessary
changes. Doing so can have a major impact on the companys
climate, culture and bottom line.

Chapter 7: Learnings

Learnings
Extrinsic motivation looks generally outward to obtaining a
specific reward (e.g. recognition, award, money, or other concrete
benefit), participating in competition, or contributing to a team
endeavor. On the flip side, extrinsic motivation also encompasses
our interest in dodging an unwanted external consequence. In short,
its about working to achieve (or avoid) an external outcome of
sorts.
Intrinsic motivation, on the other hand, plays off of our internal
interests and values. We do what we do not because were
interested in what we perceive to be a beneficial outcome or reward
but because were invested in the process itself. For example, we
want to train not because we care much about where we finish in a
race but because we just love the release of working out of seeing
our usual path, of enjoying how we feel during and after a run.

Chapter 8: References
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