Evaluation Of Financial And Non Financial Motivation Methods Accounting Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Aiming at motivating workers, there have been two different kinds of motivation named financial motivation and non-financial motivation methods for companies to use. Motivation is necessary for companies' operations because a lack of motivation in the short run will result in the reduction of effort and disappearance of commitment (Hall, D et al, 2008). Motivation can be defined as a desire that employees have to do their jobs better. There are some conventional theories of motivation. For instance, Taylor's Scientific Management puts forward 'a fair day's pay for a fair day's work', which is one method of financial motivation theories. The other two examples are Herzberg's two-factor theory and Maslow's hierarchy of needs, which include both financial and non-financial methods. To be critical, non-financial and financial have both benefits and weakness, and they are suitable for different people in work places. For instance, blue collar workers and white collar workers may be motivated in different ways. In fact, financial methods indeed have significant impacts in motivation. Be similar to them, non-financial methods have functional results in motivating employees as well, not as people's general thoughts that non-financial is less practical.

Firstly, financial motivators are efficient because financial methods are major about money that can also be explained as financial rewards to employees, which can satisfy the basic needs of workers, such as salaries and wages, and different types of payment which involve performance related pay, profit sharing. As a successful example of efficient financial methods, Tesco expended out £50 million to just over 100,000 of its employees after holding £38 million-worth of shares on their profits for three years in its profit-share scheme in 2002 (Tutor2U, n.d). The great example of financial methods theory for motivation is Taylor's, a fair day's pay for a fair day's work. According to Maslow's hierarchy of needs (Hall, D et al, 2008), money is a fundamental need which belongs to physiological needs for workforce. In addition, Maslow (Hall, D et al, 2008) had divided the needs of staff into five parts, for example, the physiological needs mentioned before is the basis, and the highest level of needs is self-actualization. Furthermore, in research by Hays in 2006, 42% of employees surveyed said they preferred financial rewards, while 9% focused more on non-financial rewards. "This shows a significant increase in the number of people preferring cash rewards" (Hays, 2009). These are the reasons why raising the income may motivate people to become more efficient than other methods.

Despite of that financial motivation methods have significant advantages; monetary methods of incentive are less effective in some situations. The first one is that employees may be paid the same as others who are not as productive as them (Tutor2U, n.d), which can lead to unfairness and dissatisfaction that can be commonly seen in team-work. In addition, rigidity is a serious problem in financial methods of motivation, which means that some workers may enjoy the same income without productivity in the given time. Moreover, financial methods may be useless for high level employees. For example, some employees work in international companies can get high salaries and wages. "When a need is mostly satisfied it no longer motivates and the next higher need takes its place" (Net MBA, 2007). That is, they would pay more attention to other areas of their jobs, such as safety needs and belonging that rank a higher position in Maslow's hierarchy of needs theory. In a word, those problems of financial motivation methods can not be ignored when doing business.

Non-financial motivation methods may be more available for companies in the long run because they are flexible, especially for some large companies. For example, Microsoft employees are almost skilled workers who derive satisfaction from their work itself possess a strong sense of commitment to not only their field of professional knowledge but also to their managers as well (Echeat, 2005). Employees may perform better in their given tasks and responsibilities in this way (HR, 2010). Herzberg's two-factor theory has stated that there are not only financial methods for motivating the workforce, such as job satisfaction, job enrichment, job rotation, as well as empowerment (Hall, D et.al, 2008). Job enrichment can give new energy to those workers who have been bored with their work and then bring higher productivity (Tutor2U, n.d). Empowerment can fulfill workers' belonging and the small ambition of power. Furthermore, non-financial methods of motivation are valid motivators for those people who have been appeased with their incomes and ask for higher needs of jobs. For instance, the feeling of belonging as well as a comfortable environment may be needed for employees in companies. Consequently, the benefits of non-financial motivation methods are practical and should be well used.

On the other hand, non-financial motivators also have barriers to a company on some sides, such as difficulties in controlling and unfairness. Firstly, they are hard to operate. For empowerment, the power that is divided into different parts need to give to some excellent and honest employees. However, it is hard for managers to judge whether an individual can deal with authority and decision-making well (Tuto2U, n.d). Secondly, non-financial methods are unfair sometimes, especially in team-work. Everyone in a team may enjoy the same environment and security as fair, but not all colleagues will expend a same effort, which will break the balance in a team. Non-financial methods are definitely beneficial for motivating the workforce, but the limitations will also affect the profit of a firm in a negative way, which should be paid more attention to.

Based on those motivation methods, there could be given some basic recommendations. The first one is that a business ought not to only use financial or non-financial methods in the process of doing business. "A combination of financial and non- financial incentives help together in bringing motivation and zeal to work in a concern"(Management Study, 2009). For example, linking increasing wages to improving working environment or hold activities after working is a functional way to motivate bottom workers and high level employees. Moreover, as a non-financial method for motivating employees, training is efficient in improving their abilities and getting more professional knowledge. Another useful method is doing researches between employees to make sure what they need. "Staff surveys are usually very helpful in establishing whether staff in your company is motivated and therefore performing to best effect"(Business Balls, 2009)

All in all, doing business is a complex process, which needs different directions of information to make strategies. Motivation is one of the most important elements for the operation of a company because motivation is about employees which can be defined as the basic factor of a business. For instance, P&G considered its employees as its most important asset and indicated that their interests were in helping and improving the company (Hub Pages, n.d). Financial and non-financial methods of motivation have different functions in work places. Furthermore, non-financial methods, such as enriching jobs and empowerment to motivate white collar workers could be used more efficiently for managers to avoid defects of non-financial and financial methods. That is, decision makers should be more careful in this area by making a best use of motivation theories and in a practical way.