In the increasingly competitive and challenging market, all employees should maintain high enthusiasm and enjoyment in order to contribute as much value as possible to the firm. It is why firms make schemes to encourage employees and focus on their motivation. "Motivation is defined as the activation that encourages employees to achieve organizational targets." (Bnet, n.d). According to Ehow (n.d), motivation plays a vital role in organizations and companies in all levels who want to reach their business objectives. Employees with a high level of motivation typically work harder, which leads to higher productivity, better work quality and more financial gain. There are different motivation theories, which can be divided into two major parts. One is called content theories, which describe the particular factors that a firm uses to motivate employees, such as Maslow's hierarchy of needs, Alderfer's ERG theory, Herzeberg's motivator-hygiene theory, and McClelland's learned needs or three-needs theory. The other is process theories, which are concerned with the thinking processes that affect behavior. For instance, Vroom's Valence x Expectancy theory and the Porter and Lawler Model are some of the major content theories (Hall. et al, 2008). Therefore, a variety of theories provide an explanation of how to motivate the workforce by financial and non-financial incentives, which have both advantages and disadvantages.
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First of all, it is vital for a business to find out what satisfies particular individuals with different needs. "Workers will be more motivated to work if their needs are satisfied." (Hall, et al, 2008:374) Individuals are different, as well as their needs. As a result, employers may have to offer different incentives from worker to worker according to their specific conditions. According to Hall (2008), Maslow put forward a theory that people have five levels of satisfaction to fulfill, including physical, safety, social, esteem and self actualization, which are illustrated in a pyramid blow, called "hierarchy of needs". Maslow stated that only when lower level needs have been satisfied, would an employee be motivated by a high level of needs (Tutor2U, n. d. c). As the figure illustrates, the most basic needs that people are concerned with is to have enough money to make a living, after which are achieved, they can move on to higher level stage. Thus, the manager should find out which level each employee is in, and decide whether financial or non-financial incentives are suitable to meet their needs.
Figure 1: Maslow's hierarchy of needs (Tutor2U, n. d. c)
On one hand, a number of theories explain that financial rewards are the most vital elements to motivate the workforce. For instance, Frederick Taylor suggested that 'a fair day's pay for a fair day's work' (Hall et al., 2008). As money is necessary for employees to survive, financial rewards are efficient ways to motivate a reluctant workforce. There are different financial methods that enable employers to motivate workers, such as salaries and wages, piece rates, fringe benefits and performance-related pay, profit sharing and share ownership. While they lead to better performance and productivity, they also cause some problems, such as quality and operating problems. For example, piece rates are payments per product a worker produces, which was recommended by Frederick Taylor. (Hall et al., 2008).Workers are paid depends on the number of units they produce. Thus, they would produce more so as to get more highly paid, which increases the speed of work and earnings. However, workers would rather concentrate on speed of work than quality of products, which leads to poor quality products and gives the firm a poor reputation. In addition, another financial incentive is profit sharing, which is a scheme that employees receive a share of profits made by the firm (Hall et al., 2008). It is a good way to motivate workers because it encourages them to increase profits, of which they can own a share. Moreover, they can also feel a sense of being in the same position as shareholders. For instance, after two years' service, staff in Tesco can join the profit-share scheme. According to the number of hours employees work each week, a number of shares are allocated to them. That means the more work they do, the more shares they could hold. During 2002, Tesco paid out £50 million to over 100,000 of its workers in its profit-share scheme. Through sharesave and bonus schemes, Tesco, which had 195,000 staff, earned more than £200 million. (Tutor2U, n. d. a) Because of profit sharing and sharesave schemes, employees are motivated to work and make more profits, and thus the shareholders and employees get extra money. By contrast, it is difficult for workers to have a control over how much profit the firm makes. They may feel that there is no effect on the firm's profits although they make extra effort to work, so there is no incentive if the amount received is fairly small. As a result, financial methods are short run motivators, which have some apparent merits and drawbacks.
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On the other hand, despite these characters of financial motivation, there are many methods of non-financial motivation, which provide employees various factors aside from money as typical motivators, such as job enrichment, empowerment and team working. "It is false that more money equals happy employees." (Biztrain, n.d) Employees are not motivated by money alone, and they should be motivated in different aspects. As for job enrichment, it is supported by Herzberg (Hall et al., 2008). It involves offering opportunities for employees to get more tasks to improve their skills, by funding them to take courses, which provides education and job training. For example, RBS motivates employees relating to the recognition of good performance. There is a personal development plan for each employee, involving more training and attending courses. They are encouraged to grow and develop their skills and abilities and gain new understanding, which can offer more opportunities to promote and increase their reward. (thetimes100, n. d) Nevertheless, Tutor2U (n. d. b) points out that it might be easy to make some mistakes if the work is too complex for the employees to perform well. As a consequence, there are some obvious advantages of non-financial motivations, and disadvantages also exist.
In conclusion, motivation is necessary for a business to achieve its goal. As Maslow's hierarchy of needs describes, employees are motivated by different things, so managers should determine what motivates individual people efficiently, whether a financial or non-financial incentive, which have both benefits and drawbacks. As far as I am concerned, both of the two ways are useful for a business to motivate its employees and prevent job dissatisfaction. Financial motivators are suitable in the short run, and non-financial methods will motivate employees to work in the long run. Consequently, managers need to motivate more effectively by taking good advantage of these two incentives and avoid weaknesses, in order to offer personal recognition and make achievement.