What motivates employees?

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Interesting article from the Economic Times about motivation for employees. Of course non-cash incentives drive engagement!

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What motivates your employees? Is pay the sole motivating factor or do non-cash incentives drive engagement?

The debate on whether money motivates employees more than other factors has been prevalent in organisations for quite a long time. Should incentives or rewards be financial or non-financial? Both options make an action seem more purposeful, but how one chooses the incentive option that is ideal for the organisation, is crucial.

Sridhar Ganesan, managing consultant – Mumbai operations and rewards practice leader, Hay Group, expresses that there is no ‘this or that’, when you plan for an overall rewards value proposition for the employees; it has to be holistic, which means both have to be aligned in a balanced manner.

“The reward strategy has a more powerful effect on employee engagement if it doesn’t just concentrate on cash incentives, but instead creates an overall employee value proposition incorporating intangible rewards such as quality of work, non-financial recognition and work climate,” he says.

According to Ashish Kumar Srivastava, director – HR, Canara HSBC Oriental Bank of Commerce Life Insurance Company, “As an organisation, the challenge is to determine whether financial rewards or non-financial ones have a greater impact on the motivation of various employee segments. A ‘one size fits all’ approach does not work. For example, a young sales employee working in a target-driven environment is more likely to be motivated by tangible monetary incentives, whereas for a mid-level manager, access to a valued leadership development training programme may hold greater relevance.”

Financial rewards is an extrinsic motivating factor, and non-financial incentives represent the intrinsic one, points out Rajita Singh, head HR, Broadridge Financial Solutions India Pvt Ltd.

“But it’s interesting to note that eventually, we employ less intrinsically motivated actions. As children, spontaneous learning and curiosity are vital for our cognitive development . As we get older, rules and regulations mean that most of what we do is extrinsically motivated to some extent. And now in the conceptual age that we live in, we seem to be going back to the route we must, which is – small things matter,” she avers.

Understanding employee perceptions of the reward package on offer can greatly enhance an organisation’s ability to deliver a return on its investment. Ganesan explains, “At the CXO level, our research points to a growing focus on performance, thus leading to a more pronounced variable pay component in overall compensation – pegged to be at around 15 to 30 per cent of the fixed CTC.

On the other hand, Gen Y want their recognition and they are not willing to wait till the annual performance appraisal for feedback/recognition. At the same time, a good work-life balance features overwhelmingly high in their idea of a preferred working environment.”

According to the McKinsey Quarterly survey – ‘Motivating people: Getting beyond money’, the respondents view three non-cash motivators: praise from immediate managers, leadership attention, and a chance to lead projects or task forces as more effective motivators than the three highest-rated financial incentives: cash bonuses, increased base pay, and stock or stock options.

A talent strategy that emphasises the frequent use of the right financial and non-financial motivators would benefit most companies in bleak times and fair.

Ganesan suggests a few principles that can work well in devising the ideal performance-incentive mix for an organisation:

Introduce differentiated reward structures where available rewards increasingly go to the top performers; Build line management skills in setting goals, coaching performance and recognising and rewarding performance; Clarify the definitions of performance; Balance individual and enterprise targets for bonuses; Align individual targets to the overall strategy.


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