The Impact of Monetary Incentives on Motivation

Introduction

The success of a business depends on its resources. Employees as human resources are very valuable assets to the company, therefore it is essential to understand what motivates them which will in turn, enhance their commitment and satisfaction to their job and maximise their potential at work. There are many research conducted previously on motivation theories. According to Herzberg’s two factor theory, hygiene factors which are job context related will not satisfy people, however if these factors are not met, it will cause dissatisfaction. On the other hand, motivators which are job content related are the factors that cause either high or low satisfaction level.

According to Wood et al (2010), Herzberg concluded that money was not a motivator. It was based on data whereby salary was found to have considerable cross-loading across both motivators and hygiene factors, but it was skewed more towards hygiene factors, leading to such conclusion. Therefore, the main objective of this research is to find out if Herzberg’s two factor theory applies, focusing on the question: Are monetary rewards effective in motivating employees of Small Medium Enterprises? This report comprises of a summary of literature review from various sources, the methodology, the results and analysis, conclusion, recommendations, survey questions and collated survey results.

Literature Review

Bent and Freathy (1997) mentioned that a key to organization's competitive performance has been the successful motivation of staff. Similarly, Rutherford (1990) reported that motivation makes an organization more effective because motivated employees are always looking for better ways to do a job. Therefore, the root of motivation is an important aspect that managers need to understand to engage their employees so as to ensure that their potential are maximize and that they are performing at their best. Luthan (1998) defines motivation as, “a process that starts with a physiological...