Impact of incentives on motivation of employees Literature Review

Motivation refers to the initiation, direction, intensity and persistence of behavior. Incentives on the other handare external measures that are designed and established to influence motivation and behavior of individuals,groups or organizations. Incentive systems or structures are combinations of several more or less coherentincentives. The following study has been made in the recent past based on the impact of incentives on employee motivation. A recent paper by Chao Ke, et al; (2011) studied on the current situation of incentive mechanism in AA company and has made certain strategies to overcome the present incentive problems. They have studiedon the financial and non-financial benefits to the employeesand have identified that lack of motivation is one of the main problem existing in the incentive mechanism. They have formulated strategies on attracting talents, motivating employees and forming an effective incentive scheme to enhance the overall competitiveness of AA company. Ozimec,et al; (2011) have observed that additional remuneration or benefit or incentives are giving employee recognitionat work place. The study analyses on incentives plan structure of sales people in Croatia.Further they have also discussed on the advantages and disadvantages of compensation plans for sales people. Mone, et al; (2011) have conducted a study on performance management to increase the employee motivation. They have found that performance management is much influential factor in employee engagement. Theyhave found that incentives will be decided on the basis of performance appraisal. Guang-bin, et al; (2010) have investigated different hierarchy in enterprise to improve the core competitiveness, incentive models of knowledgesharing for knowledge main-bodies of different hierarchy shouldbe established according to the principal agency theory, taking into tacit knowledge sharing, multiple stages of incentive model of knowledge sharing and they proposed incentive model of knowledge sharing for suppliers. They have found that in order to acquire

maximum rewards in enterprise special incentive contracts should be made for different types employees. Cadwallader, et al; (2009) have studied on complexities underlying employee motivation to participatein the implementation of a service innovation aimed atimproving customer service and enhancing customersatisfaction. They havedeveloped a theoretical model on complex role of motivation in employee engagement and discussed on theglobal, contextual, situationallevels of motivation. Custers, et al; (2008) have identified various models used in health care system and its effectiveness. They havedeveloped incentive models and have compared them with existing models of incentive. They have found that these models were effective in terms of incentive schemes in health care sector. Nisar (2007) has investigated the determinants of bonus pay-outs in the UK financial industry and bonuses are increasingly linked to reach the business goals such as quality, customer service, employee hiring and retention polices these replace the focus on output.He has found that a variety of contextual factors influenced the firms to make greater use of bonus payouts. He has concluded that bonus payout acts as a mechanism that supports the importance of individual employees with organizations performance goals. Yubin,et al; (2007) have identified that to motivate knowledgeemployeeshould try to satisfy needs of the employee and they have analyzed that motivation mechanism depends on employee explicit and implicit demands. They found that compensation mechanism based on the employee implicit demand.They have concluded that the productivity of knowledge work comes from theeffect of the incentive management on the knowledge employee. Shengnan Zhao,et al; (2006) have analyzed the characteristics of matrix structure and currentsalary distribution problems. They have analyzed theimpact of financial and non-financial incentives on employee motivation to improve the competitive advantage in the matrix structure organizations. They found that characteristics of matrix structure and the salary distribution of enterprise will create the enterprise culture and inspire the key employees.

Van Herpen, et al; (2005) have analyzed the relationship between pay and performance. They have studied that design and implementation of a performance measurementand compensation system affect the motivation of employees. They have found positive relationship between compensation and extrinsic motivation and intrinsic motivation is not affected by the design of monetarycompensation, but promotion opportunities. Ondrej Rydval (2003) has observed that financial incentives represent the dominant andeffective stimulator of human productive activitiesbut which may be wrong in the case mental production process because of intrinsic motivation and financial incentives substitute cognitive effort. They have formulized a model of cognitive production that would incorporate these cognitive efforts. They have found that impact of individual effort on performance is weakened by individual cognitive abilities. Condly, et al; (2003) have observed that team directed incentives had much more impact on individually-directed incentives and financial incentives will give higher motivation than nonfinancial incentives and tangible incentives (gifts and travel). They have found the impact incentives in two different types of work tasks that are cognitive and manual labor and measuring quantity of the work is much easier than quality of the work. Leonard, et al; (1999) have reviewed some traditional theories of motivation and specially concentrating on their limitations. They have proposed a meta theory of motivation incorporating traditional theories of motivation and self-concept theory. They have developed the propositions of meta theory of motivation in organization. S. Fudge,et al; (1999) have studied thatmoral considerations of employee and that areoften ignored, leading to unethical practiceswhich may hurt the long-term interests of thecompany they havefound a model to eliminate this problem with the use of expectancy theory of motivation. They have concluded that creation of corporate culture will develop the behavior of employee and employee motivation. Raduescu et al; have observedthat information systems (IS) projects are often delivered late, over budget, and not always to requiredspecifications. They have investigated the use of incentives in IS projects during development and implementation based on an agency model and they have suggested that incentives positively impact on information system development and

implementation. They havefound that Incentives seem to improve the rate of IS development and implementation and bettercontrol IS expenditure and resources. Incentives influence the behavior of the employee at work level and incentive will encourage the employees to do the extra effort in the work. Sanghee Park, et al; have studied the relative effects of merit pay, bonus pay and the long term incentives on future job performance based on the expectancy theory. They have suggested that compensation plan have greater expectancy and greater valence to motivate employees toperform better.They have analyzed that the characteristics of pay-for-performance plans result in different effects on future jobperformance. Jolene Eckert hasstudied the long term impact of incentive programs on travel organizations. They have found that most of companies collect the detailed information on sales, profitability, customerservice, quality, and job satisfaction, but this information rarely combined to analyze long-termresults of incentive programs. Adams,et al; have observed that incentives are an important means of attracting, retaining, motivating,satisfying and improving the performance of employees. They have analyzed thatincentives can be appliedto organizations,groups and individuals and that may vary according to the type ofemployer.They have found that non-financial incentives like recognition, appreciation and opportunities for career growth were motivate the employees.

References:
Chao Ke, Zhao lijia&Qiaocaihong (2011). The Incentive Mechanism of AA Company. 978-14244-6581-1/11/$26.00 2011 IEEE. Kristina Ozimec and Marija Tomaevi Lianin (2011).Motivational Incentives for developing sales force performance in emerging markets.978-1-4244-9655-6/11/$26.00 2011 IEEE. Edward Mone, Christina Eisinger, Kathryn Guggenheim, Bennett Price & Carolyn Stine (2011). Performance Management at the Wheel: Driving Employee Engagement in Organizations.Springer Science Business Media, LLC 2011, J Bus Psychol (2011) 26:205212. CUI Guang-bin, DONG Liang, LI Yi-Jun & GUAN Tao (2010). Study on Multi-levels Incentive Mechanism Model for Tacit Knowledge Sharing in Enterprise. 2010 International Conference on E-Business and E-Government, 978-0-7695-3997-3/10 $26.00 2010 IEEE. Susan Cadwallader, Cheryl Burke Jarvis, Mary Jo Bitner& Amy L. Ostrom (2009).Frontline employee motivation to participate in service innovation implementation.J. of the Acad. Mark.Sci. (2010) 38:219239. Thomas Custers, Jeremiah Hurley, Niek S Klazinga1 &Adalsteinn D Brown (2008). Selecting effective incentive structures in health care: A decision framework to support health care purchasers in finding the right incentives to drive performance. Tahir M. Nisar (2007). Evaluation of Subjectivity in Incentive Pay.J FinanServ Res (2007) 31:5373. Liu Yubin&LuoYongtai (2007). The Design of Knowledge Employees Compensation Motivation Mechanism Based on Implicit Demands. 1-4244-1312-5/07/$25.00 2007 IEEE.
Shengnan Zhao (2006). The scheme design of salary distribution in matrixorganization.978-1-4577-05366/11/$26.00 2006 IEEE.

Marco Van Herpen, Mirjam Van Praag&Kees Cool (2005). The Effects Of Performance Measurement And Compensation On Motivation: An Empirical Study. De Economist (2005) 153:303329. OndrejRydval (2003). The Impact Of Financial Incentives On Task Performance: The Role Of Cognitive Abilities & Intrinsic Motivation labour.

Condly, S. J., Clark, R. E., &Stolvitch, H. D. (2003). The effects of incentives on workplace performance: A meta-analytic review of research studies. Performance Improvement Quarterly, 16 (3), 7-24. Nancy H. Leonard, Laura L. Beauvais & Richard W. Scholl (1999). Work Motivation: The Incorporation of Self-Concept-Based Processes. Human Relations, Vol. 52, No. 8, 1999. Robert S. Fudge&John L. Schlacter (1999). Motivating Employees to Act Ethically: An Expectancy Theory Approach.Journal of Business Ethics 18: 295304, 1999. Raduescu&Heales, Discussion paper,Incentives and Their Effects on InformationSystems Projects. Park, Sanghee and Sturman, Michael C., "The Relative Effects of Merit Pay, Bonuses, and LongTerm Incentives on Future JobPerformance (CRI 2009-009)" (2009).Compensation Research Initiative.Paper 7.http://digitalcommons.ilr.cornell.edu/cri/7 Jolene Eckert, Discussion paper, Tracking the Long-Term Impact ofIncentive Programs. Orvill Adams, Discussion paper, Pay and Non-pay Incentives,Performance and Motivation.