Are Non-Compensatory Employee Rewards as Efficient in Fostering Motivation as Cash Incentives?

A Thesis Submitted to the Faculty of Philippine Merchant Marine School Las Pias City In Partial Fulfillment of the Requirements in methods of Research

Submitted by: Leader Dela cruz, Rameces A. - 20 Members Bitara Mark Julius ,-10Celesio joseph brian -10 ,Corona Joshua -12 , Correa Jorge 11 ,Estipona Jerome 14 , Florenosos Peter Paul -19 ,Gabuyo Luis 18, Galvan Mario Angelo 10 ,

Section. N-S3B1

Chapter 1 THE PROBLEMS AND ITS BACKGROUND 1.1 Introduction In the contemporary business environment, employees and managers alike are faced with numerous pressures to perform to corporate expectations. These pressures are often created by highly competitive business environments, environments which impose continuous change and internal redesign or even progressing job responsibilities which create stressful working conditions. (Amongst a variety of other pressures). In this high-paced business world, it is paramount to avoid high turnover costs as well as maintaining a highly unmotivated workforce who are not recognized for their positive organizational accomplishments. There are a wide variety of different non-compensatory programmed or options available for modern business leaders to utilize as a means to reward positive performance, efficiency and overall job-related productivity. Some of these rewards come in the form of flexible scheduling options, premium gifts elicited by company management, or even increased job-related autonomy to create perceptions of trust in the employee and their competency to carry out their job role without managerial intervention or continuous assessment. All of the aforementioned non-compensatory rewards likely have their merits in creating a more motivated workforce, however can non-cash incentives, when utilized as an alternative to cash incentives, foster long-term motivation in employees? Does todays business employee truly value the more psychological elements of workplace incentives, such as increased autonomy, or are cash-based incentives the most appropriate reward methodology for building long-term organizational commitment and job satisfaction? This proposed research study intends to answer the following three specific research questions:

To what degree do non-cash incentives increase motivation in todays active labor force? To what degree to cash incentives foster motivation within the organizational staff? Do any noticeable trends exist in employee behaviors and attitudes which directly impact whether cash or non-cash incentives should be used to boost motivation? This proposed study is intended to take an exploratory approach to research, contributing to

the wide body of literature available on business and motivational theory. There does not appear to be a definitive model or specific series of incentive programmed which can guarantee continuous, positive motivation amongst staff members, thus this proposed research study maintains the potential to create a potential best practice model for generating cash versus noncash performance incentives in order to assist todays business leaders in developing a more rewarding business environment in which employees are driven to succeed above and beyond corporate expectations. Undertaking a primary research study of this magnitude maintains one specific difficulty related to gathering the research data and in eliciting various corporate/business approvals to conduct a qualitative and quantitative research study targeted at staff members. Achieving a high level of respondent participation will require an active scan of the contemporary business environment to determine how best to utilize the proposed studys research instruments for gathering employee opinion on motivation and overall job satisfaction through incentive programmed. Further, achieving management approvals for the distribution of the research instruments will require active consultation with various business leaders to ensure minimal disruption to regular business activities. Hence, the difficulty to this study lies in the researchers tangible ability to guarantee an adequate response ratio to the study. Issues of individual

anonymity is the largest ethical dilemma inferred by this proposed study to avoid jeopardizing the reputation of a specific business/industry and to ensure that the targeted sample group is

comfortable providing responses which may cast a negative light on the internal operations or programmed incentives within their business environment. Thus, all respondents and business leaders targeted for this study will be ensured strict anonymity in the presentation of research data results. 1.2 Background of the Study The subject matter of this research is all about non-compensatory employee reward of Philippine Merchant Marine School. This reward may help the employee to pursue and strive more to motivate with their job and maintain positive performance efficiency and overall job related productivity. Rice, groceries, uniform and health care are just few of the NonCompensatory rewards at the said school and it is gevin every month of December. NonCompensatory Reward will mean a token of appreciation of the contribution/performance of employees leading to significant improvements in the work processes and effectiveness. 1.3 Statement of the Problem The study aims to determine if the non-compensatory employee rewards as efficient in fostering motivation as cash incentive among employees of Philippine Merchant Marine School, San Antonio, Talon 1, Las Pias City. Specially, it seeks to answer the following questions: 1. to what degree do non-cash incentives increase motivation among employees of Philippine Merchant Marine School Las Pias City? 2. to what degree do cash incentives foster motivation within the organizational staff? 3. do any noticeable trends exist in employee behaviors and attitudes which directly impact whether cash or non-cash incentives should be use to boost motivation?

1.4 Scope and Limitation This research study was conducted at Philippine Merchant Marine School, San Antonio, Talon 1 , Las Pias City. The respondents of this study were all employee of the said school. Recognition and rewards play an important role in work unit to attract and retain their employees. It is the day-to-day interactions that make employees feel that their contributions are appreciated and that they are recognized for their own unique qualities. This type of recognition may contribute to high morale in the work environment. Non-Monetary Rewards and Recognition is a means of providing immediate, non-cash rewards to employees for contributions to the Organization. Weve all heard the statistics on how staff members like to be recognized and rewarded for doing a good jod. That a pat on the back or a thank you can mean more to a person than any amount of money. But actually putting a system into place can be easier said than done. The ways in which people are valued can make a considerable impact on the effectiveness of the organization, and is at the heart of the employment relationship. The aim of employee reward policies and practices, if any the organization is to help attract, retain and motivate highquality people. 1.5 Significance of the Study Many previous studies have considered the relationship between monetary incentives and employee motivation. Still, the consideration of money as the basic motivating force and its superiority over any non-monetary incentives secures its place on the organizational scholars agenda. On the other hand, there is a growing interest and attention on the use of non-monetary incentives. Especially in private sector organizations, it starts to be pronounced louder and there is a wide literature on their incredible influence in obtaining highly motivated employees. Contribution to the following:

Employees To the members of the faculty. Our instructors enjoy an enviable work/life balance and an attractive working condition it may also help improves teaching. To the administrative staff. To encourage administrative staff initiative in solving problems, achieving efficiencies and thinking creatively as well as to inspire cooperation across departments and schools and throughout the campus. Employers Employers even furthered increase the rating of their company because of the extra benefits they provide employees receive a rewards . Consequently be more hard working as they work and more as each other improve them. And because of good correlation of employers and employees the company will become successful .

Chapter 2 THEORETICAL / CONCEPTUAL FRAMEWORK 2.1 Review of Related Literature and Studies This chapter includes foreign literatures and foreign studies read by the researchers, other unpublished thesis, and studies conducted by other research groups. This chapter also includes local literatures, taken from local published books and materials, and local studies, taken from research works and studies related to the subject matter. Related foreign and local literature and studies that dealt with theories, principles, concepts, approaches and techniques are reviewed which contributed a lot towards the enrichment of knowledge, deeper understanding and insight of the researchers. Foreign Literature (Philiotis, 2007). The cons to such incentives include the production of negative employee responses in relation to perceptions of corporate frugality. Essentially, if the company procures inexpensive merchandise, the company will appear cheap and create a long lasting negative impression. Additionally, Philiotis further suggests that companies must be careful when determining whether luxury food items can be considered valuable alternatives to cash, as a diverse, multi-ethnic organizational staff may consider the contents of the gift package to be incongruent with lifestyle preferences or personal beliefs. Thus, from a diversity viewpoint, some varieties of non-cash rewards, if not planned properly to fit staff ideals, can be demotivating elements with long-term implications in regards to employee perceptions against their employer. Daniels (2000) supports the idea that the design of the non-cash incentive is directly correlated to increases or decreases in staff motivation levels. This professional acknowledges that some varieties of non-cash rewards can actually work against day-to-day motivation if incongruent to

the needs of the organizational staff. However, Daniels does appear to herald the importance of non-cash motivational incentives by citing that the nature of the work (such as job design and levels of personal autonomy) is far more important as a determinant of productivity than that of cash received for performance. Strategic Direction (2006) offers that companies might consider flattening their organizational structure, in terms of reducing multiple layers of middle management, as a means to boost motivation. This falls into the category of increasing worker job-related autonomy by eliminating continuous managerial oversight and intervention. Eliminating multiple management layers theoretically provides employees with a sense of personal belonging and security in a method that is proposed as superior to cash incentives based on trends in the contemporary worker regarding the fulfillment of various inherent psychological needs. Messmer (2007) supports this notion by suggesting that increased responsibilities, off-site team-building exercises, and frequent performance-related recognition are effective non-cash motivational tools. Despite the aforementioned viewpoints regarding the suitability of non-cash motivational incentives, Ritter & Taylor (1997) offer that todays workers have no real, measurable difficulty in landing comparable jobs in markets which function both efficiently and quickly, thus it is important to ensure that cash-related incentives are congruent with the competitive business environment. Essentially, the authors suggest that it is only compensatory rewards, due to employee perceptions of ease of company exit in favor of new salary opportunities that can sustain employee commitment and longevity to the firm without seeking new employment incentives. Incentive (1989) offers that 1/3 of todays companies use cash incentives as a means to boost staff motivation, which might suggest that companies are recognizing that cash rewards are the most viable methodology for improving internal staff satisfaction levels. The authors indicate a variety of other non-cash incentives which have been

known to build positive motivation, however the underlying human drive is the receipt of cash as a means to create perceptions of equity, trust and mutual reward. This would tend to illustrate that only cash incentives really manage to fulfill the psychological needs of employees over that of non-cash incentives. Local Literature One of the main agencies responsible for ensuring the welfare of the Filipino worker is the DOLE (Department of Labor and Employment). DOLEs responsibilities include setting the minimum wage, ensuring safe working conditions, and creating occupational safety and health ( OSH) standards. It also has a Productivity Improvement Program to increase workers productivity in select manufacturing industries through improved working and living conditions. The department is in constant dialogue with workers, employers, and their organizations with regard to social and economic concerns, including environmental issues. DOLE and its close links with the well-established NGO (Non-Governmental Organizations) network promote greater bilateral participation in enhancing safety and health in the workplace while both entrepreneurs and workers are encouraged to implement low cost improvements in work conditions which can eventually lead to improvement in productivity and the general well-being of the workers. Workers have been urged to increase productivity rather than demand for higher wages in this time of economic difficulty. "Higher wages are unsustainable unless you increase productivity. If factory raises wages and productivity remained low, it will close its shop in the country and move to other countries where wages could be smaller," Socioeconomic Planning Secretary Romulo Neri said. He said it is difficult to demand for wage adjustment without increasing productivity in view of the current global economic slowdown.

Foreign Studies Which variety of incentive is most effective at fostering employee motivation? Do noncash incentives work as a long-term business strategy? Phipps, Bazley & Povey (2007) suggest that non-compensatory, team-related rewards, such as the corporate-funded group dinner or activity day are incentives which have been successful in boosting staff motivation levels. The goal of such incentives is to lower the burdens on the corporate payroll budget whilst also creating an internal organizational culture built on positive peer relations and team-building methodology. However, the authors indicate that if the non-cash incentive does not appeal to the members of the lower-level staff, it can actually de-motivate the workers. Other modern companies have turned toward the utilization of luxury incentive packages as a means to boost employee motivation, such as offering premium wine gifts or offering a prize package of modern technologies such as presenting a DVD player or digital camera as a noncash incentive. Local Studies On 1991, Josephine Tuble of the University of Santo Tomas Graduate School made a study that concerns the productivity and job satisfaction of workers in construction company in Metro Manila. These results to productivity level that was rated on the whole as good due to the following dimensions: quantity of work, quality of work, supervision required, attendance, and conservation. Also, the respondents of this study were neither satisfied nor dissatisfied because of low ratings made on promotion and pay aspects. In connection with this, the level of productivity is correlated with job satisfaction with regards to the nature of work, supervision, co-workers relationship and pay aspects. Moreover, sponsored by the American Studies Association of the Phils. - Baguio Cordillera Chapter, Antonia Corinthia Naz accomplished a study regarding the factors that influences the labor Productivity of miners in Benguet. With this, it has been found

that the productivity level vary according to mining methods and was significantly affected by technical factors followed by economic factors and personal factors. Major problems on labor productivity are: the need for more involvement in decision-making; thorough discussion on miners concerns; that the company adopts a variety of training methods; the need to be informed of the policies; the desire of workers for management to be more sensitive and responsive to workers concerns and the necessity for more and better quality of tools and equipment for underground work. 2.2 Research Framework Conceptual Framework The framework as depicted through the conceptual map (Fig 1.) presents the research suppositions and lines of enquiry from the organizations and employees perspectives. It is assumed that an organizations profile will have an influence on its philosophy which in turn will monitor the practices. Likewise an individuals characteristics will determine his/her needs which will be manifested through the choices that they make. Role of the superior is assumed to have an impact on how the rewards are practiced within the organization. The past experiences of the individual employee with non-monetary rewards are said to impact their needs and the same is expected of the organization and superior. Finally, some differences are expected between employee choices and organization practices which when resolved may lead to positive outcomes for the organization as well as the employees.

Are Non-Compensatory Employee Rewards

Non-Monetary Rewards 1. Jewelry, 2. Precious Metals 3. Automo bile 4. Health care plan

Intrinsic Rewards 1. Challenging Task 2. Decision Making Process 3. Higher Rank 4. Increased Salary

Extrinsic Rewards 1. Pay Rice 2. Bonuses 3. Paid Leaves 4. Annual Recreatio nal Etc.

Fig 1. Research Paradigm Theoretical Framework The concepts of incentive, reward and recognition are quite interrelated and complementary in the context of employee motivation. It is difficult to draw a line among them. The broadest category is the incentive which refers to any means that makes an employee desire to do better, try harder and expend more energy. It may be divided into two categories: monetary incentives and non-monetary incentives. Monetary incentives involve granting of reward in terms of money such as commissions, bonuses etc. Non-monetary or non-cash incentives do not involve direct payment of cash and they can be tangible or intangible. Some examples of this kind of incentives are; encouraging the employees by providing them with autonomy in their job and participation in decision making, assigning challenging duties, improving working conditions, recognizing good work through small gifts, letters of appreciation,

plagues, tickets to restaurant etc., providing some services for the employees, organizing social activities in the work place, etc. The difference between an incentive and reward may be noted as while incentive aims to motivate future and encourage certain behavior, reward is the appreciation for the accomplished behavior and it is a potential reinforce. Recognition covers monetary and non-monetary rewards and it refers to crediting, encouraging and appreciating individuals and teams who contribute, through their behavior and their efforts, to the success of the organization. It provides after-the fact reinforcement for specific types of performance or accomplishments and emphasizes what the organization values. Moreover, it helps to create a sense of being a valued member of a successful organization. Examples of recognition are10 giving public praise, granting monetary and non-monetary rewards, celebrating and communicating successes etc. 2.3 Hypothesis This study is anchored to the following hypothesis: Ho : There is no significant effect of non-compensatory rewards in the performance of the employee Ha : There is a significant effect of non-compensatory rewards in the performance of the employee 2.4 Definition of Term Compensation given in a transaction which does not involve cash.. A non-monetary reward can consist of almost any material object such as jewelry, precious metals or an automobile for example. In business, a non-monetary reward can also be a service such as improvements made on a property or repairs done on a car.

Non-monetary compensation can include many different elements from free coffee to a company picnic or discounted parking. Most frequently, though, it refers to the value of more traditional benefits. Extrinsic rewardsusually financialare the tangible rewards given employees by managers, such as pay raises, bonuses, and benefits. They are called extrinsic because they are external to the work itself and other people control their size and whether or not they are granted. In contrast, Intrinsic rewards actually fulfill employees intrinsic factors or motivators and thus motivate him. Examples include; giving challenging task, involving in decision making process, giving a higher rank in hierarchy etc all these rewards do not required to have increased salary as well and employee may be working at higher management rank without an increase in the salary and still more motivated. Employee incentive programs are programs used to increase overall employee performance. Employee programs are often used to reduce turnover, boost morale and loyalty, improve employee wellness, increase retention, and drive daily employee performance. Non-cash rewards - Merchandise and other non-cash rewards are more often perceived as separate from compensation. Accordingly, non-cash rewards tend to stand out as rewards for performance, which enhances their long-term effect. Branded merchandise and other non-cash rewards have high trophy value, bringing greater recognition to the recipient at the time of the award and possessing a long-term lasting effect that can result in increased engagement in the organizations goals. Motivation - is the psychological feature that arouses an organism to action toward a desired goal and elicits, controls, and sustains certain goal directed behaviors. For instance: An individual has

not eaten, he or she feels hungry, and as a response he or she eats and diminishes feelings of hunger. There are many approaches to motivation: physiological, behavioral, cognitive, and social.

Chapter 3 RESEARCH METHODOLOGY 3.1 Research Design The approach to data collection and analysis will be both qualitative and quantitative design, in order to utilize statistical information gathered from the proposed research instruments as well as making a variety of subjective assessments of similar research data. The quantitative design methodology will involve the production of an appropriate questionnaire designed to elicit questions regarding cash versus non-cash incentives for productivity and efficient job performance so as to generate data on the contemporary worker viewpoint of motivational rewards. The qualitative approach to research will involve a series of semi-structured interviews targeted at several different layers of management within different business environments. 3.2 The Sampling The proposed sample group will consist of responses from 100 employees in a Philippine Merchant Marine School (PMMS) with the questionnaire distributed to members of the organizational staff upon management approval to conduct the study. Responses from both the managerial sample and the subordinate sample will be compiled and analyzed in order to fulfill the studys research objectives on management viewpoint, employee viewpoint, and the overall nature of motivational, performance-driven incentives. 3.3 The Instrument

Responses will be closed-ended on the questionnaires, structured in a multi-tick format ranging from 1-5, exhibiting different cash and non-cash incentives and their overall levels of importance to a variety of different organizational staff members.

3.4 Data-Gathering Procedure The interviews will be structured using many closed-ended questions regarding perspectives on cash versus non-cash incentives and how these have been effective or ineffective at boosting long-term staff motivation. The semi-structured approach was considered as it will provide the interview respondents with an opportunity to discuss issues not originally considered in the interview design to provide unique insights into the phenomenon of employee motivation and reward. It is highly important to this study to gather the perspectives of both the modern worker as well as the contemporary manager, who could be considered expert advisors regarding the current nature of the business environment and its role in motivating performance. In order to determine whether any noticeable or measureable trends exist regarding employee values pertaining to reward incentives, the qualitative portion of the research study was most appropriate. 3.5 Statistical Treatment of Data This proposed study methodology is most congruent to the fulfilling the research objectives outlined in the introductory section as it will provide a wide variety of subordinate and managerial perspectives on contemporary motivational theory whilst providing the opportunity to determine whether management maintains a different viewpoint of cash versus non-cash incentives over that of the contemporary subordinate. If congruencies exist (or noticeable divides

between opinion), the multi-instrument approach to research will provide the tools to determine whether any measurable correlations exist in individual viewpoint.

X
1.

fx
N
,

RF

f x100 N

Sir/Madam We are students in Method of Research conducting a Research Study entitled Are Non Compensatory Employee Rewards as Efficient in Fostering Motivations as cash Incentive In this connection may we request you to please answer diligently this questionnaires, out instrument in gathering data. Your kind considerations and understanding is highly appreciated. I. Please check the appropriate box that corresponds to your response. 1. Types of Employee Administrative Staff Members the faculty Admin-faculty Years in PMMS Less than 1 year 1-5 years 6-10 years 11-15 years 16-20 years More than 20 years II. Please encircle your response where 1 as the least and 10 as the greatest 1 least and 10 Greatest. 1. To what degree would the following non-cash incentive appeal to you: Luxury gift products such as wine baskets or gourmet foods? 1 2 3 4 5 6 7 8 9 10 2 To what degree would the following non-cash incentive appeal to you: Winning a trip to an exotic location as a reward for high productivity? 1 2 3 4 5 6 7 8 9 10 3. To what degree would the following non-cash incentive appeal to you: Off-site recreational activities, funded by the business, such as staff dinners or business conference invitations? 1 2 3 4 5 6 7 8 9 10 4. To what degree would the following non-cash incentive appeal to you: Merchandise as a reward option, such as DVDs or various modern technological products? 1 2 3 4 5 6 7 8 9 10 5. To what degree do you feel that cash incentives are LESS important than non-cash incentives? 1 2 3 4 5 6 7 8 9 10 6. To what degree would you prefer increased job autonomy (meaning less management intervention and assessment of your job function and productivity) over that of a small-scale cash incentive? 1 2 3 4 5 6 7 8 9 10 7. To what degree effect of financial rewards on job commitment to Philippine Merchant Marine School? 1 2 3 4 5 6 7 8 9 10 8. To what degree effect of non-financial rewards on job commitment to Philippine Merchant Marine School? 1 2 3 4 5 6 7 8 9 10 Please comment (in less than 50 words) on how you believe a company can best motivate you to perform to high expectations when using different incentives? 9.To what degree do you feel that health plans are efficient in Fostering Motivations then cash incentives? 1 2 3 4 5 6 7 8 9 10

4.0 Pilot Study Feedback This proposed study developed preliminary research instruments in the pursuit of testing the viability of the chosen research approach. Five individuals with experience in the current job market were identified and were distributed a pilot questionnaire regarding cash and non-cash motivational incentives. This pilot study was conducted to ensure that the developed questions were congruent with the proposed research objectives and to guarantee that the nature of the questionnaires was clear and concise for utilisation on a broader sample scale. Appendices A illustrates the questionnaire utilised for this pilot study.

The structure of the questionnaire illustrated several varieties of non-cash incentives, asking the five respondents to indicate to what degree they were inspired or otherwise interested in differing non-cash incentives. In virtually all non-cash incentive varieties, the respondents indicated very low interest in items such as luxury food products, trips, off-site recreational activities to boost teamwork, and various technological merchandise incentives. When asked whether they felt cash incentives were less important than non-cash incentives, the respondents overwhelmingly indicated a high perception that cash is far more motivating than non-cash incentives with an average score of 8.1 out of a possible 10. The results of the preliminary pilot study tended to illustrate a higher employee favourable attitude toward cash-based incentives as a means to foster productivity and boost overall motivation. Interestingly, all of the five respondents indicated that increased autonomy as a motivational tool maintained very little importance, scoring an average score of 3 out of the possible 10 points as a maximum satisfaction element in the workplace. This somewhat conflicts with the literature available suggesting that autonomy is a viable management tool for fostering motivation, offering the opportunity to focus around issues of autonomy in the construction of the tangible research instrument to be utilised in this proposed study. Autonomy, from a managerial perspective, will be incorporated into the research interview template to determine whether employee views on this practice are congruent or widely different than that of leadership. This will determine, theoretically, whether autonomy as a non-cash motivational incentive can be considered viable from both management and the subordinate levels or whether this is a potentially antiquated element of non-cash reward which pales in comparison to cash based productivity rewards. The pilot study also gave this researcher practical experience in distributing and

managing multiple data in terms of compiling and comparing research results. This quantitative approach to the research will assist in the tangible, broader research study to determine whether specific employee trends exist regarding the value of non-cash incentives. Because the initial piloted sample group indicated such low levels of satisfaction and interest in the variety of noncash incentives listed in the pilot questionnaire, this provided the opportunity to list a wider variety of potential non-cash incentives (or than those presented in the pilot study) to determine whether there is a specific non-cash variety which is more effective or whether employees just, as a matter of preference and personal value, desire money as a reward for productivity. Hence, the pilot study created the necessity to build a broader employee-targeted questionnaire utilising a wider variety of potential non-cash incentives for the tangible research study. If employee perceptions of multiple non-cash incentives return a very low interest rate in comparison to cashbased rewards, this will clearly indicate the state of the contemporary worker regarding the most efficient motivational tools available for todays business leaders. 5.0 References Daniels, Aubrey C. (2000). Bringing Out the Best In People: How to Apply the Astonishing Power of Positive Reinforcement. McGraw-Hill Professional: 87-91. Incentive. (1989). Employee motivation: facts survey sales incentives. 163(9): 49. Philiotis, Alex. (2007). Incentive Critique. Promotions & Incentives. London: C9-C11. Phipps, S., Bazley, J. & Povey, G. (2007). Motivation Clinic. Promotions & Incentives. London: S6-S8. Messmer, Max. (2007). What employees want: 4 meaningful ways to keep them motivated. NPA Magazine. 6(6): 24B.

Ritter, J. & Taylor, L. (1997). Economic Models of Employee Motivation. Working Paper Series. Federal Reserve Bank of St. Louis. Retrieved 7 Mar 2008 from http://research.stlouisfed.org/wp/1997/97-006.pdf. Strategic Direction. (2006). New generation organizations; Motivating employees through creative working practices. Bradford. 22(11): 22. ThesisTown.com