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RESEARCH REPORT THE IMPACT OF FINANCIAL INCENTIVES ON THE PERFORMANCE OF EMPLOYEES

SUBMITTED TO SIR-BAKHTIAR MUHAMMAD

SUBMITTED BY NOUMAN ISHAQ REG 081144

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Table of Contents
Abstract3 Introduction4 Limitations of the research.5 Statement of the problem6 Purpose of the study6 Variables ...4 Dependent variables Return on assets...4 Net income..4 Cash flow4 Return on investment.5 Dividend5

Independent variables.5 Literature review6 Theoretical Model 11 Hypothesis Methodology Introduction Research approach Research design

Sampling plane Procedure Instrument Method of data analysis References ...12

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ABSTRACT

Basically this research has been prepared to investigate the effect of different type of rewards that are given to the health workers so that they show good performance. In this research the researcher will investigate whether the extrinsic and intrinsic rewards that are given to employees increase their performance or not and if they increase their performance then what bare the factors that increase their performance and what are the factors that decrease there performance and play a vital role in decreasing their performance. In this research study the researcher has used all possible ways to investigate hat what is the impact of rewards on the financial performance of the employees. The latest version of SPSS software has been used to analyze the data and interpret the results that have been collected through the questioners. A population of 45000 thousand people was selected from Islamabad and Rawalpindi out of which a sample of 328 was taken. And after taking the questioners were distributed to the people for data collection. In this research study a lot of limitations were a also faced by the researcher which were time limitation, limited knowledge and low experience because this researcher was first time being conducted by the researcher.

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INRODUCTION. Incentives are basically the different ways through the employees are motivated by different organizations and through these different type of incentives the employees are motivated and tend to work harder and harder in order to show good performance to get these benefits.(Wikipedia). Different type of incentives are given to employees these incentives includes Financial incentives Non-financial incentives

Financial rewards are also called extrinsic rewards as well as monitory rewards these rewards are different type of monitory benefits that are given to employees of different type of organizations. These type of employees also include advancement in carrier like promotions giving a senior post to the employee when achieves his target or shows good performance. (Wikipedia). On the other hand good relationship with the employees is also extrinsic rewards because co-workers start liking and appraising the employee when he shows good performance in the organizations and then achieves the high targets for the organization. (Wikipedia). On the other hand the employees are also given more authority and supervision on other employees and his authority is therefore is increased which also motivates him and act as an element of pride for the employees and he tries to show better and better performance than before. The financial incentives act as a motivating element for the employees or de motivating employees for the employees and either their performance is decreased or increased. (Wikipedia)

5|Page No-financial rewards are also called as intrinsic rewards and they play a very important role in increasing the performance of employees intrinsic rewards include increased social status of the employees and this increased social status plays a very vital role in increasing the performance. On the other hand the employee are given more secure environment as compared to the other employees for example the employees are given separate cabins and where they can easily work and can be productive as compared to other employees. This research study will provide a clear analysis which the researcher will describe that how financial rewards increase or decrease the performance of employees and they are motivated or de motivated to work harder and lesser when they are given financial rewards. LIMITATIONS OF THE RESEARCH. TIME LIMITAION.

As the research has been carried out in a limited time period. The time period in which the researcher conducted the research was only a period of 3 months which is a very limited time period to conduct a research. LACK O F EXPERIENCE OF THE RESEARCHER.

This was another major limitation for conducting the research because the researcher has no experience of conducting the research before. This is the first time the researcher is conducting the research so the lack of research of the researcher should be kept in mind before judging the validity and analysis of the data. RESPONDENTS ERROR OF PARTICPATION.

There might be error of participation in the researcher has tried to motivate the respondents to fill the questioners but the respondents might not fill the questioners accurately. LACK OF ACESS.

The researcher had no access to some data because that was restricted and only authorized could approach that data.

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STATEMENT OF THE PROBLEM. Basically the research is conducted because of the rising problems that are arising in the health sector. The problem that is arising is that the employees are not getting incentives and rewards according to the amount of work they are ding and on the other hand there are no specific types of incentive schemes made for the employees there for they are not performing up to the maximum level and their performance is average or below average. So in this research the researcher will find about that is there any significant relationship between rewards and employees performance whether rewards should be given to the health workers or not. Whether cv of these financial rewards increase their performance or not.

PURPOSE OF THE RESEARCH. The purpose of this research is to find the relation between the rewards and performance employees in the health sector of Pakistan. In this research the researcher has used strong set of guidelines and framework for finding out the relation between rewards and employees performance.

VARIABLES. Dependent variable. (Financial performance). The researcher has concluded financial performance as the combination of financial and non-financial performance .Financial incentives include the total cash flows, profits that are achieved, the return on capital and inventory turnover.

Return on Assets.

7|Page It indicates the profitability of a company as compared to its assets that are getting over a total period of time. The return on assets show the overall performance of a company in terms of performance

Net Income. Net income also shows the performance of a company it is calculated by subtracting the total cost that has been used to run the business, taxes, depreciation and other expenses from the revenues of the companies.

Cash Flow. The cash flow actually represents the total amount of money or cash generated by company after taking out all of the money that is required to maintain or expand the assets. Cash flow can be calculated by adding depreciation and amortization with the total net income and after getting the sum of this sum is subtracted from all the changes in the capital expenditures and working capital.

Return on Investment. (ROI). It is a also the financial performance of the company that is measured by calculating the net gains from investment and the total cost of the investment that is acquired.

Dividend. It is the distribution of the different portions of the company which are distributed according to the decisions of the board of the directors of the company and they are decided by keeping in mind the ownership of the shareholders.

Independent Variable. (Financial reward).

8|Page Rewards can be actually treated as the extra offering given to an employee in addition to the basic he gets. These financial rewards may include bonuses, certificates of appreciation that are given to the employees by the managers and the. The supervisors, and even the thank you notes.(Nelson 1994). Financial rewards divided into extrinsic rewards and intrinsic rewards. Extrinsic rewards include basic salary, bonuses, car, foreign trip, extra money; accommodation facility. The intrinsic rewards include motivation by the manager, appraisals by the managers.

LITERATURE REVIEW. According to the recent research the researcher concluded that financial incentives that are given to workers in health organizations have significant influence on their performance and those individuals who receive financial incentives perform much better as compared to those individuals who not receive no financial incentives in the organizations. So financial incentives play a very important role in increasing the performance of employees in the health sector.(Mohammad Imran Qureshi , 2010).

According the results that he has found that the workers rewards package matter a lot in any organization and when the workers are not given the financial rewards the workers tend to show displeasure from their work and therefore through there no commitment and poor performance with the job. Therefore they should keep financial rewards to their workers.( Mohammad Imran Qureshi , 2010).

According to a recent study the researcher has identified that extrinsic rewards which include many type of financial benefits have a high and significant influence on the performance of employees the research

9|Page also concludes those individual who receive extrinsic rewards they perform better than those who do not perform better. (Ayaborus , 2009).

According to the a research study done by the researcher there is a negative relation between rewards and employees performance and the performance is decreased due to the financial rewards given to the employees. On the other hand there is no effect on the motivation level of the employees when they are given financial rewards. The motivation level of the employees can be increased if the rewards and recognition programs are made better when these programs are organized the employees are motivated and in the return of increased motivation the performance of employees is increased. (Reena Ali etel, 2009).

According to a recent study made by the researcher the researcher has found that there is low and not significant relation between rewards and employees performance .The researcher has also found that those employees who always and consistently show good performance when they are given financial incentives they perform better and their performance is increased with a greater ratio and compared to this those employees which consistently show poor performance when they are given financial rewards is not increased but decreases .(Edwin Leuven , 2006)vcx cvvsf

According to a recent study made by the researcher it has been found that financial boost the performance of employees but this is only for a limited time span and financial rewards only increase performance when there is single solution and when the solution is judgment based and involves innovation and creativity skills the financial rewards are unable contribute any major decrease or increase in performance. Financial rewards mostly lead to decrease in performances and impaired performances where cognitive thinking is involved. (Leslie Allan)

10 | P a g e According to a meta-analysis research study of 51 case studies it has been founded that the financial incentives have negative impact on job performance and the job performance is decreased due to financial rewards.

According to this study done by the researcher it has been found that financial rewards are a important element for increasing the performance of the employees but they also show a positive impact on the whole units collective effort and the performance is increased. (Suzanne J. Peterson , 2006).The researcher has also identified that the performance can be increased but the manager s have to organized training sessions for their employees and they have to properly use the incentive system so that can take maximum performance from their employees when they are given financial incentives.(Suzanne J. Peterson , 2006).

According to this study that is done by the researcher there is astringe relation between financial rewards and employee performance and the financial rewards significantly increase employees performance but the condition for this is that they should be given to employees with a carefully and accurate manner and through incentive programs. (Steven J. Condly). And before giving the financial rewards to employees cost benefit analysis should be done that what impact is giving any type of incentive to a specific employee. An analysis on return on investment should be made before giving the incentives to the employees so that there should be no miss management. (Steven J. Condly).

Marwan Al-Nsour (2012) found that there positive relation and employee. According to his research study the performance of employees in the Jordan University is increased when financial incentives are given to them and therefore they show good and improved performance. The financial rewards in the Jordan University were ranked at first place which showed that there is a highly positive relation between financial rewards and employees performance. Al-Harthi (1999) in a case study found that financial

11 | P a g e incentives decrease the performance of employees and are unsatisfactory. He found that other than financial incentives other elements like promotion are useful in increasing the performance of employees and they are more beneficial in increasing the performance of employees.

Al-Aydi (2000) also concluded that the impact of financial incentives or financial reward on the performance of employees in the textile industry of Pakistan is very strong .This research study shows that there is a negative relation between financial incentives and employees performance and the performance of employees increases to a great extent when they are given financial incentives. Researcher also concluded that the reward system in most organizations is not good sue the employees are not given accordingly to their job status and requirements and therefore they are able to get there fair reward for their achievements and work they do for the organization and fore therefore their performance is decreased so in order to increase the performance of employees there should be proper reward system made so that the employees the rewards for their achievement.

OECD Employment Outlook (2005) found that there is negative relation between financial rewards and employees performance. But financial incentives are beneficial for employees if they are given with a proper manner and through proper management .Different type of cost management schemes should be made. But these type of schemes should be costly if they are not properly organized these type of financial rewards and benefits should be best when they are combined with a policy and instrument.

James C. Sesil (1999) searched out that there is positive and strong relationship between rewards and employees performance and there is a lot of gain in the performance of employees when incentives are given to employees both for establishing companies and single. But one thing the author has identified that there is more increase in performance when the employees are given group incentives and group incentives are more performance gaining as compared to the individual performance.

12 | P a g e According to the research done by the researcher it has been found that financial rewards have negative impact on performance of employees and the financial rewards not play an important role in boosting the performance of the employees .(Elke Wolf , 2004)

According to a recent research done by the researcher it has been found that there is negative relation between financial rewards and employees performance and the performance decreases with increase in financial rewards. (Pouliakas, 2009)

According to a recent research done by the researcher it has been found that employee performance is negatively correlated with financial rewards are given to them. According to the researcher if an employee is given more reward d he will perform much faster than before the more the reward the greater the financial performance of employees. (Winter Mason).

According to this research study that has been made it has been found that increase or decrease in performance of employees due to financial rewards depends on the attitude and behavior of the employee how he behaves in the society and is his attitude towards the incentive system of the organization.(GARY J. YOUNG , 2012).

THEROTICAL MODEL

INDEPENDENT VARIABLE Supervision Overall performance Companies policies Financial rewards Other benefits Advancement

DEPENDENT VARIABLE

FINANCIAL PERFORMANCE

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Monitory rewards Non- monitory rewd rewarre Recognition

According to this research model financial rewards include Basic salary Performance Allowances Others

rrewarrewards Basic salary the basic pay that an employee gets for his work. Then performance rewards are given are rrewarrewards also given to employees which include given extra pay and bonuses for showing more and better performance. On the other hand different allowances such as transport facility, house rent, car and different type of bonuses are given which in return increase the performance of employees.

HYPHOTHESIS Hypothesis are actually are the e research questions which are to be finded and due to theses type of questions which are arising in the mind of the researchers. Actually hypothesis is made because without the hypothesis the research cannot be completed and with the help of hypotheses a proper guideline is given to research. Based on the objectives of the research the following research questions are formulated.

H1. There is a correlation between rewards and employee performance.

14 | P a g e H1 (a). There is correlation between extrinsic rewards and employees performance. H2 (a). There is correlation between intrinsic rewards and employees performance. H2. The performance of employees can be increased by giving monitory and non-monitory . H3. The performance of employees is increased by giving recognition. H4. Advancement opportunities and other benefits increase employees performance. H5. Is there is any relationship between the financial reward received by the employees and companys financial performance?

METADOLOGY

INTRODUCTION.

This part of the research will explain about the methods that are adopted to conduct the research. CH used which has been collected with the help of questioners which have been filled by several doctors of Shifa Internaytional Hospital ISB

RESEARCH APPROACH.

15 | P a g e The research approach means that the instrument that has been used to conduct the research the research .this research has been used with the help of qualitative approach in which a questioner is used. The quantitative approach includes a lot of close ended questions which can be asked through the people with the help of this questioner. These close ended questions are basically the instrument through which the research is carried out and these tools are very important to measure. The questioners consist of different types of questions which are from different variables.

RESEARCH DESIGN.

Research design basically means the way or the method through which the research is going to be conducted. The research is basically based on a co relational analysis in which the research is conducted purely on personal basis and there is no intervention made in the research of the other researcher. This includes two type of rewards intrinsic rewards and extrinsic rewards. Extrinsic rewards include monitory benefits such as pays, bonuses, and other type of monitory benefits while on the other hand intrinsic rewards include non-monitory benefits such as recognition and appraisals that are given these are basically to motivate employees. in the research design the there will be a co relational analysis made between the intrinsic rewards and intrinsic. A direct relation was finded between intrinsic rewards and extrinsic rewards.

SAMPLING PLANE.

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The population of interest for this research is employees of different private hospitals that are located in Islamabad and Rawalpindi. These employees are the only doctors of these hospitals which are currently working in these hospitals. The selected hospitals for the research purpose are Shifa International Hospital ISB and Quaid e Azam Hospital RWP.

A sample of 330 was made to conduct the research. These 330 people were the employees of Quaid e Azam Hospital RWP and Shifa International Hospital ISB. Example of 200 people was made from Quaid e Azam Hospital RWP and a sample of 130 people was taken from Shifa International Hospital ISB.A questioner including about 19 questions was made to conduct this research.

PROCEDURE. In this research two methods were adopted to conduct the research. Primary research Secondary research

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The secondary research was conducted with the journals which were downloaded from different types of search engines different books which were written by different writers were studied to get all the type of related data to conduct the research effectively, on the other hand different online references were also studied to collect related data and to build strong data base for the research process. The references that were included in the hard copy are from different journals which were read to collect data and to gain knowledge on the previous researches made on the same topic. Then the primary research which was also conducted to collect was done with the help of questioner. And one major hurdle that was faced in collecting data with the help of was that the questioners were first to be approved from the both hospitals whose employees were included in the research then the research was conducted. The data was collected with the help of these questioners were feeded in the SPSS sheet v.16.0 through this software the data was collected.
INSTRUMENT. A short questioner including 19 questions was selected to conduct the research. The questioner consist of 9 types of rewards including intrinsic as well as intrinsic rewards. The intrinsic rewards include Social status Security Advancement Appraisals

The extrinsic rewards include Supervision Monitory rewards Bonuses

18 | P a g e Carrere advancement company policies

The items of the research were .,Are you happy with company policies ,The way company policies are put into practice ,Is your pay according to you job ,Your performance in the past year ,Have you transport facility by the company ,Have you hiring facility by the company ,Did you get extrinsic rewards from the organization ,Do you believe that all employees should be equally rewarded, Do you think rewards are given according to your abilities ,Are you appraised by your supervisors for good performance ,Do you think non-monitory rewards should be given to employees ,Is it important for you to be recognized for your work , Did your job allow you adequate opportunity to be recognized.

DATA ANALYSIS METHOD. The Software which was used for the processing of data was SPSS.To take out results from the SPSS sheet both descriptive and quantitative data was used. In order to measure the results accurately the objective of the research were linked with the SPSS sheet so the results comes accurately and precise.

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REFRENCES

(Lenvin ,Oosterbeek ,Klaauw) The effect of financial rewards on students' achievement: Evidence from a randomized experiment

Ali , Ahmed(2009) The Impact Of Reward And Recognition Programs On Employees Motivation And Satisfaction: An Empirical Study International Review of Business Research Papers (Vol. 5 No. 4 June 2009 Pp.270-279)

Qureshi, Zaman, Shah (2010) Relationship between Rewards and Employees Performance in the Cement Industry in Pakistan Journal of International Academic Research (2010) Vol.10, No.2.

Young,beckman,baker(2009-2011) Financiail incentives,professional values and performance: A study of pay-for-performance in a professional organization (Journal of Organizational Behavior, J. Organiz. Behav. (2012))

Wolf, Zwick (2008) Reassessing the Productivity Impact of Employee Involvement and Financial Incentivessbr 60 April, 160-181.

Pentice ,burgess ,propper(2007)Performance pay in the public sector: A review of the issues and evidence

20 | P a g e (Adams, Hicks) Pay and Non-pay Incentives,Performance and Motivation. GenevaVol. 1 No. 7 [38-47]

Pouliakas, Konstantinos and Theodoropoulos (November 2009) Variety of Performance Pay and Firm

Performance: Effect of Financial Incentives on Worker Absence and Performance .MPRA Paper No. 18820, posted 24. November 2009 / 09:49

(Mason ,watts )Financial Incentives and the Performance of Crowdswinteram@yahoo-inc.com ,Yahoo! Researce

Rana, Badar-ul-islam,Munir, Kashif (2011) Increasing Financial Incentives toWork:The Role of In-work BenefitsPaper No. 327291, August 2011

James C. Sesi (1999The Impact of Employee Involvement and Group Incentives on Performance in UK High Technology Establishments

Same day easy,s.com(2012) The Impact of Rewards on Employee Performance: Case Study of Organisations from Two Sectors in Nigeria

McDonald,sohi,tickle,roland,doran (aug 2010) The impact of incentives on the behaviour and performance of primary care professionals.

21 | P a g e Allan (2009-2011) Business : Financial Rewards and the Damage They Do(http://www.businessperform.com/workplace-training/workplace_environment.html(

Peterson,luthans(2006) The Impact of Financial and Nonfinancial Incentives on Business-Unit Outcomes Over Time (Journal of Applied Psychology, 2006, Vol. 91, No. 1, 156165)

Condoly , Clark, stolovitch(2009-2011) The Effects of Incentives on Workplace Performance: A Meta-analytic Review of Research Studies (Performance Improvement Quarterly, 16(3) pp. 4663)

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