MG480 of fierce debates among different scholars




Summative Essay





“it’s not what you pay, it’s the way you pay it,” then should employer also
consider other aspects of compensation, such as commitment, communication,
relationships, timing and trust, for example?

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!

order now

















Count: 1455

Dr Jonathan Booth




system has become an essential subject of fierce debates among different
scholars in recent decades since reward system management can help to attract
talented employees and retain them by stimulating to achieve goals and perform
well (Danish, Khan, Shahid, Raza, Humayon, 2015). Managing employee
compensation is highly significant because it can affect key outcomes such as employee
contribution, attitudes and behaviours, job satisfaction, attraction, cooperation
and performance (Gerhart & Milkovich, 1992: 1). Moreover, scholars of
management have also taken an interest in intrinsic rewards, arguing that such non-financial
mechanisms tend to increase the employees’ feeling of recognition and
achievement while motivating them for further advancement and growth (Kohn,
1993). However, despite over 50 years of organisational research that has an irrefutable
evidence that employees are motivated by more than monetary rewards alone, many
specialists, HR-managers and top managers overall continue to rely on financial
compensation mechanisms (Silverman, 2004), and “in most companies, insufficient
time and effort are spent on considering non-monetary sources of motivation”
(Gratton, 2004). Although organisations increasingly need to consider rewards
more broadly, as they are likely to be in a much better position to reinforce
psychological contract and prevent the breach, organisations have to be careful
with implementation non-monetary rewards mechanisms in order to align with the
culture of the organisation (Silverman, 2004). This essay will review main
theories of rewards and motivation (Maslow,1954; Herzberg, 1966; Deci, 1975),
strengths of intrinsic rewards (Giancola, 2014; Kohn, 1993, Reif, 1975) and
concerns that should be taken into account before bringing theory to practice (Silverman,


Before examining
strengths and concerns of this issue, it would be fair to define extrinsic and
intrinsic rewards and appeal to main theories. During the last decades, there
have been formulated two strategies for efficient work behaviour, despite some
differences by Abraham Maslow (1954), Frederick Herzberg (1966), and Edward Deci
(1975). The first strategy appeals to the extent that employees are motivated
by tangible rewards like salary/ wage, bonuses, job security, and promotion
(Reif, 1975). However, according to Pfeffer (1998), people work not only for
monetary stimulus but also for meaning in their life (non-cash award), such as
relationships with boss and peers, commitment, a feeling of trust among
colleagues. Thus, the second strategy comes from the assumption that employees
are generally motivated by intrinsic rewards, also known as job motivators that
can be thought of as internal thoughts and feeling of self-esteem, commitment
and self-sufficiency, trust and feedback (Reif, 1975; Silverman, 2004). In
other words, an intrinsic reward is an outcome that gives an individual
personal satisfaction and positively valued experience from well-done work
(Stumpf, Tymon, Favorito, Smith, 2013).


according to the recent survey of Society of Human Resource Management (SHRM),
HR-managers and leaders underestimate the value of intrinsic rewards and do not
give intrinsic motivational matters a high priority in their work agenda, there
are some crucial points that they might also play a vital role in the organizational
process. First of all, non-financial awards are likely to enhance employees’
motivation much stronger than financial rewards (Herzberg, 1968). People are
generally more willing to achieve company’s goals when they face open
relationships with the boss and colleagues, clear messages from the top that
are appropriate to the organization’s vision, culture and mission, accurate deadlines
and, importantly when employees can trust to managers and peers. This can be
proved by the several surveys that were conducted by respected organizations. In
2009 Sibson Consulting Rewards of Work study conducted a survey among more than
2,000 employees from all parts of the world and more than 25 industries. According
to the survey job responsibility and feedback, as well as affiliation (e.g.,
organisational support, trust in management) were the most important driving
forces (Giancola, 2014). In addition to this study, in 2009 consulting company
McKinsey & Company Study Motivating People under the project “Getting
beyond the Money” surveyed 1,047 executives, managers and employees from all
regions and most sectors and found that opportunity to lead projects or task
forces, as a part of work commitment, motivated more than the highest-rated financial
incentives – base pay increases, cash bonuses and stock options (Giancola,
2014). Not only that but, besides, non-financial rewards can offer a more in-depth
and longer lasting impact on motivation than more financial rewards
(Silverman,2004). There is no evidence for the assumption that giving people
more money will encourage them to work better or even, in the long term, more
work (Kohn, 1993). Therefore, financial incentives buy temporary compliance and
cannot predict the harm over the long term, as opposed to a useful feedback,
social support and trust that can help to avoid difficulties and form more
explicit focus on strategic business goals and values (ibid, 1993).


A sense
of fulfilment, trust, engagement, empowerment and growth not only stimulates
employees to work well but also have an influence on job satisfaction and
well-being, as well as on an intention to stay with the company during
organizational change programs (Stumpf et al., 2013). Intrinsic rewards and
appreciations have a link with outcomes expected because of employees’ job
satisfaction (Danish et al., 2015). In organizations with such a reward system
employees who are appreciated by intrinsic awards motivated positively for the prosperity
of the company for them, as well as perform well according to their job
description (ibid, 2015). In addition to this, open relationships, trust,
commitment reduce possibilities for severe competition and increase the level
of cooperation and interest as opposed to financial reward mechanisms, that, in
most cases, may collapse relationships between supervisors and subordinates
and, therefore, organizational excellence (Kohn, 1993). Regarding retention
talented people, organisations can reinforce affective relations between
employer and employee to binds the two more closely together and make the
individual more likely to stay and harder for rival companies to compete
(Silverman, 2004). Thus, the system of intrinsic awards can determine some
problems in advance, such as effective collaboration, sense of powerless and
burnout employee by using different types of incentives.


implementation of non-monetary rewards requires taking into account some
concerns that can affect an organisation’s competitive advantage. The most
significant point is how such incentives align with organisational culture.
Non-financial rewards have to seem congruent to the mores, culture, values of
organisation (Silverman, 2004). For example, conservative companies with strict
rules and norms are likely to reject American style of management with more
flexible rules and values. Personality and job characteristic also take part in
implementation, while one type of incentives works with particular individual,
other- does not. For instance, IT-specialists, engineers, accountants, as well
as introverts – professions and personal trait that do not require or prefer
social interactions and high level of commitment, they are not extremely
interested in intrinsic rewards, as opposed to bank tellers, social workers and
extroverts, who are dependent on social inclusion with colleagues, departments,
trust, empowerment, commitment and timing. Managers should think not only about
cultural and personal fit but also about the time and economic situation when
they decide to implement the mechanisms. Non-financial rewards should be
checked regularly and updated where appropriate to ensure that they are still useful
(Silverman, 2004). Intrinsic rewards are not always sufficient over the
longer-term because time dictates new demands and an old scheme might become
uninteresting for employees, although they are likely to feel good at the
moment. In relation to the economy, Tahmincioglu (2004) suggests that economic
environment influences the effectiveness of non-financial reward schemes. In a
time of downsizing and restructuring, for example, such mechanisms may not be
effective in motivating and can lead to adverse consequences while in a time of
economic arise these methods may show the opposite effect and be beneficial for
employer and employee (Tahmincioglu, 2004).


To conclude, this essay has attempted to provide a
brief summary of the literature and theories relating to the managing employee
compensation system, and it seems that empirical studies on this issue are somewhat
mixed and hotly debated. In addition to this, empirical research is generally
lacking the optimal combination of intrinsic and extrinsic rewards that can be
useful for HR-managers to implement such methods of awards in their work
practice. Designing the jobs with intrinsic rewards, such as commitment,
communication, relationships, timing and trust may motivate employees to work
better, improve job satisfaction and well-being, reduce stress and absenteeism, along
with the most significant acceptance and return with the group. It can be beneficial not only for employees but also
for employers by developing a competitive advantage in recruitment, retaining
and rewarding employees while intrinsic rewards are a relatively inexpensive
and powerful motivator (Giancola, 2014). However, managers should focus both on
advantages of non-monetary incentives and on circumstances, such as
organizational culture, time, th economic situation in order to predict the
potential risk of backfire.







Danish, R.Q., Khan, M.K., Shahid, A.U.,
Raza, I., Humayon, A.A. (2015). Effect of
intrinsic rewards on task performance of employees: Mediating role of
motivation. International Journal of Organizational Leadership. 4, pp.

Gage, M., & Deci, E. L. (2005). Self-determination theory and work
motivation. Journal of Organizational Behavior, 26, pp. 331-362.

Gerhart, B., & Milkovich, G. T.
(1992). Employee compensation. Research
and practice. In M. D. Dunnette (Ed.). Handbook of industrial and organizational
psychology, pp. 481-569.

F.L. (2014). Should HR Professionals
Devote More Time to Intrinsic Rewards? Compensation & Benefits Review,
46 (1), pp. 25-31.

Gratton, L. (2004). More than money. People Management, 29 January, pp. 23.

Herzberg, F. (1966). Work
and the Nature of Man. World publishing Co.

Herzberg, F. (1968). One more time. How do you motivate employees?
Business review.

Kohn, A. (1993). Why incentive plans cannot work. Harvard Business Review,71 (5), pp. 54-63.

Maslow, A. (1954). Motivation and Personality. Harper &
Row, New York.

Pfeffer J., (1998). Six dangerous myths about pay. Harvard
Business Review. 76 (3), pp. 108-119.

Reif, W. E. (1975). Intrinsic versus Extrinsic rewards:
resolving the controversy. Human Resource Management. Wiley Periodicals Inc., 14 (2), pp. 2–9.

Rynes, S.L., Gerhart B., Minette K.A. (2004). The Importance of Pay in Employee
Motivation: Discrepancies Between What People Say and What They Do. Human
Resource Management. 43 (4), pp.

Stumpf S.A., Tymon W.G.,
Favorito N., Smith R.R. (2013). Employees
and change initiatives: intrinsic rewards and feeling valued. Journal of
Business Strategy. 34 (2), pp. 21-29.

Tahmincioglu E. (2004). Gifts that gall. Workforce Magazine. April, pp. 43-46.