Bahria University Islamabad

Research Paper

Impact of Monetary and Non-monetary

benefits upon employee’s motivation,
working in organizations of Islamabad.

Organizational
Behavior

SUBMITTED TO Nusrat Huma

 SUBMITTED BY Muhammad Salman Khan,
Wardah Anwar, Zahra Haider,
Sidra Ehsan, Sana Salahudin,

Table of Contents

Introduction:...................................................................................................2
Research objectives:......................................................................................4
Justification of the study:................................................................................4
Research Question:........................................................................................5
Theoretical framework:..................................................................................5
Literature review:...........................................................................................7
Research methodology:................................................................................11
Questionnaire............................................................................................20
References:..................................................................................................23

References:
Title:
The title of the proposal is, “Impact of monetary and non-monetary benefits
upon employee’s motivation, working in organizations of Islamabad.”

Introduction:

The theme of the topic and its purpose is to review the importance of
monetary as well as non monetary benefits in order to motivate the employees and
enhance their performance. The unit of analysis selected includes organizations of
Islamabad and the impact of monetary and non monetary compensation on the
employee’s performance in the prevailing economic conditions. Many employees
working in the certain organizations are tied to the organization due to heavily paid
benefits in the form of cash and other facilities and these things are even a part of the
salary package. But the point that arise curiosity in the brain is that what actually
attracts more towards motivation and interest in the job, the benefits in the form of cash
or the other benefits which may include transportation, free fuel, rent facility, medical
insurance etc. the applicability of the topic varies in the environments. In China, people
prefer more the non monetary benefits and do not rely much on the papers in their
pockets, however in some parts of the world, money is considered as the most valuable
benefit that can be gained by good performance and which also creates interest in the
employees for good performance. Similarly, an area with less transportation facility
would require transportation benefits instead of monetary benefits. All the organizations
which come under our analysis concentrate a lot on the benefits and compensations for
their employees because it helps the employee to realize himself as a valuable asset of
the company and his significance in the company, so it will induce loyalty and job
satisfaction in the employee and in the end he would obviously perform well to enhance
the productivity factor of the economy. Thus compensations and benefits of all type
play a vital role to increase the production in the economy.

Another thing as a result of this research can be that it may also increase the
competition race among the firms, thus more the competition, more would be the
technological progress by the firms to get at the top of the order. Another benefit of this
research can be that the future employees would realize the benefits provided by firm
and if they suit them then they will work hard to be the part of that firm, hence the firm
would have more learned and competitive employees. Thus, it can be assumed that this
research can enhance the economic progress of Pakistan.

Problem statement:

Employees require intrinsic motivation or extrinsic motivation?

Employees in our analysis may think of self esteem nothing and may prefer
psychological needs over them due to recession and present economic conditions. Our
society is a place where money matters so in our analysis results may vary. Money has
always been thought of as an unethical mean to motivate people and make them work
like animals. Pakistan, most people do the same thing. But is the same case here? Do
people here really prefer non monetary benefits like thank you, appraisal etc on money?
This question has actually provoked curiosity to do this research and find out the answer
of this question in our analysis. The concluded problem statement is,
[

“The basic source of motivation in Islamabad for employees is monetary benefits

or non monetary benefits. What is preferred more by the employees from both
kinds of benefits?”

This problem statement can solve many issues regarding the organizational decisions as
which benefits and compensation would make employees more satisfied and motivated
which would in turn help to improve the overall productivity of the organization. The
outcome of research would be interesting for the management decision makers and it
may change the current practices of the organizations in terms of rewards and benefits.

Research objectives:

Following are the research objectives of the study.

• Understand the importance of monetary and non monetary benefits to

motivate employee.

• Formulate best policies relating to monetary and non monetary

compensation and hence improve production by motivating employees
intrinsically and extrinsically.

• Understand the preference of employee in relation with monetary and non

monetary benefits.

• Increase interest and psychological health of the employee.

• Provision of benefits according to the needs of the employee, hence,

inducting loyalty in them.

Justification of the study:

This research study would be helpful in many ways like:

• Awaring managers the importance of benefits in an organization

• Understanding the needs and requirements of the employees who are a part
of intellectual capital
• Best ways to design the monetary and non monetary beneficial policies
according to the needs of the employee
• Providing the employee with what he wants which would in turn promote
loyalty and hard work in him
• Understand the preference of the employees regarding the monetary and non
monetary benefits in our unit of analysis
• Stopping the false paradigm models applied to our organizations
 • Promote psychological health of the employee
This research is important in a sense that such type of research has never been
conducted in our society and it will yield excellent results to enhance our production
and economy.

Research Question:
The research question of our research is,
“Do Employees in organizations of Islamabad prefer monetary benefits or non
monetary benefits as a source of motivation for them?”

Theoretical framework:
In the research going to be conducted following are the variables:
• Dependant variable: Employee’s motivation
• Independent variables: D1: Monetary Benefits
D2: Non Monetary benefits
To find out that what do employees in Pakistan actually prefer, the monetary
benefits or the non monetary benefits in order to enhance their motivation.
The link between variables is very logical. If an employee performs well, expects
some reward, even a “thank you” or “great job” compliment by the boss works for
that employee. If an employee is given with certain monetary or non monetary
benefits or rewards for good performance or even for being an employee of the
organizations, that employee has a feeling that organization do cares for him and he
gets motivated. Due to this motivation, employee becomes a long term member of
the company and also works hard. Thus, the productivity of the organization
increases.

The hypothesis is:

H1: Monetary benefits create more motivation in employees working in
different organizations in Islamabad.

Ho1: Monetary benefits do not create more motivation in employees working in

different organizations in Islamabad.
 H2: Non Monetary benefits create more motivation in employees working in
different organizations in Islamabad.

Ho2’: Non Monetary benefits do not create more motivation in employees

working in different organizations in Islamabad.

The employee satisfaction and need assessment would be done to view the effect of
independent variables on the motivation that is dependant variable.

DEFINITIONS:

• Motivation:

The term “motivation” was originally derived from the Latin word movre, which means
“to move”. But this one word is insufficient to describe the processes with how human
behavior is activated. Given below are some representative definitions of
motivation…..

• It deals with how behavior gets started, is energized, is sustained, is directed,

is stopped, and what kind of subjective reaction is present in the organism
while all this is going on (Jones, 1955)

• Monetary benefits:

Monetary incentives include profit sharing, project bonuses, stock options and warrants,
scheduled bonuses (e.g., Christmas and performance-linked), and additional paid
vacation time. Traditionally, these have helped maintain a positive motivational
environment for associates. Monetary incentives can be diverse while having a similar
effect on associates. One example of monetary incentives is mutual funds provided
through company pension plans or insurance programs. Because it has been suggested
that associates, depending on their age have different needs pertaining to incentives,
traditional incentive packages are being replaced with alternatives to attract younger
associates. So simply we can say that

Monetary benefits = benefits with money

 • Non monetary benefits:

Non-monetary benefits are to reward excellent job performance through opportunities.

Non-monetary incentives include flexible work hours, training, pleasant work
environment, and sabbaticals. More appropriately,

Non monetary benefits = benefits without money

Literature review:

Managers are individuals who achieve their goals through other people. They
are constantly searching for ways to motivate their employees to make them work at
their optimal level of performance to accomplish the company objective. Various
incentives are provided by the managers to their employees for motivation. The
incentives that are provided by the mangers to their employees can be broadly classified
as monetary incentives and non-monetary incentives.

Comparison of monetary and non-monetary incentives:

The purpose of monetary incentives is to reward associates for excellent job

performance through money. Monetary incentives include profit sharing, project
bonuses, stock options and warrants, scheduled bonuses (e.g., Eid and performance-
linked), and additional paid vacation time. Traditionally, these have helped maintain a
positive motivational environment for associates. Monetary incentives can be diverse
while having a similar effect on associates. One example of monetary incentives is
mutual funds provided through company pension plans or insurance programs. Because
it has been suggested that associates, depending on their age have different needs
pertaining to incentives, traditional incentive packages are being replaced with
alternatives to attract younger associates. On the other hand, the purpose of non-
monetary benefits is to reward excellent job performance through opportunities. Non-
monetary incentives include flexible work hours, training, pleasant work environment,
and sabbaticals.
Theories which support intrinsic motivation:

Various theories that support the concept that intrinsic motivation which is
attained through non-monetary incentives is important and better than extrinsic
motivation are as follows:

• Maslow’s Hierarchy of needs

This theory states that the needs of social, esteem and self actualization are
higher order needs. The differentiation between the higher order needs and
lower order needs is that the higher order needs are satisfied at the individual
level whereas the lower order needs are satisfied externally.

• Herzberg’s two-factor theory

It supports the emphasis on factors associated with work like promotional
opportunities, opportunities for personal growth, recognition, responsibility, and
achievement which employees find intrinsically rewarding

• McClelland’s Theory of Needs

This theory focuses on three needs: achievement, power and affiliation. They are
defined as follows

Need for achievement: The drive to excel, to achieve in relation to a set of

standards, to strive to succeed.

Need for power: The need to make others behave in a way that they would not
have behaved otherwise

Need for affiliation: The desire for friendly and closely interpersonal
relationships.

• Cognitive evaluation theory

 This theory states that allocating extrinsic rewards for behavior that had been
rewarding intrinsically leads to decrease in overall level of motivation. Thus it
supports the view that it is better to continue intrinsic motivation to boost the
morale of employees.

• Goal-Setting theory
This theory supports the idea that specific and difficult goals with feedback lead
to higher motivation and performance.

• Self-efficacy theory(Social cognitive theory)

It is the individual’s belief that a task assigned can be done. Higher the self
efficacy higher is the confidence of the employee at the workplace.

• Reinforcement theory
This theory states that the behavior is a function of its consequences. If
employees feel that their efforts are duly rewarded then they will work in a more
effective manner for the organization.

• Equity theory
This theory states that individuals compare their job inputs and outcomes with
those of others and then respond to eliminate any inequities. If their colleagues
are given recognition employees will work towards achieving those rewards.
This motivates them to perform them to work better which beneficial to the
organization.

• Expectancy theory
The strength of a tendency to act in a certain way depends on the strength of an
expectation that the act will be followed by an outcome and on the attractiveness
 of that outcome to the individual. Thus when expectations from an employee
increases the employee responds with better performance.

From the above theories (however different they may be) it is clear that intrinsic
motivation is desired by the employees.

The literature review shows that most of the studies and researches conducted before
relate to the European countries where non monetary incentives are considered much
more valuable than the monetary incentives. There has been nothing about the
comparison and importance in employee’s point of view regarding these two types of
benefits. This is the reason that this research would be performed in Pakistan and
Pakistan has been selected as the unit of analysis. Firstly, the literature applicability is
not for Pakistan, it may lead to false paradigm model. Secondly, literature shows that
non monetary benefits and intrinsic satisfaction is more important than monetary
benefits but the situation may be different with respect to our unit of analysis, i.e.
Pakistan.

Procedure to be followed:
The data would be collected from capital city of Pakistan and from each
organization six members would be selected, the research team would visit every
organization just once to collect the data. The employees of the organizations would be
sampled according to the departments from top to bottom and 3 members from each
department would be selected to provide us with the most accurate and precise data.
Random sampling of three people from each department would be done using
probability sampling technique.

POPULATION AND SAMPLING:

The population of our research consists of three organizations in
the main city Islamabad. The sample frame would be designed in order to form a list of
those organization and show that which of them were actually considered and why. The
employees of the organizations would be sampled according to the departments from
top to bottom and 3 members from each department would be selected to provide with
the most accurate and precise data. Special care to minimize errors and biasness would
be taken in order to show truism in the results. Random sampling of three people from
each department would be done using probability sampling technique.

Research methodology:
The research methodology is a vital part to show
the truism in our research proceedings. The design and methodology would be adopted
in such a way that it would have minimized biasness in it and the true picture of the data
collected from the respondents. Data will be collected in both forms the quantitative as
well as the qualitative data in order to induce preciseness in our research work. The
process of data collection would include having access to different organizations of the
Islamabad, view their compensation and benefits policies, and view the difference of
monetary and non monetary benefits and their ratio pursued in the company. Then we
will interview the certain sample of different employees and shall ask them in what
ways these benefits motivate you, what changes do you want in these policies
( assessing their needs), and finally what motivates you more, monetary or non
monetary benefits. Some questionnaires would also be served to the target samples.
Organization which have ease of access and which are governed by the government
would be preferred in order to collect data.
Data Analysis and Findings:
Q1:- What do you prefer as a best motivational tool?

• Bonus Yes / NO

• Cash Reward Yes / NO

• Paid holidays Yes / NO

• Salary increase Yes

/ NO

• Promotion Yes / NO

• Letter of Appraisal Yes / NO

• Employee of the Month / Year Yes

/ NO

• Recognition through Newspaper Yes

/ NO
Conclusion:

Q2:-Does your organization is giving importance to the motivational tools?

Conclusion:

Q3:- Do the productivity and performance of an employee is dependent on

Monetary or on non monetary benefits?

Conclusion:

Q4:-Is the Monetary benefit or the non-monetary benefit best tool to

motivate an employee?

Conclusion:

Q5:-What is more important for you?

Conclusion:

Q6:-Which option will you prefer if the company purchase a insurance policy
for you or pay you amount equal to the amount of insurance?

Conclusion:

Q7:-For good performance what will you performance?

Conclusion:

Q8:-If your company is going to start its new branch in a rural area and your
company offers you the post of CEO for that particular branch. What will
be your response?
Conclusion:

Q9:-What will you do if your company offers you

Conclusion:

Q10:-What will you prefer among these?

Conclusion:
 Grand Conclusion:

Recommendations:

Questionnaire

Name: ___________________ Gender:

_____________

Age: ___________________
Occupation: __________

Q1:- What do you prefer as a best motivational tool?

• Bonus Yes / NO

• Promotion Yes / NO

• Cash Reward Yes / NO

• Salary increase Yes

/ NO
 • Letter of Appraisal Yes / NO

• Employee of the Month / Year Yes

/ NO

• Recognition through Newspaper Yes / NO

• Paid holidays Yes / NO

PURPOSE: To know what managers and employees prefer among these

monetary and non-monetary benefits and to know the inclination towards
the monetary and non-monetary benefits.

Q2:-Does your organization is giving importance to the motivational tools?

Yes
No

PURPOSE: To see do the managers actually do what they say. Their will be a
cross check on what managers saying, because we will be asking the same
question from the employees of the same organization.

Q3:-Do the productivity and performance of an employee is dependent on

Monetary or on non monetary benefits?

Monetary
Non-monetary

PURPOSE: To see what do managers and employees prefer in terms of their

performance and what things increases their production and performance.

Q4:-Is the Monetary benefit or the non-monetary benefit best tool to

motivate an employee?

Monetary
Non-monetary
PURPOSE: To see what actually been preferred by the lower and upper level
of management.

Q5:-What is more important for you?

Salary Increase
Increase in Authority

PURPOSE: We are using in direct approach in this question in order to check

that which will be proffered monetary or non-monetary benefit.

Q6:-Which option will you prefer if the company purchase a insurance policy
for you or pay you amount equal to the amount of insurance?

Your Insurance
Equaling to the amount of insurance

PURPOSE: We are using in direct approach in this question in order to check

that which will be proffered monetary or non-monetary benefit.

Q7:-For good performance what will you performance?

Cash prize
Promotion with minimal increase in salary
Awarded with a shield of Pride of Performance

PURPOSE: We are using in direct approach in this question in order to check

that which will be proffered monetary or non-monetary benefit or both.

Q8:-If your company is going to start its new branch in a rural area and your
company offers you the post of CEO for that particular branch. What will be
your response?
 Accept the post
Stay where you are at present

PURPOSE: We are using in direct approach in this question in order to check

that which will be proffered monetary or non-monetary benefit.

Q9:-What will you do if your company offers you

Double salary for working in two shifts

Refuse to serve twice a day

PURPOSE: We are using in direct approach in this question in order to check

that which will be proffered monetary or non-monetary benefit.

Q10:-What will you prefer among these?

Contract based job with high salary, faster promotion, no gratuity

and no pension
Permanent job slow promotion, low salary, with gratuity and
pension

PURPOSE: We are using in direct approach in this question in order to check

that which will be proffered monetary or non-monetary benefit.

References:

1. Robbins, Judge. (2007). Organizational Behavior. Prentice Hall of

India Pvt ltd.

2. Hiam. (2003). Motivational Management. American Management

Association

3. Thomas. (2000). Intrinsic Motivation at work. Berret Koehler

Publishers
4. Hollyforde, Whiddett. (2005). The motivation handbook. Jaico
Publishing house

5. http://en.wikipedia.org/wiki/Professional_development

6. http://en.wikipedia.org/wiki/Retirement _planning

7. http://www.maritzrewards.com/pdfs/site-benefits.pdf

8. http://etd.lib.metu.edu.tr/upload/12605141/index.pdf

9. http://www.101rewards.com/non-monetary-rewards.html

10.http://www.recognitionrewards.com/top_five_items.htm

11.Wikipedia