Effect of Intrinsic Rewards on Employees Performance: A Study from

Education Sector of Pakistan

Dissertation Submitted By :
Hira Batool
Under Supervision Of :
Mansoor Mahmood
In Partial Fulfillment For the Degree of
MBIT
February 2016

Institute of Business and Information Technology

University of the Punjab
Lahore

Chapter 1

Introduction :
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In any organization n there should be more than financial rewards given to their employees .
Non-monetary incentives are long term while monetary incentives are considered to be short
term .They provide a significant level of employees satisfaction and the least costly nonfinancial reward is to say just Thank you. Many organizations understand the fact that offering
rewards and incentives that not only recognize but validate and value outstanding work are
important. We can define rewards as anything that can boost up the frequency of employees
action so here In this paper I will be covering how intrinsic rewards that are qualitative in nature
are helpful in bringing employees performance.
Problem Statement :
The general perception about the performance of employees is that money seems to be the only
reason for which employees choose to work however it is experienced that money alone cannot
do anything. We have been exposed to Maslows hierarchy of needs, Herzbergs hygiene theory,
Theory X and Theory Y.
Here the researcher seeks to assess whether non monetary incentives bring employees
performance
Scope of the Study :
There are both monetary and non-monetary benefits in existence but we cannot recognize both in
this single study so we have confined our scope to only non-monetary incentives in public sector
universities of Pakistan mainly Lahore , Punjab.
Objectives of the Study :
The primary reason foe this study is to see the impact on intrinsic compensation on employees
performance in public sector universities of Pakistan.. In this study we will see the application of
these incentives and how they actually improved ones performance. Also giving light to the fact
that what sort of intrinsic rewards are being given to the employees of public sector universities.
We will search whether or not these incentives have enhanced employees performance in terms
of their job commitment, job satisfaction , job attitude, organizational citizenship behavior, work
punctuality and few others .

Hypothesis :
Ho: There is a significant relationship between employees performance and non monetary
incentives
Hi: There is no relationship between employees performance and non monetary incentives

Chapter 2

Literature Review :

Successful leaders use praise effectively. Employee achievements and/or performance

improvement is a vital part of performance management. Sincere and honest praise lets
employees know that you appreciate their efforts. This simple act takes little time but will
provide many benefits. With a few positive, encouraging words and a pat on the back, you can
recognize and reinforce desired performance behaviors. An employee who feels that his or her
best efforts are valued by you is likely to continue those efforts. It is important that your
employees know they are viewed as valuable members of the organization. With praise, you can
create and reinforce a positive self-image in your employees, making them feel like winners.
This is most desirable in confusing or unclear situations where the employee is trying to do the
right thing but is uncertain of the actual performance level.
Employees under stress also need a few words of praise to let them know they have done the
right thing in a difficult situation. When an employee has been assigned necessary but
unchallenging tasks, they, too, must be praised for their contributions. (Reward and
Recognition)
Non-financial rewards can have an even more substantial impact on employee satisfaction and
motivation than traditional financial rewards. A study by the Hay Group involving around four
million employees found that employees listed work climate, career development, recognition
and other non-financial issues as key reasons for leaving a job. Even well-compensated
employees may leave a company if dissatisfied with these aspects. Companies with excellent
non-financial incentive plans can attract, motivate and retain talented people.
According to a survey conducted by consulting company Mercer in 2011, employees in
Argentina, Brazil, Canada, Mexico and the United States all listed being treated with respect as
the single most important factor in motivation. Recognition and praise can send employees the
message that the company respects them and values their contribution. Financial incentives and
bonuses were number 13 on the list in all five countries. American employees rated base pay
fifth on the list, so although financial rewards remain important they actually have less
importance for most employees than respectful treatment and recognition. (Scott Thompson)
Non-financial objectives, such as customer loyalty and employee training, target assets that are
difficult to quantify but are equally as important as financial objectives. The balanced scorecard,
a concept created by professors at the Harvard Business School, integrates financial and nonfinancial objectives to measure and manage organizational performance. (Sessoms)
In a knowledge economy where the greatest asset an employee can offer an organization is their
intelligence, experience, problem solving ability and change-savvy persona, intrinsic rewards are
especially important to workers. In fact, Frederick Herzberg, who is one of the leading theorists
of workplace motivation, found intrinsic rewards to be much stronger than financial rewards in
increasing employee motivation. This is not to say that employees will not seek financial rewards
in addition to intrinsic rewards, rather it just means that money is not enough to maximize
motivation in most employees. People want to feel like their contributions matter. (Hartzell)

Non-Cash incentives have Evaluability, meaning they capitalize on affective reactions to the
award, and increase the utility value of the award. For example, non-cash incentives like a big
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screen television will serve as a reminder to the participant about his or her performance (and the
firm) every time it is watched. Vacation travel provides memories, pictures, etc. In the case of a
non-cash incentive, the award itself is the physical marker. (Jeffrey, 2003)
According to Hatice zutkua (zutkua, 2012) It has been found that there is a significant
difference between intrinsic and extrinsic rewards in terms of their effect on people results
performance indicators. The use of intrinsic reward practices exhibited a significantly positive
effect on people results performance indicators. However, it has been determined that effect of
extrinsic reward practices on people results is not significant. This study highlighted the
importance of the reward system for implementing TQM, especially putting the intrinsic reward
system behind the use of TQM practices on the job.
According to NILAY YAVUZ (YAVUZ, 2004) non-monetary incentives are valued highly by
the employees, even in the absence of monetary incentives. Among the non-monetary incentives,
job related non-monetary incentives are more preferred as the incentive that would
increase the employees interests in their jobs the most. This may imply that most
of the employees in the organization value meaningful job with more
responsibility, variety of tasks and opportunity to use variety of skills, autonomy
over job, participation in decision making, promotion, development opportunities
etc.

In an article published on website (Green, 20144)Monetary incentives dont buy workplace

happiness. The age old methodology of motivation, using monetary carrots such as perks or
financial remuneration has a weak exchange rate with todays knowledge worker, for whom the
most valuable currency is recognition. As the Harvard Business Review explains: Though
necessary, these extrinsic motivators [perks, promotion, pay] dont necessarily excite people to
work smarter or harder. Instead, they prompt employees to do only the minimum required to get
that next raise or job title. ( Build a motivated workforce, 2007)
Employees are viewed as an important element and considered as the human capital of any
organization. If employees are motivated and satisfied, they will perform their duties diligently
and actively. De-motivated employees are likely to put in little or no effort in their jobs, produce
low quality work, mostly avoid their workplace and even exit the organization when they have
available opportunities. On the other hand, employees who are motivated to work are likely to be
determinant, innovative and competent. Motivated employees are content, dedicated and work
enthusiastically, resulting in the optimum level of employees retention, loyalty, and harmony.
These aspects contribute significantly to the growth and development of the overall
organization. (Dhanonjoy Kumar)

According to the study conducted by (Rizwan Qaiser Danish, Muhammad Khalid Khan, Ahmad
Usman Shahid, Iram) The employees who area appreciated by intrinsic rewards within the
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organization not only perform well according to their job description but also get motivated
positively for the welfare of organization and for them. Employees struggle when their
organization appreciate their work, reward them, respect them and consider them as a vital part
of the organization. The employees efficiently do their jobs, behave effectively in the
organization, and remain loyal to their organization. Reward management system and
performance appraisal techniques can be improved by paying attention on human resource
management approaches that improve the performance of the organization.
In a study conducted by (Cheema, 2013) it was concluded that verbal praise of appreciation
from management in front of colleagues, feeling of being valued in the bank, a positive working
environment, encouragement by upper management on new initiatives, effective internal
communication, gaining respect and good relationship with other co-workers, proper and correct
appraisal of employee by management are motivating factors for employees. Non-monetary
rewards and effective recognition has a significant positive impact on employees motivation

Chapter 3

Research Methodology :

In order to test the hypothesis , Descriptive analysis technique will be used and quantitative study
will be conducted. Independent variable i.e intrinsic rewards will be taken to ascertain its effect
on dependent variable i.e employees performance. Survey method will be employed to collect
data using a standard and well structured questionnaires from different public sector
universities in Pakistan mainly focusing those universities which are in Lahore . Questionnaires
will be handed over to respondents in printed form.
Data will be analyzed using Statistical package for The Social Sciences (SPSS). We will be
utilizing descriptive statistics and Charts to elaborate our results in an effective way.
Population :
Our focus will be on the employees of public sector universities mainly in Lahore Punjab
Sample Size :
Sample will be around 500 .
Tools :
To test the research hypothesis , the Pearson product moment chi-square and graphs will be
used.Likert scale will be used to measure performance in terms of job satisfaction , attitude
towards job , organizational citizenship behavior. One sample T-test will also be employed .
Expected Results :
Be reviewing literature , it has been found that non monetary rewards have a significant impact
on employees performance and this had been viewed by his job performance, his attitude
towards organization , work punctuality and through his organizational citizenship behavior.

Limitations of the Study :

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1: Data will be collected from Public sector universities only in Lahore

2: We cannot force anyone to give their opinion
3 :The procedure used for data collection is so common i.e questionnaires , other data collection
methods can be used
4 : Budget constraint is always a big limitation.
5 : This study has taken only one dependent and one independent variable , there are many other
dimension which can also be taken and we can incorporate their effects on each other.
Practical Implications :
The findings of the study will provide a valuable understanding for policy makers on how to
retain their best employees and it will provide them an insight of what their employees actually
want .This will also help them make their employee more committed to their organization and
hence desired benefits will be achieved once their employees will be showing their full
citizenship behavior. By optimal provision of intrinsic rewards academic administration will be
able to make their core work force more satisfied and committed . As the data will be collected
from the public sector universities of Lahore only so the results wont be generalized.
Conclusion :
There has been a lot of research already conducted on this study yet I chooses this because I
wanted to test this theory myself by applying it on the employees of public sector universities of
Lahore . There can be more to done just by seeing the effect , we can use these measurement for
our future work i.e by making such policies that include intrinsic rewards so that to make our
workforce motivated enough to perform their duty in full zeal and zest.

References :
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Build a motivated workforce. (2007). Retrieved from Harvard Business Review.

Cheema, D. F.-E.-A. (2013). Impact of Non-monetary Rewards on Employees
Motivation: a Study of Commercial Banks in Karachi. Journal of Management
and Social Sciences.
Dhanonjoy Kumar, M. Z. (n.d.). Impact of Non-Financial Rewards on Employee
Motivation. Asian Accounting and Auditing Advancement.
Green, S. (20144, September 14). Its Kudos Not Cash: How Non-Monetary Social
Recognition Delivers More For Less. Retrieved from HRVoice.org:
http://www.hrvoice.org/it%E2%80%99s-kudos-not-cash-how-non-monetarysocial-recognition-delivers-more-for-less/
Hartzell, S. (n.d.). Reward Systems & Employee Behavior: Intrinsic & Extrinsic
Rewards. Retrieved from Study.Com:
http://study.com/academy/lesson/reward-systems-employee-behaviorintrinsic-extrinsic-rewards.html
Jeffrey, S. (2003). The Benefits: Of Tangible Non-Monetary Incentives. The Incentive
Research Foundation,.
zutkua, H. (2012). The Influence of Intrinsic and Extrinsic Rewards on Employee
Results: An Empirical Analysis in Turkish Manufacturing Industry. Business
and Economics Research Journal.
Reward and Recognition. (n.d.). Retrieved November Friday, 2015, from Florida
International University : https://hr.fiu.edu/index.php?
name=reward_recognition
Rizwan Qaiser Danish, Muhammad Khalid Khan, Ahmad Usman Shahid, Iram. (n.d.).
Effect of intrinsic rewards on task performance of employees.
INTERNATIONAL JOURNAL OF ORGANIZATIONAL LEADERSHIP .
Scott Thompson, D. M. (n.d.). The Importance of Non-financial Rewards for the
Organization. Retrieved from CHRON:
http://smallbusiness.chron.com/importance-nonfinancial-rewardsorganization-45146.html
Sessoms, G. (n.d.). The Importance of the Non-Financial Objectives Theory.
Retrieved from CHRON: http://smallbusiness.chron.com/importancenonfinancial-objectives-theory-37874.html
YAVUZ, N. (2004). THE USE OF NON-MONETARY INCENTIVES AS A MOTIVATIONAL.

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