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Raja Usman Abdullah

Khalil ullah Mohammad

Ali Zubair

Muhammad Affan

Abdullah Atif

Mohammad Ali Butt

Ahmed Ali Adil

Asif Mumtaz Malik

MBA-2(A)

Methods of business Research

Impact on employee motivation by monetary and non

monetary benefits separately, in Pakistan

Submitted to:
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Table of Contents

Title:................................................................................................................ 3
Introduction:................................................................................................... 3
Literature review:........................................................................................... 4
Problem statement:...................................................................................... 11
Research objectives:..................................................................................... 12
Research question:....................................................................................... 12
Theoretical framework:................................................................................ 13
Research methodology:................................................................................ 14
Justification of the study:.............................................................................17
Structure of the thesis:................................................................................. 17
References:................................................................................................... 19
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Title:
The title of the proposal is, “Impact on employee motivation by monetary and non monetary
benefits separately, in Pakistan.”

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 Pakistan 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 arises 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 unit of 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.

The related studies on the concerned and linked topic shows that there always have been studies
and tests done on the variables like motivation, its types, monetary benefits, non monetary
benefits, their types, best of these, worst of these, but it has not been observed as what motivates
employees more. This thing if found can be very helpful to maximize the production capacity of
our unit of analysis. 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.
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Literature review:
“People won’t change their behavior unless it makes a difference to them to do
so”

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., 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. 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.

Problems with monetary incentives

“Managements have always looked at man as an animal to be manipulated with

a carrot and stick. They found that when a man is lured/hurt, he will move to get
the prize/avoid the pain-and they say, ‘We are motivating the employees.’ Hell
you are not motivating them, you are moving them.”

-Frederick Herzberg, Professor Emeritus

Monetary incentives usually encourage compliance and achievement of difficult targets instead
of encouraging creativity, innovation and foresight which are more important in the long run.
Thus employees are not able to express their true talent and in the long run lose their creativity.
Employers also may use monetary incentives as an extrinsic rather than an intrinsic motivator. In
other words, associates are driven to do things just for the monetary reward versus doing
something because it is the right thing to do. This can disrupt or terminate good relationships
between employees because they are transformed from co-workers to competitors, which can
quickly disrupt the workplace environment. Another problem with monetary incentive is that it is
given to circumvent a bigger problem for a short run. Sales employees are given higher monetary
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incentives to compensate for poor management and poor products, employees are paid more for
working in poor work environment. Monetary incentives can even drive the employees to falsely
reporting their achievements. Huge monetary incentives given to middle mangers are seen as a
hook to retain them which may make them work counterproductively. Though the monetary
incentives have a better effect than the monetary incentives in the short run, they fail miserably
in the long run and in extreme situations downfall of the company (when employees start
anticipating monetary incentives even for routine jobs and in absence of which they start
working inefficiently or go on a strike as in the case of some government employees). Also most
of the non-monetary incentives are intrinsic in nature. Intrinsic motivation is more effective as
the impetus to work is from within. Employees are working because they feel satisfied or
fulfilled by the activity they undertake. Under these circumstances the management can be
regarded as more of a support than control. So managers should concentrate more on non-
monetary incentives after the minimum level of monetary benefits and properly structure them
according to their employee’s preference. This will ensure high motivational level of the
employees which will get reflected in their better performance at work.

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.
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Feedback

Achievers

Responsibility Moderate risks

Figure 1: Matching achievers and non-monetary incentives

 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.
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 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.

Intrinsic Motivation by non-monetary incentives

Various non-monetary incentives motivate employees intrinsically which is more

efficient than the extrinsic motivation. The intrinsic motivation that these incentives offer is the
result of intrinsic rewards of self management.

Self management

In employee’s perspective self-management is choosing activities, monitoring

competence, committing to purpose and monitoring progress. The intrinsic motivation that
energizes the work comes directly from the four management events namely activities, purpose,
opportunities and rewards. From these four events the employees make a judgment –of the
meaningfulness of the task purpose, the degree of choice available in selecting activities, the
competence with which the activities are performed, and the amount of progress being made to
the task purpose. The judgments from self-management lead to intrinsic rewards which in turn
provide the energy for self- management which completes the cycle.
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OPPORTUNITY ACCOMPLISHMENT

Rewards Rewards

From task Sense of Sense of

ACTIVITIES CHOICE COMPETENCE

Sense of
Sense of
From task MEANINGFULN
PROGRESS
ESS
PURPOSE

Table 1: Intrinsic rewards of self-management

 Sense of meaningfulness
It is the opportunity that makes the employees feels that they are on a path that is worth
the energy and time-that they are on a valuable mission that matters in the larger scheme
of things.

 Sense of choice
It is the opportunity that the employees feel to select task activities that make sense to
them and to perform them in ways that seem appropriate to them. The feeling of choice is
the feeling of being free to choose-of being able to use their judgment and act out of their
own understanding of task
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 Sense of competence
It is the accomplishment that employees feel in skillfully performing task activities that
have been chosen by them. The feeling of competence involves the sense that they are
doing good, high-quality work on a task.

 Sense of progress
It is the accomplishment felt in achieving the task purpose. The feeling of progress
involves the sense that the task is moving forward, and their activities are really
accomplishing something.

Non-monetary incentives

The non-monetary incentives desired by employees across generations have gone rapid changes.
The following table shows the preferences in non-monetary incentives across generations.

Baby Boomers
Generation X’ers Generation Y’ers
(born between 1946-
(born between 1964-81) (born after 1982)
63)

Retirement planning Flexible schedules Flexible schedules

Flexible schedules Professional Professional

development development

Job training
Feedback Feedback

Sabbaticals
Tangible rewards Tangible rewards

Work environment Work environment

Attentive Employers

Autonomy

Table 2: Preferences in non-monetary incentives across generations

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Thus it is obvious that the demands of the current generation of employees are ever
increasing and in current scenario where there is low loyalty to the companies, high attrition rate
these demands have to be met reasonably well to attract prospective employees who can perform
really well and to retain the employees.

Another Research shows that employees some employees are primarily motivated by
financial rewards, and will dramatically improve their performance to achieve such
rewards.  On the other hand, some other employees may see motivating others with money
as vulgar, and are dis incented by such offers.  This second group of employees is more
likely to be motivated to improve their performance through the use of nonmonetary
rewards such as being thanked publicly at a departmental function, having lunch with the
head of the organization, or receiving an extra day off.  The desired outcome of rewards
and recognition programs is to improve performance. Non-monetary recognition can be
very motivating, helping to build feelings of confidence and satisfaction. An American
Society for Training and Development (ASTD) report on employee retention research
identified consistent employee recognition as a key factor in retaining top-performing
workers. (http://www.101rewards.com/non-monetary-rewards.html).

Research on what employee’s value for rewards and recognition indicated a monetary
reward only ranked 12th in a list of items important to employees. It is true, we all need
money for the expenses of day to day living but studies indicate that when employees receive a
monetary bonus it is typically used to pay bills, expenses or purchase something that the
employee needs, not some thing they truly enjoy. Consequently money becomes a very in-
personal gift.

Conversely, if you want to give a very sincere gift that not only says thanks but will help create
the loyalty, dedication and motivation you would like your employees to have, consider a gift or
award that will touch them personally. Something they will truly enjoy and use or some thing
that brings them pleasure in their leisure or family time.
(http://www.recognitionrewards.com/top_five_items.htm)

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. Only one study has been done in Pakistan regarding this issue the topic of
which is Effect of non monetary benefits on motivation and physiological health of an employee
at workplace. So 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. The topic that has
been selected is found to have some gaps which are consistent with the literature review. 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.
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Problem statement:
As observed through the thorough review of the literature, it has
been found out that certain researches regarding the effect of non monetary benefits on
employee’s performance has been conducted and non monetary benefits are considered as the
basis of the intrinsic motivation whereas monetary benefits base the extrinsic motivation. Now in
our unit of analysis, employees require intrinsic motivation or extrinsic motivation? Employees
in our unit of analysis may think of self esteem as 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 unit of analysis results may vary. Money has always been thought of as an
unethical mean to motivate people and make them work like animals by most of the researchers,
so most of them have researched on the effect of non monetary benefits on motivation, even in
Pakistan, most people did the same thing. But is the case same 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 specific unit
of analysis. So the gap analyzed by us in the respective literature review is that no study has been
done in the unit of analysis selected by us and the monetary benefits may matter more in our
society so the researches done before on this topic only apply to their respective unit of analysis.
The concluded problem statement is,

“The basic source of motivation in Pakistan 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
research being conducted is actually a gap to be explored of the studies conducted before
some of which are shown in the literature review part. 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.
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Research objectives:
Following are the research objectives of the study.

 Understand the importance of monetary and non monetary benefits in our unit of
analysis 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 him.

Research question:
The research question of our research is,

“Do Employees in Pakistan prefer monetary benefits or non monetary benefits as a source
of motivation for them?”
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Theoretical framework:
In the research going to be conducted following are the
variables:

 Dependant variable: Motivation

 Independent variables: Monetary and Non Monetary benefits

The research pursued by researcher has the logic that the researcher wants to find out the
consistence of the studies done before on the related topics is the same and also wants to find
out the gap analysis. Basically in our unit of analysis, situation seems to be very different as
in European countries non monetary benefits are given much importance and that is because
of availability of un employment and children funds which makes their pockets filled up to a
certain amount but being a third world country, things are very different in our case therefore
we want 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 as well as loyalty with their
organization.

The link between variables is very logical. If an employee performs well, he expects some
reward, even a “thank you” or “great job” compliment by the boss works for him. So if he is
given certain monetary or non monetary benefits or rewards for good performance or even
for being an employee of the organizations, he has a feeling that organization do cares for
him and he gets motivated. Due to this motivation, he becomes a long term member of the
company and also works hard. Thus, the productivity of the organization increases. So if the
organization knows that what reward either monetary or non monetary would be more
motivating for him, they can make him more loyal and productive, this research will help to
answer this question actually. In our unit of analysis, the Herzberg motivational theory or
theory of needs may not be applied as needs for our employees are quite different here. And
by applying those theories to our society we would get nothing as these will only act as false
paradigm models. Employees in our country are attracted more towards the extrinsic needs
i.e. the first three bases of the hierarchy of five needs, so extrinsic motivation may matter
more for them. So our hypothesis can be:

H1: Monetary benefits create more motivation in employees working in different

organizations in Pakistan.

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

The employee satisfaction and need assessment would be done to view the effect of
independent variables on the motivation that is dependant variable.
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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 unit of
analysis. We would be collecting both 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 country, 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.

ACTION:

Data collected from the respondents would be through one to one interviews,
telephone and surveys and questionnaires. This will yield to the quantitave data as from
interviews and qualitative data from surveys and questionnaires by using symboling
technique and assigning numbers and ratings to the questions to calculate the rate of intrinsic
and extrinsic satisfaction through monetary and non monetary benefits provided by the
company. This approach would help to compare organizations, reward and benefit policies
pursued by them, employee satisfaction and affect of the variables on the production. Hence
we can dig out that which benefits are the best applied in our unit of analysis and how they
can be more improved to further enhance the production factor.

UNIT OF ANALYSIS:

The specific unit of analysis selected by us is Pakistan, we would

be conducting our research in different organizations of Pakistan depending on the ease of
access and preciseness of information expected. The unit of analysis has been selected as
Pakistan due to its particular environment, being a third world country, implications of false
paradigm models, no research regarding this issue in this unit of analysis, situation and
economy of the country which may lead to more importance given to non monetary benefits
by the employee and find out the reality if it is not so.
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POPULATION AND SAMPLING:

The population of our research consists of three

organizations in the main cities of the Pakistan. 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 us 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.

WORKING 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 behaviour is
activated. Given below are some representative definitions of motivation…..

 The contemporary (immediate) influence on the direction, vigour, and persistence of

action (Atkinson, 1964)
 It deals with how behaviour 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)
 A process governing choice made by persons or lower organisms among alternative
forms of voluntary activity (Vroom, 1964)
 Motivation has to do with a set of independent/dependent variable relationships that
explain the direction, amplitude, and persistence of an individual’s behaviour, holding
constant the effects of aptitude, skill, and understanding of the task, and the constraints
operating in the environment (Campbell & Pritchard, 1976)
Summarizing the fore mentioned definitions, Motivation is the process that accounts for
an individual’s intensity, direction, and persistence of effort toward attaining a goal. Thus
from the various definitions it can be seen that primary concerns while discussing motivation
are what energizes, channelizes, and sustains human behaviour. By definition, managers are
individuals who achieve goals through other people. The saying “If you want something done
right, do it yourself” is very true as it is very difficult to find people who could do a
challenging job well than to do it yourself. But unfortunately managers can’t step in for their
employees who are not performing well. They have the unenviable task of nurturing
necessary competencies and commitment in their employees. More often the employees are
competent enough to complete a task but they don’t have the motivation to do their job to
their potential.
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 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

In order to collect the data about the variables, techniques like surveys, questionnaires and
interviews would be used which main include nominal or ordinal scale in them. This would help
us to convert the data into the quantitative form rather than qualitative and then analyze and
interpret it. The reliability and validity of data can be evidenced only if special care of the data
from biasness and errors is taken, hence in this way data will show true result and outcomes and
the research will be useful and replicable.

OPERATIONAL FIELDS:

The data would be collected from some main cities of Pakistan and from each city three known
organizations would be selected, the research team would visit every organization just once to
collect the data.
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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.

The key terms in our research are same as operational definitions. The context is not changed in
the research and those definitions can help understand the topic very well.

Structure of the thesis:

The structure of the thesis would comprise of the following
headings.

1. Introduction:
Introduction of the thesis or dissertation would consist of the topic, title, research
problem and question plus the summary of the methodology to be adapted. Basically the
introduction would be a summary of the initial part of the proposal, so the main and
important information from the proposal would be extracted to form a summary and
provide a background of the overall research problem.

2. Literature review:
The second heading would consist of detailed literature review and all its prospects. It
will show the causal relationship among the variables, the research topic and the previous
studies and findings on this topic. The gap analysis would also be performed in order to
form the problem statement in a more generalized and expressive way. This would help
to tell that why respective question was asked.
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3. Theoretical framework:
Hypothesis would be represented in this section in order to match it with the outcome of
our research. Here researcher will define the variables, their dependency and
independency and also their causal relationship. The theoretical framework will actually
represent the theory of the research to make it well understand to the reader and
understand the problem going on and get curious to find the solution represented by the
researcher. This part creates interest for the reader and he understands the key terms and
context of the research.

4. Methodology:
This heading would under lye the information regarding the methodology adopted, reason
for adopting it, sampling techniques and scales of measurement. It is actually the
justification of the methods to be used to collect data and link them with the research
topic and variables to be found. It will also tell about the sampling frame, population and
samples, the instruments would also be described in bits and pieces to give an overview
of the actions to be taken. Similarly the operational definitions which are also key terms
in our context of the research would be explained.

5. Findings:
This heading will tell about the research findings after collecting, analyzing and
interpreting all the required data. This section of the thesis carries all the importance as it
will tell that do the hypothesis match the findings or not and what are actually the
outcomes of the research. Here researcher will also describe important phenomenon and
points n his context regarding the research and shall also justify them.

6. Conclusion:
Last heading would conclude all the findings and proceedings of the research. Here
researcher will show any better alternative technique that could have given better results
but skipped or could not adapt, he may also tell any gaps in the research process for the
up coming scholars to fill them, the limitations, screening, refining and suggestions to
improve and continue the research if it can be to find out new paths to development.
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References: