MOTIVATION THEORIES AND APPROACHES
ARIZONA STATE UNIVERSITY
MGT 502 - ORGANIZATIONAL BEHAVIOR
WEEK 4
A. UNDERSTANDING MOTIVATION
Every organization must have goals that must be realized. It can be said that, in
achieving effective goals, it is necessary to involve highly motivated people (Turabik,
Baskan, 2015). Many terms are used to refer to motivation or motive, including need, urge,
wish, and drive. Motivation is fundamental for humans to make choices and will or behave.
Therefore, it is necessary to understand the theory of motivation. Psychologists mention
the importance of motivation as it relates to human behavior, by introducing the concept of
motive (Campbell, 1985). Motive is defined as any force that consciously or unconsciously
gives rise to behavior, provides continuity, and directs behavior. Kirel (2015) defines
motivation as the process to act as an incentivizing effect of a motive. Motives are defined
as the sum of efforts to persuade one or more people progressively towards activation in a
particular direction (object or goal) (Eren, 2004). Motivation is explained in different ways
in many theories but is generally indicated as having four basic phases as follows:
The process of motivation shows that every individual has some needs that they want
to fulfill. This makes individuals need control to behave in a certain direction so as to get
satisfaction for the fulfillment of needs. The term motivation, which is defined as a state in
a person's personality that encourages individual desires to carry out certain activities in
order to achieve goals. The motivation that exists in a person is the driving force that will
realize a behavior in order to achieve the goal of self-satisfaction (Handoko, 2009).
Motivation talks about how to encourage a person's work enthusiasm, so that they want
to work by giving optimally their abilities and expertise in order to achieve goals. This
stimulus will create an urge in a person to carry out activities. According to Berelson and
Steiner quoted by Wahjosumidjo, motivation is a conscious effort to influence a person's
behavior so that it leads to the achievement of organizational goals (Sunyoto, 2015).
The process of arising one's motivation is a combination of the concepts of needs,
drives, goals, and rewards (Tewal et al., 2017). According to Gibson (2018) there are
several stages in the motivation process.
The motivation process consists of several stages, namely:
1. The emergence of an unmet need that causes an imbalance in a person and tries to
reduce it with certain behaviors.
2. One then looks for ways to satisfy these desires.
3. A person directs his behavior towards the search for goals or achievements in ways that
have been chosen with the support of his abilities, skills and experience.
4. Judgments of achievement are made by oneself or others about one's success in
achieving goals. Behavior aimed at satisfying needs, for example, pride, is usually
assessed by the individual. Whereas behavior aimed at meeting a need, for example,
financial or position, is generally carried out by superiors or organizational leaders.
5. The reward or punishment received or perceived depends on the evaluation of the
performance.
6. A person assesses the extent to which behavior and rewards have satisfied their needs.
If the motivation cycle has satisfied the need, then an equilibrium or satisfaction of
certain needs is felt. However, if there are still unmet needs, there will be a repetition of
the motivational cycle with different behaviors.
Motivation is very necessary in organizations because it is related to efforts to provide
encouragement to employees to achieve organizational goals. Organizational goals are
impossible to achieve without the enduring commitment of its members. An understanding
of motivation needs to be based on the assumption that motivation is a good thing, as a
determinant of work performance, as a thing that never stops, and as a measuring tool for
work relationships in organizations. Therefore, organizational managers are required to
have the ability to motivate their employees, namely through an understanding of
motivation theories such as needs theory, expectancy theory, and equity theory, and other
theories, (Ratmawati & Herachwati, 2007).
B. THEORIES OF MOTIVATION:
Motivation theories are divided into two: content theory (traditional theory) and
process theory (modern theory). Content theory explains the factors that drive and motivate
people, while process theory focuses on how various personal factors influence human
behavior (Brooks, 2006).
1. Content Theory (Traditional Theory):
a. Herzberg's Two Factors Theory (Hygiene-Motivation Theory):
The theory developed by Herzberg is known as the Two-Factor Model, namely
motivational factors and hygiene or "maintenance" factors. Motivational factors are
intrinsic things (sourced from within a person) that encourage achievement, while what is
meant by hygiene or maintenance factors are factors that are extrinsic (sourced from
outside themselves) that also determine a person's behavior. (Haryati, et al, 2018). In its
implementation in an organization / company environment, this theory emphasizes the
importance of creating / realizing a balance between the two factors. One of them is not
fulfilled, which will result in ineffective and inefficient work (Tahir, 2014).
b. Maslow's Hierarchy of Needs Theory:
Maslow's Hierarchy of Needs Theory suggests that people in the workplace are
motivated by a desire to satisfy a number of needs that exist within a person (Tewal et al.,
2017). According to this theory, individuals are motivated to fulfill their needs which are
ranked in a hierarchy of needs. Maslow emphasized that these needs are the most important
factors determining individual behavior with the idea that every behavior stems from
efforts to solve their specific needs. Maslow has created this hierarchy of needs from the
lowest level to the highest level. The levels of needs can be described as follows:
1) Physiological (physiological needs). Physiological needs are the most basic hierarchy
of human needs which is the need to be able to live. In an organizational context,
compensation is the physiological needs of employees so management must provide
appropriate salaries to employees to buy basic needs, employees must be given
adequate rest and meal time.
2) Safety and security (safety and security needs). If the relative physiological needs have
been satisfied, the second need arises, namely the need for safety and security. This
need includes the security of protection from the dangers of work accidents, guarantees
of job continuity, and guarantees of old age when someone is no longer working.
3) Belongingness, social, and love (social needs). If the first and second hierarchical needs
have been minimally satisfied, social needs will emerge, namely the need for
friendship, affiliation, and closer interaction with others. In an organizational context,
this relates to the need for a cohesive work group, good supervision, shared recreation,
and so on.
4) Esteem (appreciation needs). These needs include the desire to be respected,
appreciated for one's achievements, recognition of one's abilities and expertise and the
effectiveness of one's work. Therefore, managers must appreciate and reward, and
promotions for employees who work well.
5) Self-actualization (self-actualization needs). Self-actualization is related to the process
of developing one's true potential. The need to demonstrate one's abilities, skills and
potential. Self-actualization is an ongoing and insatiable process. Instead, the need for
self-actualization has a tendency to increase in potential as people actualize their
behavior. A person who is dominated by the need for self-actualization enjoys tasks
that challenge their skills and abilities. Therefore, managers can provide work that
challenges employees so that their skills and creativity are fully utilized.
c. Mc Clelland's Need For Achievement Theory:
This theory classifies based on the results of an activity in the form of achievements
achieved, including at work. In other words, the need for achievement is a motivation in
carrying out work. This means that humans essentially have the ability to excel above the
abilities of others (Thoha, 2003). According to Tewal, et al (2017) Mc Clelland examined
three types of needs, namely the need for achievement (n Ach), the need for affiliation (n
Aff), and the need for power (n Pow).
The need for achievement (n Ach), from the results of research conducted by Mc
Clelland, there are three characteristics of people who have high n Ach, namely: (1) have a
high sense of responsibility for the implementation of a task or finding a solution to a
problem. As a result, they prefer to work alone rather than with others. If a task requires
the help of others, they prefer to choose a competent person rather than their best friend;
(2) tend to set a moderate level of task difficulty and calculate the risks; (3) have a strong
desire to obtain feedback or responses to their task execution. They want to know how well
they have done, and they are eager to get feedback no matter whether the results are good
or bad.
Affiliation needs (n Aff), is a desire to have friendly and warm relationships with
others, whose characteristics are: (1) they have a strong desire for the approval and
reassurance of others; (2) they tend to conform to the wishes and norms of others in their
environment; (3) they have a genuine concern for the feelings of others. People who have
high n Aff seek opportunities in the workplace to satisfy these needs. They therefore tend
to work with others rather than alone, tend to have high attendance rates, and tend to
perform better in situations where there is personal and moral support.
The need for power (n Pow), is the need to influence and control others and be
responsible to them. People who have high n Pow are characterized by: (1) the desire to
directly influence others; (2) the desire to exercise control over others;
(3) there is an effort to maintain the follower-leader relationship. People with high Pow
tend to make more suggestions, more often give their opinions and evaluations, always
trying to influence others into their way of thinking. They also tend to place themselves as
leaders in their group activity environment.
d. Alderfer's E.R.G. approach
This theory is a refinement of the theory of needs put forward by Maslow. According
to Alderfer in Robbins (2001: 171), there are three hierarchies in core needs, namely
existence, relatedness, and growth. The three hierarchies in these core needs can be
described as follows:
1) Existence Needs The first need is the need for existence which is the provision of basic
material existence requirements, including items that Maslow considers as security and
safety needs and physiological needs such as salary, working conditions, work
equipment or basic human needs for survival and so on.
2) Related Needs The second related need is the desire we have to maintain beneficial
interpersonal relationships. Social and status desires require interaction with other
people to be satisfied, and these desires align with Maslow's social needs.
3) Growth Needs The third need is growth needs. Growth needs are an intrinsic desire for
personal development, encompassing the intrinsic components of Maslow's reward
category and the characteristics involved in self-actualization.
It can be concluded that existence needs are basic needs for humans related to
physiological needs and security and safety needs. Relationship needs are human needs to
interact between one individual and another in the organization, and finally growth needs
are the desire of each individual to get appreciation and be able to develop their abilities.
2. Process Theory (Modern Theory):
a. Vroom's Expectancy Theory:
This theory was developed by Victor H. Vroom in 1964 which was later expanded by
Lawler and Porter. This theory argues that a person will be motivated to do something to
Motivation = Expectancy (E) x Instrumentation (I) x Valence (V)
achieve a goal if they believe that their behavior leads to the achievement of that goal.
According to Vroom, there are three aspects that affect motivation: expectancy, instrument
and valence.
1) Expectancy (E) is how likely it is that if they perform certain behaviors they will get
the expected work results (i.e. high work performance).
2) The instrument (I) is how much the relationship between work performance and higher
work outcomes (namely income, either in the form of salary or other things provided
by the company).
3) Valence (V) is how important a person assesses the income given to him by the
company, for example, if the most coveted thing by a person at a time, promotion, then
it means that for him promotion occupies the highest valence.
Kreitner and Kinicki (2007) explain that expectancy theory has three key concepts,
namely the understanding that expectancy (E) is the expectation of effort and performance
(effort-performance), instrumentality (I) is the perception of performance-outcome, and
valence (V) refers to the value a person gives to the outcome.
From the explanation above, Vroom formed motivation is a function of valence,
expectations and instrumentation.
According to Robbins, et al. (2005) expectancy theory is the most comprehensive
explanation of motivation available today. Victor
H. Vroom argues that: Motivation is a product of three factors, Valence (V) shows how
strong a person's desire to obtain a reward, for example if the thing most coveted by
someone at a time, promotion, then it means for him promotion occupies the highest
valence; Expectacy (E), shows the possibility of work success (performance probability).
Probability moves from 0, (zero, no hope) to 1 (one, full of hope). Instrumentality (I),
indicates the likelihood of receiving a reward if the job is successful.
Victor Vroom suggests that expectancy theory includes three variables or relationships,
namely:
1) The expectancy or effort-performance link, is the likelihood perceived by the person
that putting in a certain amount of effort will result in a certain level of performance.
2) Instrumentality or performance-reward linkage is the degree to which the person
believes that working at a certain level is a means to achieving the desired outcome.
3) Valence or reward attractiveness is the weight that the person places on the potential
outcomes or rewards that can be achieved at work. Valence considers the person's goals
and needs. (Surbakti, 2014)
b. Lawler and Porter's Expectancy Theory:
Lawler and Porter's Expectancy Theory is an extension of Vroom's Expectancy
Theory. Lawler and Porter's Expectancy Theory is based on satisfaction obtained through
performance and rewards. According to this theory, satisfaction is determined by the
difference between the rewards or rewards received by one individual and another. That is,
if individuals get rewards or rewards that are proportional to his performance, then he will
get satisfaction and vice versa. In addition, Lawler and Porter divide rewards into intrinsic
and extrinsic rewards. Intrinsic rewards are rewards obtained for the individual's behavior
in the organization such as work achievements which are efforts in developing themselves,
while extrinsic rewards are the increase in wages earned, proper recognition or employee
status and job security provided by the organization. Lawler and Porter also argue that
knowledge and skills are needed in achieving performance success which will have an
impact on the acquisition of intrinsic and extrinsic rewards, resulting in satisfaction and
motivation.
c. Adams' Equity Theory:
Equity theory is a theory better known as balance theory or justice theory developed by
Stacy Adam in (Robbins & Judge, 2018) which states that individuals perceive the form of
injustice they receive by comparing the relationship between the input given to the
organization and the results of the input received, where the comparison is made to other
people outside and inside the organization. Referring to this theory, an employee will show
his attitude towards the state of injustice he receives at work and try to eliminate injustice.
Employees will conduct four forms of comparison in assessing forms of injustice based on
Stacy Adam's equity theory (in (Robbins & Judge, 2018))
1) Self-in: a comparison of the experience of another employee in a different position
within the organization.
2) Self-outside: comparison of experience with an employee of another organization who
is in a similar position or situation.
3) Other individuals-within: comparison of an individual's own experience with others in
the organization.
4) Other individuals-outside: other individuals or groups outside the organization.
According to this theory, a person's satisfaction depends on whether he feels there is
justice (equity) or unfair (unequity) for a situation he experiences. This theory is a variation
of social comparison theory. The main components of this theory are:
1) Input
It is something that is valuable to someone who is considered to support their work,
such as: education, experience, skills, the amount of effort devoted, the number of
hours worked, and personal equipment used for their work.
2) Outcomes
It is something that a worker considers valuable that is derived from his or her work,
such as salary, fringe benefits, status symbols, awards, and opportunities for success or
self-expression.
3) Comparison person
It could be someone in the same company or elsewhere and it could even be himself or
herself against his or her past work.
Equity theory focuses on the input-output ratio in organizations. Input is represented by
our contribution to the organization; output is everything we receive from the organization.
The theory assumes that when we engage in exchange relationships with organizations and
evaluate the fairness of what we get out of these exchanges by comparing our own input-
output ratio with others, to determine whether we are underpaid or overpaid.
C. SUMMARY MATERIAL:
In an organization there are many characteristics of the people involved in it. The
differences in these characteristics cannot be the reason for a weakness to cooperate with
each other, but make advantages so that the achievement of vision, mission, and goals can
be achieved. A leader must always be aware of the different characteristics of his members
and always provide motivation. Therefore, it is necessary for leaders to understand what
the concept of motivation is so that later it can be applied appropriately to its target. There
are so many theories of motivation, organizational leaders can use one or collaborate with
each other. The attitude of leaders who pay attention to their members by providing
motivation will cause a positive work passion in the organizational environment so that an
effective and efficient vision, mission, and goals can be achieved.
TASKS AND EVALUATION
1. Explain the concept of motivation!
2. Explain and describe Maslow's theory of motivation!
3. What is the pattern of motivation proposed by Mc Celland?
4. Give an example of the application of Vroom's expectancy theory in an organization!
5. In your opinion, which motivation theory can be effectively used in an organization?
Explain why!
REWARD SYSTEM AND EMPLOYEE PERFORMANCE IMPROVEMENT
A. INTRODUCTION:
The industrial era 4.0 and Society 5.0 where the industrial era 4.0 emphasizes on
artificial intelligence while the focus of Society 5.0 is on people who make a balance
between economic progress and solving social problems through a system that strongly
connects the real and virtual worlds. The massive adoption of technology has shaped the
socio-economic system and made it more competitive. In order to maintain this
competitive environment, companies are competing to improve the performance of their
employees. Therefore, the employee reward system becomes very important and gives a
competitive advantage to companies that can continuously improve the performance of
their employees. In other words, adequate management of Human Resources (HR) is
expected to increase the competitiveness of the company with other companies of the same
type or in the same industry.
An organization or agency cannot be separated from the role of human resources who
work in it (Saefudin & Wahyuningsih, 2014). The quality of human resources is one of the
factors needed to increase the productivity of an agency's performance. Therefore, an
organization or agency needs to assess the performance of its employees. This assessment
system can then be called the reward and punishment system. Employee reward systems
help companies to recognize the achievements of their employees by praising them with
monetary or non-monetary rewards. With a system like this, the management can provide
various types of rewards which of course can motivate employees to give their best
performance. A well-managed reward system will also help company management reduce
problems such as employee turnover and absenteeism. At the same time, the management
will get a great opportunity to attract the best talent.
The number or size of rewards given to eligible employees depends on many things,
especially determined by the level of achievement the employee can achieve. In addition,
the form of reward is also determined by the type or form of achievement achieved and to
whom the reward will be given. So, HR managers need to choose the best reward system
for their employees because it is not easy to choose the best method.
B. REWARD SYSTEM:
Some definitions related to reward systems are as follows:
1. According to (Nugroho, 2006), Reward is a gift, reward, appreciation or reward
intended to make someone become more active in their efforts to improve or increase
the performance that has been achieved.
2. Meanwhile, Chiang and Birtch (2008) state that reward is a broad construct to represent
anything that may be valued by an employee that an employer is willing to offer in
return for his contribution (cited in (Bustamam, Teng, & Abdullah, 2014).
3. Bratton (2017) states that the reward system can be monetary or non-monetary
including psychological assessment as a form of compensation for the work done by
employees (Ryan, 2013).
4. According to Maund (2001), reward systems are powerful tools especially in today's
competitive environment (cited in (Njanja, Maina, Kibet, & Njagi, 2013). Employee
actions are said to be influenced by reward systems and systematically facilitate
positive outcomes to achieve required performance (Wilson, 2003 as cited in (Njanja,
Maina, Kibet, & Njagi, 2013). Systematic rewards are considered fair and reasonable
(Fischer and Smith, 2003; Stone et al., 2007) as cited in (Webb Day, Holladay,
Johnson, & Barron, 2014).
5. According to (Puwanenthiren, 2011) rewards are formed from all organizational
components, processes, rules and decision-making activities in terms of allocation to
provide compensation and benefits to employees in return for contributions made to the
organization.
6. (Ruvendi, 2005) states that reward is a gift to employees or something that employees
receive in return for their achievements to the company in carrying out work.
Economic rewards are generally given in the form of salaries, wages, allowances,
bonuses, incentives, and so on.
Based on some of these definitions, it can be concluded that reward is the provision of
rewards to employees for their hard work that has exceeded the targets set by the company.
Giving rewards in the company is done with the aim of motivating employees to work
harder. Management can take advantage of this reward system to minimize employee
turnover and attract new employees, and at the same time increase their motivation and
performance. Company management is required to implement a reward system that is in
accordance with the company's strategic goals and employee needs.
C. REWARD SYSTEM OBJECTIVES:
Rewards are a way to improve employee performance by setting goals that are aligned
with company goals. For example, bonus standards that have been set by management can
be a way to reward the achievement of sales targets. This results in motivated and
enthusiastic employees to achieve more bonuses, thus achieving more quotas (Maund,
2001 as cited in (Njanja, Maina, Kibet, & Njagi, 2013).
However, a study conducted by the High Performance Organization (HPO Center), a
global research organization found that certain reward systems are considered a "hygiene
factor" and have minimal effect on the long-term performance of the company (McGraw,
2012). Andre de Waal, Director of the HPO Center, argues that companies have to spend a
lot of time setting up complex reward systems when minute performance has already been
achieved. On the other hand, a simpler and fairer reward system should already be in place
(McGraw, 2012).
A company without rewards can create an unpleasant working atmosphere that will
ultimately reduce employee motivation (Bustamam, Teng, & Abdullah, 2014). This can
increase employee resignation or turnover which is also the cause of the company's failure
to retain talent. As a result, rewards are considered important and a concern for
companies/organizations. Rewards should decrease employee turnover, attract other
employees, increase motivation to improve performance, and to stimulate and reinforce
employee behavior (Bustamam, Teng, & Abdullah, 2014).
Although the reward system is influenced by national cultural values, there are other
factors involved such as the cultural values of the company and the members in the group
(Chiang and Birtch, 2005; Mannix et al., 1995; Triandis, 1994 as cited in (Webb Day,
Holladay, Johnson, & Barron, 2014). Mannix et al., 1995 found that the goals of business
enterprises are beyond profit, instead, leaning more towards intrinsic development.
Therefore, corporate culture become more dominant than the national culture (Webb Day,
Holladay, Johnson, & Barron, 2014).
There are several goals that the company wants to achieve related to the
implementation of the reward system, namely;
1. To keep the focus on the company's goals by aligning employees' desires and targets
with the company's goals.
2. Maintain a low employee turnover rate and retain employees who have the right skills.
3. Keep employee motivation high.
4. aligning corporate risk preferences with managerial and subordinate levels
5. comply with legal requirements.
6. Doing what is ethically right.
7. Become financially viable and comfortably managed (Ryan, 2013).
The main objectives of the reward program according to (Ivancevich, Kanopaske, &
Matteson, 2006), namely:
a. Attract qualified individuals to join the organization.
b. Retain employees to keep them coming to work.
c. Encourage employees to achieve high levels of performance.
D. FORMS REWARD: REWARDS EXTRINCTIVE AND INTRINCTIVE
Everything that a company provides to satisfy one or more individual needs is referred
to as Reward. Types of rewards are divided into two categories: (Long, Perumal, &
Ajagbe, 2014)
a. Extrinsic Rewards
These rewards are given to satisfy basic needs, security, social needs, and the need for
recognition. The nature of Extrinsic Rewards is tangible or physically perceivable.
b. Intrinsic Reward
An award that an employee receives for himself for completing a task that was
challenging for him.
According to (Ivancevich, Kanopaske, & Matteson, 2006), Reward is divided into two
types, namely:
1. Extrinsic rewards:
Extrinsic reward is a reward that comes from outside the individual employee.
a. Financial rewards
1) Salaries and wages
Salary is a monetary reward received by employees as a consequence of their
position as an employee who contributes energy and thoughts in achieving
company goals or can be said to be a fixed payment that a person receives from a
company. Meanwhile, wages are rewards paid based on hours worked, the number
of units of goods that can be produced, or the number of services performed.
2) Employee benefits such as: pension, hospitalization, and vacation. Generally
unrelated to employee performance, but based on seniority or attendance records.
3) Bonuses/incentives are additional rewards above or beyond the salary/wages
provided by the company.
b. Non-financial rewards
1) Interpersonal rewards, managers have a certain amount of power to distribute
interpersonal rewards, such as status and recognition.
2) Promotion: Managers view promotion awards as a form of "the right man in the
right place". Hence, companies that measure performance that accurate will help in
decision-making in the allocation of promotion awards.
Retention programs will be successful if employers are committed to improving their
compensation strategies and become market leaders, or at least on par with competing
companies in their salary offerings (Conley, 2017). Every employee ensures the
compensation system they receive is fair and equal to their skills, experience, and
knowledge within their organization (Long, Perumal, & Ajagbe, 2014). Fair and equal
compensation received by employees will help companies retain and motivate their
employees to work in their organization (Johari, Yean, Adnan, Yahya, & Ahmad, 2012)
(Aguenza & Som, 2018). An attractive extrinsic reward plan will encourage employee
engagement in the company, increase productivity and quality of products and services,
reduce errors in work, reduce accident rates and maintain loyalty to the organization
(Wickramasinghe & Sajeevani, 2018).
2. Intrinsic rewards:
Intrinsic rewards are self-regulated rewards.
a. Completion
What is very important to some employees is having the ability to start and finish a job
or project. Such employees value what they call task completion. Another subset of
employees have a need to complete tasks and the effect of completing such tasks for
them is a form of self-esteem.
b. Achievement
Accomplishment is a self-generated reward that is earned when one achieves a goal
that is considered challenging.
c. Autonomy
Every employee wants to do a job that gives them the right to make decisions and or
work without being closely supervised. A feeling of autonomy can result from the
freedom to do what is best for the employee under certain circumstances.
Related to the reward system, the rewards provided by the company can be financial or
non-financial. They are also known as extrinsic and intrinsic respectively (Yang, 2008 as
cited in (Njanja, Maina, Kibet, & Njagi, 2013). Extrinsic rewards are monetary-based and
include working conditions (Ryan, 2013). There are 2 types of extrinsic rewards:
1) Direct rewards include salary increases, commissions, bonus systems, profit sharing,
and stock options, and individual and team rewards.
2) Indirect rewards include employee benefits such as: health insurance policies, paid
leave, employee discounts, and child care benefits (Henderson, 1994 as cited in
(Velnampy, 2005) (Njanja, Maina, Kibet, & Njagi, 2013). Extrinsic incentives can
improve performance, e.g. a decline in intrinsic motivation would be a concern if
extrinsic incentives were withdrawn, as increased performance levels are unlikely to be
sustained.
Intrinsic rewards depend on the satisfaction of employees in carrying out their work.
Some examples of intrinsic rewards include: authority, and promotion, comfortable
working environment, allocated vacation time, social activities, work design, flexible
working hours, recognition and feedback, and others (Yang, 2008 as cited in (Njanja,
Maina, Kibet, & Njagi, 2013). The employee feels personally accomplished and feels that
he or she has contributed to society. An example is volunteer workers who work in non-
profit organizations. Since, they work for non-monetary rewards, they are motivated by
intrinsic rewards, especially the satisfaction of contributing to society (Ryan, 2013).
Intrinsic incentives can be stronger than extrinsic incentives because intrinsic rewards
supplement, rather than replace extrinsic incentives (Datta, 2012).
Intrinsic rewards are difficult to define compared to extrinsic rewards because they
come from within the job itself and depend on the worker's own perception. It is intangible
and varies across workers, beyond management control, and is also based on the worker's
job satisfaction. Intrinsic rewards are divided into two elements, namely physical and non-
physical intrinsic rewards, and both are complementary (Aritonang, Jepri, Sadalia, &
Wibowo, 2018). Physical intrinsic rewards include physical elements in the workplace,
such as the layout of the work area, noise levels, and ergonomic factors (Rahim, Wahab, &
Munir, 2017). Management can provide a productive work environment by introducing
new technology and equipment to help workers perform their duties (Long, Perumal, &
Ajagbe, 2014). Non-physical intrinsic rewards include work atmosphere, sense of
meaningfulness in the organization, and social interaction in the organization (Ajmal,
Bashir, Abrar, Khan, & Saqib, 2015).
A positive atmosphere such as having supportive teammates and cooperative
coworkers is a major factor that encourages retention among workers where employers
support and encourage them to work effectively and efficiently (Christmas, 2008). A good
and positive work environment is an important element for employees to stay in the
organization (Putra, & Prasetya, 2018). Previous important findings reveal a work
environment that is not (Ellingson, Tews, & Dachner, 2016) (Lu, Lu, Lu, Gursoy, & Neale,
2016) (McGinnis Johnson & Ng, 2016). Creating a positive and comfortable work
environment not only attracts newcomers, but also retains experienced, knowledgeable,
and creative employees (Aritonang, Jepri, Sadalia, & Wibowo, 2018) (Rahim, Wahab, &
Munir, 2017).
A good and cooperative work environment increases employee job satisfaction and
loyalty more than salary and benefits (Moncarz, Zhao, & Kay, 2009).
According to Yuniarsih and Suwatno (2016) there are several factors that influence
Reward, namely:
1) External factors (competition, economy, image, law, market, social, and technology)
2) Human factors (ability, age, attitude, performance, and cooperation)
3) Company factors (organization, communication, delegation, planning, and structure
processes).
E. MONETARY REWARD SYSTEM:
Money is one of the strongest motivational tools, but its use must be adjusted to the
perceived value of each employee. In order to minimize employee dissatisfaction, company
management often uses monetary rewards, although in the long run it may not be the best
motivator (Mossbarger and Eddington, 2003 as cited in (Bustamam, Teng, & Abdullah,
2014). On the other hand, Deeprose (1994) states that although monetary rewards may not
be a very good motivator, without monetary rewards, it can produce a powerful de-
motivator (Bustamam, Teng, & Abdullah, 2014). Armstrong (1996) agrees with Deeprose
(1994) on the fact that monetary rewards show recognition of employee effort, increase
self-esteem, and state one's position and achievements. Thus, monetary rewards strongly
support strategic HR objectives (Bustamam, Teng, & Abdullah, 2014).
Research on salary increase reactions using psychophysical techniques: "identify only
visible differences" has found absolute thresholds (Rambo & Pinto, 1989; Champlin &
Kopelman, 1991; Worley et al., 1992; Mitra et al., 1997 as cited in (Bhakta & Nagy, 2005).
The study categorized the perception of percentage increase in income. For example, a 2%
increase in income was perceived to be disappointing, while a 5% increase in income was
considered neutral. Researchers concluded that a 7% increase was mostly perceived
positively although more than 7% of employee satisfaction was reduced (Bhakta & Nagy,
2005).
Therefore, in order for monetary rewards to motivate even greater improvements in
company performance,:
1. Employees should have a net interest in big money. This means not only the desire to
have money but other outcomes associated with their performance.
2. Employees realize that the money is linked to their performance.
3. Employees realize that there must be an effort towards performance. Employees must
realize that their performance must improve as the company grows.
F. NON -MONETARY REWARD SYSTEM:
Non-monetary rewards can still yield positive results. It refers to rewards where
employees are not financially incentivized thus saving money for the company (Chiang
and Birtch, 2008 as cited in (Bustamam, Teng, & Abdullah, 2014). Recently, it is better
understood that employees require more non-monetary rewards for the effort (Millmore et
al, 2007 as cited in (Bustamam, Teng, & Abdullah, 2014). In other words, employees are
looking for something more valuable and meaningful, whereas some are just there for the
extra money (Johnson and Welsh, 1999 as cited in (Bustamam, Teng, & Abdullah, 2014).
The corporate strategy to be cost-effective tilts the reward system towards non-
monetary rather than monetary rewards as a means to build job satisfaction and in turn
improve employee performance (Chiang and Birtch, 2008 as cited in (Bustamam, Teng, &
Abdullah, 2014). Another advantage of implementing non-financial rewards is the fact that
they can serve as a reminder of employees' good performance (Scott, J., 2004). For
example, a bicycle reward will remind employees of their rewarded efforts every time they
use the bicycle to exercise. A vacation paid for by the company as a reward will remind the
employee of his or her positive efforts every time the employee looks at vacation photos.
Non-monetary rewards can be informal or formal. One form is recognition from superiors
which is the most basic and effective way, viz;
a. Arrival received by immediate superior.
b. Official written award letter.
c. An official written letter from one of the top managers.
d. Verbal recognition during meetings or dinners.
e. Employee attribution of months or years (Silverman, 2004).
Some examples of other non-financial rewards are those that can be used outside of
work;
a. Vouchers for traveling.
b. Recreational services.
c. Complimentary Dinner Ticket
d. Cinema or theater tickets.
e. Reserved parking space.
f. Outdoor activities such as hot air balloon flights or a day at the salon/spa.
g. Domestic goods (Silverman, 2004)
Indeed, there are many types of rewards and none is considered the best. Therefore, the
management of the company must choose the one that best suits the achievement of the
desired targets of certain employees, this is reinforced by research conducted by In Income
Data Services, 2002 as cited in Silverman, 2004. However, IDS reported that corporate
culture is one of the most effective ways to influence employees. (Silverman, 2004) states
that company management must choose the most appropriate type of reward.
G. HOW TO SET UP THE REWARD SYSTEM:
As mentioned in the previous discussion, management should choose rewards that
match the type of behavior that the company demands from employees (Njanja, Maina,
Kibet, & Njagi, 2013). At the same time, employees should consider the type of reward
given and link it to the efforts made at work. Managers must continuously monitor
employee performance. Therefore, the reward system should be able to increase positive
behavior in addition to increasing productivity (Njanja, Maina, Kibet, & Njagi, 2013). For
example, employees working long hours, employee initiative, working well in teams,
reliability, high work attendance, positive customer feedback, meeting deadlines, and so
on. So, the company management must be able to measure and design and establish a
reward system.
Employees must link rewards to the effort put in. Managers should link rewards to the
organization's strategy and understand the needs of employees and evaluate the course of
work. This brings the importance of communication and performance evaluation for
reward allocation. This should be done schematically to achieve fairness and maintain a
healthy culture within the company as shown in Figure 9.3 (Webb Day, Holladay, Johnson,
& Barron, 2014).
H. REWARDS SYSTEM EFFECTIVENESS:
The foundation of reward system management is built on the strategy and vision of the
organization/company thus forming the basis for better internal organizational processes,
financial strategy, employee advancement and growth, and satisfied customers (Kaplan and
Norton, 1996 as cited in (Niki, Nili, & Nilipour, 2012). The following is a framework for
Evidence Base Reward Management (EBRM). EBRM model developed by (Armstong,
1977), presents an analysis of the failure of current organizations to assess the
effectiveness of pay and reward practices.
Description of Reward System Effectiveness (Armstong, 1977):
1. Cost-effective and affordable: Cost-effective and affordable
2. Communicated well and understood and valued by employees: Communicated well and
understood and valued by employees.
3. Commits engages and motivates employees: Commitment engages and motivates
employees
4. Customized to needs of different employees: Customized to needs of different
employees
5. Changes in response to different needs: Changes in response to different needs
6. Controlled efficiency to manage and administer: Controlled efficiency to manage and
administer
7. Compliant legally, internally, equitable, fair: Compliant legally, internally, equitable,
fair
8. Competitive externally to recruit and retain: Competitive externally to recruit and
retain
9. Convergent with business strategy and required values, skills, and behaviors:
Convergent with business strategy and required values, skills, and behaviors
10. Contribution and performance are rewarded: Contribution and performance rewarded
I. CONCEPT OF REWARD INFLUENCE ON PERFORMANCE :
According to (Mulyadi, 2001), the reward system and recognition of trainee
performance is a means of directing trainee behavior to behavior that is valued and
recognized by the organization. With the provision of rewards that have been set by the
organization, how a person's support in dealing with work will see how the impact of
giving rewards to someone in accordance with what the organization has set, and how the
impact of giving rewards that have been set by the organization, strengthening or
weakening its relationship with performance. Reward can be a tool for companies in
solving problems related to trainee management and is one of the tools to motivate
trainees. If people feel that there is a high likelihood that a good performance will be
rewarded based on good performance, the motivation for people to try to achieve the goals
that have been set will be high. Vice versa, if there is a low likelihood that a performance
will be rewarded, then people's motivation to achieve set goals will be low as well.
J. EMPLOYEE PERFORMANCE IMPROVEMENT METHODS:
Several methods can be applied related to improving employee performance and to
minimize performance problems and encourage employee performance to be optimal,
which in turn will support targeted business results even better.
1. Understand the company's vision and mission:
Employees should understand the vision and mission of the company/organization so
that they also understand their roles, duties and responsibilities to take part in contributing
to the achievement and success of the vision and mission. Employees will even be able to
contribute beyond their job description to achieve more than expected.
2. Make employee goals and expectations clearer with good and smooth
communication:
Employees must know what their goals and expectations are, when their goals will be
achieved, and how company/organization leaders know that the employee has achieved
his/her goals and company/organization targets and even exceeded the targets set for
him/her. Employees who clearly understand their duties and responsibilities mean that
communication within the company is running well and smoothly. This means that the
employee knows what they have to do and how to complete it with good results.
Therefore, involving employees in setting their own goals makes them feel that they
have been given autonomy over their goals. Similarly, when setting company/organization
goals, actively involving employees will increase their motivation. For example, if an
employee takes a break beyond the company/organization's allotted time, management
should tell the employee to keep their lunch break to one hour and consider documenting
their lunch break or clock-in and clock-out.
3. Empowering employees to do the best work they can do:
Employees will do their best work when they are engaged and motivated. For example,
employees become motivated about a long-term career with the organization/company. On
the other hand In addition, company management is required to plan HR development and
leadership regeneration through training, coaching, competency certification provision,
assigning employees to attend conferences, seminars, workshops, conferences, and so on
that support the achievement of long-term HR development targets, explore the potential
and talents possessed by employees, and employees can also give their best as a form of
the results of these activities. The point is that employee development both in the short
term and in the long term is a priority for the company in order to achieve its business
goals.
4. Make employees accountable for set goals:
Employee performance will fluctuate but can be stabilized and even improved if
employees are aware of their responsibilities. Of course, this requires good and clear
communication so that employees feel responsible and will be held accountable.
Employees who are asked to carry out a task / project, it is very important to continue to
remind their performance. The company management needs to remind the employee if
their performance tends to decline by giving a warning and the consequences that will be
received. Consideration is also to carry out a performance improvement plan for employees
whose performance tends to decline, if they do not get better results then the employee's
dismissal action can be taken.
5. Company culture to reward high performance:
Company leaders in many companies/organizations try to improve and correct low-
performing employees and look for new talent by opening recruitment as widely as
possible. However, they ignore the high-performing employees because they do not cause
problems. This causes a new problem, where over time the high-performing employees
will become disengaged and even less motivated because the effort they have put in so far
is not worth it. They are not appreciated and the company does not want to know about the
results they achieve. In fact, as we know high-performing employees are very attractive in
the eyes of competitors.
6. Creating a conducive and positive work environment:
A conducive and positive work environment is a factor that also determines the level of
employee engagement, productivity, and motivation. An organizational culture that gives
employees the freedom to feel comfortable expressing opinions or ideas regardless of
position, giving birthday greetings and gifts to employees who are having a birthday,
company family gathering activities, eating together to celebrate a success, and so on.
These simple things can build a strong and good relationship between one another, both
leaders and employees and vice versa. Thus, their involvement in realizing the goals of the
company/organization will be higher and they feel better appreciated.
7. Company management improves job satisfaction:
The company management is required to continue to conduct market analysis related to
comparing the company with competitors, for example: payroll and incentive issues,
facilities for employees, company environment, and so on. In addition, a survey is also
conducted to employees in connection with payroll and incentives and other matters related
to rewards, whether it can improve their performance and motivation and other things that
are considered important by employees. Thus, inputs and considerations needed to improve
job satisfaction will be obtained.
8. Considering remote work options:
During the current Covid-19 pandemic, flexible working hours and remote working or
work from home can be an option. This is also in line with modern civilization, where it is
believed that flexible working hours and work from home will not reduce the number of
employee productivity. It is possible that employees who are not well enough can do their
work at home and remain productive rather than coming to work but transmitting the
virus/germs to other employees. Thus, employees keep working and achieving results
rather than producing nothing. Even for certain jobs, the company may not need to pay for
free time but the employee remains productive.
9. Simplify by equipping or implementing advanced technology to support higher
performance:
Some work is related to the technology used, the more sophisticated the technology, the
faster and more precise the work will be done. Technology investments made by
companies include: automation machines, information and communication technology,
digital technology, and so on. Indeed, with investment in technology, companies will enjoy
cost reduction, process changes, and information transmission in their business operations.
In other words, the technology used by the company will influence directly or
indirectly the effectiveness and efficiency so as to support the improvement of employee
performance. However, along with the company's investment in technology, employee
mastery of the technology is also needed. Therefore, training needs to be carried out so that
employees have the expertise in operating it to be able to improve company performance
and the performance of the individuals concerned.
10. Ensure that performance appraisals in the company are consistent, transparent
and fair.
Continuous and timely performance appraisals provide a sign of where the employee
stands. It is intended to keep the employee reminded of the company's goals and his or her
goals as an individual.
11. Improved morale and ethics:
The awareness to uphold morals and ethics will support the achievement of company
and individual performance.
By applying high morals and work ethics, of course, daily activities will not be boring,
carried out properly and correctly as a form of maintaining trust and responsibility and
even being able to improve performance or work performance.
12. Nurture the spirit of collaboration:
When employees work together and share knowledge, the atmosphere that unites
employees from different sections, keeping the team cohesive in achieving targets, will
create opportunities to achieve greater results. Therefore, cooperation and the ability to
work together with other coworkers becomes greater energy to produce greater results.
13. Understanding of continuous learning:
Over time continuous learning synergizes with continuous improvement. Employees
are given the opportunity to learn to learn new things, even if it is not related to their role
in the company/organization. Management must also show commitment to HR
development in the form of education for each employee so that employees believe that the
company is serious about their future. Because, HR is an asset that must be well
maintained by the company/organization.
K. MATERIAL DISCUSSION / DISCUSSION:
The need to be valued in the future for rewards and recognition of individual and team
work will be very high. In the Era of Society 5.0, where society transforms into a human-
centered society that balances technological advancements with the completion of social
issues through systems that will deeply integrate cyberspace and physical space. Therefore,
the role of humans in balancing this is very important, rather than the glorification of
artificial intelligence. At that pointreward systemwill be criticized. Therefore, it is
necessary for future studies to bring up specific discussions about "Reward and
Punishment Management in the Era of Society 5.0". Where management must really be
able to recognize and appreciate employee performance and behavior. The conventional
reward system can no longer be applied in this era, but the company/organization reward
system is required to be able to explain literally the order of people's needs by making a
clear cut off between Human Centered and Technology Based which provides new wisdom
and deserves to be rewarded with clear measures/indicators. Instead of sharpening the gap
between humans and economic problems or even upholding technology above all else,
forgetting the role of humans who deserve to be appreciated.
L. SUMMARY MATERIAL:
The quality of human resources has become one of the factors needed by
organizations/companies to increase their performance productivity. Therefore, an
organization/company needs to assess the performance of its employees. This assessment
system can then be called the reward and punishment system. Employee reward system
helps companies to recognize the achievements of their employees by praising them with
monetary or non-monetary rewards. A well-chosen and appropriate reward system is one
that suits the needs of the organization/company and can be a solution that benefits both
parties (employees and management) both in the short and long term.
TASKS AND EVALUATION:
1. List some definitions related to reward systems
according to?
2. Explain the purpose of the reward system?
3. Describe the forms of rewards?
4. Explain how to set up a reward system?
5. Name some examples of non-financial rewards?
6. Explain the effect of rewards on performance?
7. Explain what is meant by reward system effectiveness?
8. Some methods that can be applied related to improving employee performance and to
minimize performance problems and encourage employee performance to be optimal?
9. Explain what is meant by intrinsic rewards.
10. How can monetary rewards motivate even greater improvements in company
performance?
