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Employee Incentives in Strategic Management
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Strategic planning has become a mundane activity in nearly if not all organizations.
Businesses have unanimously adopted the management technique to realize optimal operational
efficiency while generating value for stakeholders. Strategic plans foster the orientation of
business decisions and discussions towards prioritized objectives. Besides, the plan incredibly
ensures that employees and other stakeholders are in synchrony with a common goal. Aside from
having strategic plans, businesses adopt incentive mechanisms to motivate their employees to
attain their targets. These may be informed of rewards and benefits. Incentives are pivotal in
motivating employees and spurring an oomph to put in more effort and dexterity towards
reaching the common goal as stipulated in the strategic plan. The company's incentives may also
be used to attract and recruit talented employees, engage employees, retrain them, and build the
employer's brand. Conversely, productivity is enhanced, and so is the profitability of the
business venture. Increased productivity is also crucial in increasing a company's market share
while enhancing its competitive advantage. This writer seeks to delve into the plethora of
research done to decipher the significance of incentive as a strategic management plan to
increase business productivity.
History of reward systems
Employees' strategic compensation may be perceived as a novel management technique
unearthed in the present-day century, yet it has been in existence since the early 1800s (Caudill
& Porter, 2014). According to Caudill and Porter (2014), reward systems were predominantly
adopted during the scientific era between the 1800s and 1920s. The researchers posit that
strategically rewarding employees to motivate them towards productivity is not a new thing.
Rather, it was implemented during the 1900s to solve the wage problem facing the American
Society of Mechanical Engineers. Caudill and Porter (2014) attribute the success and formulation
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of the reward system during the era to the philosophical input of Fredrick Taylor, Henry Gantt,
Harrington Emerson, Frank Gilbreth, and Lillian Gilbreth.
Taylor proposed a payment scheme based on the premise that the worker wanted higher
wages from their employers while the employers wanted higher productivity from the
employees. Taylor's contribution to the individualization of rewards where employees were
compensated individually for the mastery in the job rather than addressed as a group. According
to Caudill and Porter (2014), like Taylor, Gantt's contribution to the compensation system was
driven by a desire to realize mutuality in benefiting from a venture. Gantt's compensation system
brought to life compensation bonuses allotted to a worker for attaining their set targets. His
reward version also featured incentives for the foreman, who was rewarded for every worker
who attained their goal. By motivating the manager, Gantt was credited for acknowledging the
foreman's motivation, which was instrumental in changing their attitude and relationship their
relationship with the worker from a boss to a helper and friend. Gantts' notion of competency
made significant steps towards enhancing employee efficiency. On the other hand, Emerson's
was the betterment of the works done by Taylor and Gantt. He proposed a reward system where
the bonuses were paid according to the set goals' realization and extra payment based on
exceedance of the set target. Emerson also pioneered the non-monetary reward system as well as
compensation based on quality and quantity. His notion stressed the fact that there needs to be
standard payment such that, for the same job, no employer should pay an employee less than
another employer would have paid the employee. Lillian Gilbreth contributed to the already vast
knowledge of rewards by inputting that employee rewards could create intricate satisfaction of
their ambitions and pride. At the same time, it could also stake the shape of allotting rewards and
punishments for lapses in responsibilities and duties. Frank Gilbreth, on the other hand, proposed
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the reward scheme of bettering the employees’ dexterity. The developed employees would then
be up for promotion and better pay as their value in the company would have been enhanced
(Caudill & Porter, 2014).
It is apparent that even in the 1800s and 1900s, the importance of employee motivation in
promoting business productivity was unanimously acknowledged. The aforementioned
individuals' efforts were pivotal in creating the foundation upon which modern-day rewards
systems are pegged.
Present-day situation
According to Caudill and Porter (2014), the reward systems utilized in the present day
have most of their bearing on the above-mentioned philosophers' works. Businesses offer
incentives in the form of profit-sharing, skill-based pay, merit-based pay, and variable-based pay.
Non-monetary rewards such as flexible work hours and employee assistance programs such as
medical covers and health insurance for employees' families are also immensely implemented.
Nevertheless, recognition of employees has been considerably used to foster productivity and
create a positive work environment. These techniques have been instrumental in attracting,
motivating, and retaining employees while fostering their efforts to enhance organizational
desired outcomes (Franco & Gomez, 2014).
Methods
To succinctly review the literature on the topic at hand, information from peer-reviewed
journals and research publications will be assessed with a particular interest in the research
methods and findings. The write-up seeks to identify research gaps in previously conducted
works by other scholars by reviewing these scholarly materials. The selected journals and
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research publications shall be biased in terms of year of publication with a tendency of being
older than ten years.
Employee recruitment
Employee recruitment is at the core of business productivity. The talent, dexterity
encapsulated in employees' profile is instrumental in determining the quality and quantity of
output they are likely to yield. It is thus inevitable that in designing a strategic plan, companies
may consider factoring in some aspects of the incentives that may make the company attractive
to prospective employees.
Martin & Ottemann (2016), in a study to determine the reward system that organizations
should adopt to attract new talent, hypothesized that companies might need to have differentiated
reward packages that are attractive to different age groups. According to Martin and Ottemann
(2016), generational differences spur varied attitudes and appeal for what may be termed as an
attractive work environment. Employees are attracted to the company by presenting the company
values, which influence the work environment that they are likely to work in. Martin &
Ottemann (2016) highlight the aspect of cognitive dissonance that ensues in the job applicant
when assessing a job opportunity's suitability. The dissonance is likely to occur when the
employees' perception of some crucial elements of the environment is misaligned. For instance,
the employee may not find the work environment of the compensation plan attractive compared
to other organizations. Nevertheless, aspects such as promotion opportunities may determine
whether the employee may find the job lucrative or not (Martin & Ottemann, 2016). Martin and
Ottemann (2016) associate this behavior with the expectancy theory, which explains the
employee's decision to join a company. The research analyses the work-related values that
traditionalists, baby boomers, generation X, and Millennials find attractive in a company. The
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research proceeds to delineate the intricate difference among the various cohorts of employees.
That notwithstanding, these generations of employees exhibited similarities in the aspect that
made a company attractive. Martin and Ottemann (2016) state that rewards system outstandingly
featured among the aspects that employees found lucrative in a company. There was a particular
preference for flexible and individual-based rewards systems across all the generations. The
research concluded that compensation played a considerable role in increasing a company's
attractiveness to talented employees. However, in advocating for flexible compensations, the
researcher also highlighted the financial implications that businesses suffered in servicing such
plans. The research yields the question of which of the incentive system a business could adopt
to attract divergent natured employees.
Thibault et al. (2017) echo the vitality of efficient rewarding of employees in attracting a
company's talent. The research was based on a synthesis of current literature on reward systems
and oriented towards identifying a suitable reads program that would enhance a company's
attractiveness to prospective employees. Thibault et al. (2017) acknowledge that the millennial
generation is quite particular about what they find attractive to them in the company. The
researchers indicate that this generation is moved beyond the salary or monetary rewards and
seeks to establish purpose and meaning in being an employee to a given organization. Thibault et
al. (2017) state that for a company to attract the top talent in the industry, it ought to offer
incentives such as travel, work flexibility, and career development opportunities, which have
been proven to attract top talent companies. The research also indicated that job applications for
companies that exhibited concerns for the employee's welfare were considerably higher than
those offering a higher basic salary. The research concluded that companies have to embrace and
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amalgamate cash and non-cash incentives that manifest the company's concern for the
employee's mastery, connectedness, and growth to attract top talent.
Research has exhibited the vitality of adopting incentive systems that make a company
attractive to employees. This reiterates the essentiality of having incentives as part of a strategic
management plan since top talent recruitment is pivotal in enhancing the quality of output
generated by the business.
Employee Engagement
Once recruited into a company, employee productivity is influenced by the culture and
values that define the work environment. Employee engagement is thus factored in as a crucial
determinant of an employee's performance. Employee engagement is instrumental in spurring
innovation and growth in the workforce.
Iqbal et al. (2017), in research on corporate businesses in Pakistan, state that businesses
have increasingly become aware of the importance of employee engagement in sustaining
competition. The research was based on self-administered questionnaires used to seek employee
sentiments on engagement. In defining employee engagement, Iqbal et al. (2017) emphasize its
difference from job satisfaction. They state that employee engagement is oriented towards
sustainably spurring the organization's growth. They added that employee engagement through
positive communication fosters employees' integration into the company as the company strives
to acknowledge and respect their work. The research adopted a mixed technique, featuring
qualitative and quantitative analysis of employees' opinions on their companies' degree of
engagement. The target population was a cohort of 6 companies that exhibited similarity in their
concern for employee welfare and strived to enhance satisfaction and retention. The employees
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were selected by simple random sampling to avert bias. Results from the structured
questionnaires were analyzed using SPSS software. The findings indicate considerable
acknowledgment from organizations on the vitality of employee engagement. Besides, rewards
and recognitions were cited as being pivotal in enhancing employee engagement. Iqbal et al.
(2017) state that the impact of cash rewards, bonuses, and incentives on employee engagement
was more pronounced, unlike job training and coaching. In conclusion, this research showed that
employees were more engaged by monetary incentives than pieces of training and coaching.
Ogbonnaya et al. (2017), in a research of how incentives affect employee engagement,
trust, and satisfaction, state that employee engagement is instrumental in sustain a company's
productivity while enhancing its competitiveness. The research sought to analyze the impact of
various incentive systems on employee commitment, trust, and job satisfaction. The research
analyzed the implication of performance-based incentive pay, profit-related pay, and share
ownership on employee engagement. The research was conducted by face-to-face structured
interviews presented to 1293 private-sector employees in the United Kingdom. The interview
featured employee training workplace characteristics pay determination, and payment systems
(Ogbonnaya et al., 2017). Analysis of the results showed that performance-related pay was the
most impactful in enhancing employee commitment to the organization, unlike the profit and
share pays. According to Ogbonnaya et al. (2017), performance-related pay offered more benefit
to individual employees as they felt rewarded for their individual input. The other payment
schemes yielded some degree of mistrust and were detrimental to the motivation of employees.
The researchers concluded that a company's payment incentive scheme considerably impacted
employee performance, which factored in attaining strategic goals. However, the researchers
state that performance-based pay at times results in stringent working conditions, which may be
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detrimental to employees' engagement. Therefore, organizations have to be prudent in selecting
the system of incentive they seek to use in enhancing employee engagement and building trust in
the company.
Therefore, employee engagement significantly affects the performance of an employee,
which influences the business productivity. Businesses may increase employee engagement by
identifying suitable incentive payment systems that enhance employee trust and commitment.
Employee retention
Employee retention is often consequential of employee engagement. Employees tend to
stay in a company where they feel valued and have the opportunity to grow. The zeal to be part
and parcel of a company is driven by a sense of satisfaction in the job that one is engaged in at
the workplace. This notwithstanding, incentives also independently contribute to lowering
employee turnover.
Davis (2013) researched employee turnover and sought to identify the factors
encapsulated in Herzberg's motivation theory that could be causative of employee turnover. The
research was based on interviews, which yielded data from the employees' perspective on what
could cause them to desert a company. The data were subjected to a 7-step modified Van Kaam
analysis, which resulted in two profound themes. According to Davis (2013), employee
compensation and strategies to increase employee morale stood out considerably. The findings
indicated that employee turnover was, to a considerable extent, attributed to lapses in
compensation schemes. Compensation, in this case, factored in salaries, benefits, and other
incentives. Davis (2013) concluded that companies ought to adopt proper compensation
strategies while integrating them with other strategic retention strategies to boost employee
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morale and decrease turnover. His research reiterates the essentiality of incentives as part of
strategic management. The loss of top talent in an organization is a setback as the company is
compelled to recruit employees who would probably require training. Hence, striving to retain
employees is instrumental in realizing business productivity.
Wickramasinghe and Sajeevani (2018) researched the impact of rewards on employee
retention among operational level employees in three companies. Their research hypothesized
that rewards and compensation had a significant impact on employee retention. The research was
conducted by structured questionnaires filled by 196 employees selected by convenience sample.
The data were then subjected to multivariate and bivariate analysis using SPSS. The research
findings indicated that employee retention was most impacted by the pay, followed by
employees' incentives and employee welfare was least significant in influencing turnover. The
research concluded that employee retention was influenced by compensation and rewards in
monetary payments and incentives. Wickramasinghe and Sajeevani (2018) advocate for
companies to adopt reasonable compensation schemes that reward employees according to effort
or quality they deliver at work.
In a study by Michael et al. (2016), the value of retaining the most desirable employees is
profoundly emphasized. In this case, desirable employees are classified as those exhibiting
dexterity in a company operation that is crucial in generating output. Besides contributing to the
company's productivity, these employees play a core role in enhancing the company's
competitive advantage. Michael et al. (2016) state that companies often offer lucrative incentives
and compensation packaged to lure their competitors' crucial employees into their organizations.
The study's objective was to determine the effect of compensation on employee retention, the
impact of compensation on job satisfaction, and the impact of satisfaction in employee retention.
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The study was based on structured questionnaires presented to a cohort of 71 employees. The
data was then analyzed using SPSS software for statistical properties such as mean, median, chi-
square, and standard deviation. In drawing their conclusion, Michael et al. (2016) postulate that
rewards and compensation are immensely critical in employee retention. Nevertheless, the study
revealed that compensation also influences job satisfaction, which was pivotal in determining if
an employee would stay in a company for long.
Rakhra (2018) posits that there is a ubiquitous loss of talent among businesses. The loss,
according to Rakhra (2018), is attributed to improper compensation systems that do not reward
dedicated and talented employees. Rakhra (2018) states that these businesses suffer considerable
losses beyond just losing their latent; they tend to spend a lot in recruiting employees and
training them. The study was conducted among 220 randomly selected employees who were
questioned on their satisfaction in their jobs. The survey concluded that most of the employees
were not contented and speculated to leave the company as soon as they got better offers.
According to Rakhra (2018), companies should review their compensation systems to retain their
most valued employees. Since employees are central in running company activities, their
satisfaction is likely to affect business productivity significantly.
Employer brand
Arguably, the impacts of incentives on employer brand are cumulative of the incentives'
implications on employee recruitment, engagement, and retention. This element is instrumental
in business productivity since it influences talent acquisition and retention.
Garavan et al. (2012) researched companies with employer brands to determine the
human resource development factors that influenced talent management. Garavan et al. (2012),
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in the quest to determine these elements carried out assessments on economic indicators such as
employee turnover, the proportion of training budget and compensation fund, and the average
cost of human resource in total company cost. The study also featured a survey of job applicants
and sought to determine what factors made a company attractive. The findings indicated that
companies with a reputable employer brand enjoyed advantages such as lower employee
turnover rates. Also, the results showed that there were economic advantages associated with
training and development of employee activities. Furthermore, incentives played a central role in
attracting job applicants to the company. This study reiterates the vitality of incentives in
influencing employee recruitment, employee engagement, and employee retention. Besides, it
shows how these elements joint together influence the employer brand. Hence, incentives are
causative of the employer brand and influence the business's productivity by influencing the
company's quality of human resources.
According to Pavlović and Zdravković (2019), a company's success goes beyond
customer satisfaction and immensely included employee satisfaction and creating value for the
employees. The study aimed to determine if the employer brand had implications on the degree
of employee satisfaction and loyalty. In drawing their conclusions, the authors found out that
employers strove to create unique images, which pronounced their commitment to creating a
desirable and unique place to work. The brand, therefore, has considerable implications in
retaining employees and keeping them motivated. Arguably, in striving to create a unique image,
companies are likely to induce lucrative incentives and workplace values that will promise new
employees seeking to create value for themselves.
Backhaus (2016) postulates that employer branding is part of a marketing technique-
oriented towards attracting and retaining top talent in an organization. Backhaus (2016) states
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that employer branding is instrumental in fostering a venture's productivity and profitability
while granting the company a competitive advantage. According to Backhaus (2016), employer
branding factors in instrumental elements such as compensations, incentives, and flexible hours,
and symbolic elements such as prestige and social approval owing to association with a given
company. Backhaus (2016) further states that, in seeking to join a company, new employees rely
on the input from current employees in the firm and seek surety and consistency in the
company’s conduct.
Conclusion
Dating back from the scientific era in the 1800s, incentives, and employee rewards have
played a pivotal role in spurring productivity in businesses. Philosophers such as Taylor, Gantt,
Emerson, and the Gilbreths are credited for their contribution towards the mutation of what
rewards and incentives were perceived in the era. Conversely, as a strategic management plan,
employee incentives play a role that cannot be understated. There is a plethora of research on the
significance of employee incentives in enhancing business productivity. The research has
dwelled on the impact of incentives on employee recruitment, employee engagement, employee
retention, and employer brand. These elements can be coined in the functionality of the human
resource department. Researchers have shown that incentives influence the motivation and
satisfaction of employees in the job. These elements are crucial in determining the value that
employees perceive in their employee, which influences their decision to stay in the company.
Researchers have acknowledged that top talent is vital in fostering productivity and, according to
the organization, some degree of competitive advantage. To attract and retain this invaluable
resource, the organization has to make working for them a lucrative venture that will reward
them financially and satisfy their urge to be contented with their work. The literature review has
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highlighted aspects such as uncertainty in what form of reward a company can adopt to satisfy
and motivate its employees optimally. This leaves room for further research and delves into the
intricate aspects that determine an employee's eventual perception of the employer.
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