In economics and sociology, an incentive is any factor (financial or non-financial) that enables or motivates a particular course of action, or counts

as a reason for preferring one choice to the alternatives. It is an expectation that encourages people to behave in a certain way.[1] Since human beings are purposeful creatures, the study of incentive structures is central to the study of all economic activity (both in terms of individual decision-making and in terms of co-operation and competition within a larger institutional structure). Economic analysis, then, of the differences between societies (and between different organizations within a society) largely amounts to characterizing the differences in incentive structures faced by individuals involved in these collective efforts. Ultimately, incentives aim to provide value for money and contribute to organizational success.[2] Contents [hide]

1 Categories 2 Other forms 3 Social pressure 4 Types of Incentives 5 Incentive in economics 6 Example: Incentive Regulation in the Utility Sector 7 Incentive problems 8 Incentives in Recession Times 9 See also 10 References

Categories

Incentives can be classified according to the different ways in which they motivate agents to take a particular course of action. One common and useful taxonomy divides incentives into three broad classes: 1. Remunerative incentives (or financial incentives) are said to exist where an agent can expect some form of material reward especially money in exchange for acting in a particular way. 2. Moral incentives are said to exist where a particular choice is widely regarded as the right thing to do, or as particularly admirable, or where the failure to act in a certain way is condemned as indecent. A person acting on a moral incentive can expect a sense of self-esteem, and approval or even admiration from his community; a person acting against a moral incentive can expect a sense of guilt, and condemnation or even ostracism from the community. 3. Coercive incentives are said to exist where a person can expect that the failure to act in a particular way will result in physical force being used against them (or their loved ones)

by others in the community for example, by inflicting pain in punishment, or by imprisonment, or by confiscating or destroying their possessions. (There is another common usage in which incentive is contrasted with coercion, as when economic moralists contrast incentive-driven worksuch as entrepreneurship, employment, or volunteering motivated by remunerative, moral, or personal incentiveswith coerced work such as slavery or serfdom, where work is motivated by the threat or use of violence. In this usage, the category of "coercive incentives" is excluded. For the purposes of this article, however, "incentive" is used in the broader sense defined above.)

Other forms
These categories do not, by any means, exhaust every possible form of incentive that an individual person may have. In particular, they do not encompass the many other forms of incentivewhich may be roughly grouped together under the heading of personal incentives which motivate an individual person through their tastes, desires, sense of duty, pride, personal drives to artistic creation or to achieve remarkable feats, and so on. The reason for setting these sorts of incentives to one side is not that they are less important to understanding human action after all, social incentive structures can only exist in virtue of the effect that social arrangements have on the motives and actions of individual people. Rather, personal incentives are set apart from these other forms of incentive because the distinction above was made for the purpose of understanding and contrasting the social incentive structures established by different forms of social interaction. Personal incentives are essential to understanding why a specific person acts the way they do, but social analysis has to take into account the situation faced by any individual in a given position within a given societywhich means mainly examining the practices, rules, and norms established at a social, rather than a personal, level.

Social pressure
It's also worth noting that these categories are not necessarily exclusive; one and the same situation may, in its different aspects, carry incentives that come under any or all of these categories. In modern American society, for example, economic prosperity and social esteem are often closely intertwined; and when the people in a culture tend to admire those who are economically successful, or to view those who are not with a certain amount of contempt (see also: classism, Protestant work ethic), the prospect of (for example) getting or losing a job carries not only the obvious remunerative incentives (in terms of the effect on the pocketbook) but also substantial moral incentives (such as honor and respect from others for those who hold down steady work, and disapproval or even humiliation for those who don't or can't).

Types of Incentives
1. Straight piece rate: In the straight piece rate system, a worker is paid straight for the number of pieces he produces per day. In this plan, quality may suffer. 2. Straight piece rate with a guaranteed base wage: A worker is paid straight for output set by management even if worker produces less than the target level output. If worker

exceeds this target output, he is given wage in direct proportion to the number of pieces produced by him at the straight piece rate. 3. Halsey Plan: W = R.T + (P/100) (S-T).R where W: wage of worker, R : wage rate, T : actual time taken to complete job, P : percentage of profit shared with worker, S : std. time allowed. Output standards are based upon previous production records available. Here management also shares a percentage of bonus.[3] 4. Rowan Plan: W=R.T + ((S-T)/S).R.T Unlike Halsey Plan gives bonus on (S-T)/S , thus it can be employed even if the output standard is not very accurate.

Incentive in economics
The study of economics in modern societies is mostly concerned with remunerative incentives rather than moral or coercive incentives not because the latter two are unimportant, but rather because remunerative incentives are the main form of incentives employed in the world of business, whereas moral and coercive incentives are more characteristic of the sorts of decisions studied by political science and sociology. A classic example of the economic analysis of incentive structures is the famous Walrasian chart of supply and demand curves: economic theory predicts that the market will tend to move towards the equilibrium price because everyone in the market has a remunerative incentive to do so: by lowering a price formerly set above the equilibrium a firm can attract more customers and make more money; by raising a price formerly set below the equilibrium a customer is more able to obtain the good or service that she wants in the quantity she desires. A strong incentive is one that accomplishes the stated goal.[4] If the goal is to maximize production, then a strong incentive will be one that encourages workers to produce goods at full capacity. A weak incentive is any incentive below this level.[5] Incentives help people to make the right decision, or the one one would like them to make. To accomplish things you want done in economics you must give the consumer or the producer incentives, with out them they would have no reason to do what you ask.

Example: Incentive Regulation in the Utility Sector

Incentive-based regulation can be defined as the conscious use of rewards and penalties to encourage good performance in the utility sector. Incentives can be used in several contexts. For example, policymakers in the United States used a quid pro quo incentive when some of the U.S. incumbent local telephone companies were allowed to enter long distance markets only if they first cooperated in opening their local markets to competition. Incentive regulation is often used to regulate the overall price level of utilities. There are four primary approaches to regulating the overall price level: rate of return (or cost of service) regulation, price cap regulation, revenue cap regulation, and benchmarking (or yardstick) regulation. With benchmarking, for example, the operators performance is compared to other operators performance and penalties or awards are assessed based on the operators relative performance. For instance, the regulator might identify a number of comparable operators and compare their cost efficiency. The most efficient operators would be rewarded with extra profits and the least efficient operators would be

penalized. Because the operators are actually in different markets, it is important to make sure that the operators situations are similar so that the comparison is valid, and to use statistical techniques to adjust for any quantifiable differences the operators have no control over. Generally regulators use a combination of these basic forms of regulation. Combining forms of regulation is called hybrid regulation. For example, U.K. regulators (e.g. Ofgem) combine elements of rate of return regulation and price cap regulation to create their form of RPI - X regulation.[6]

Incentive problems
Incentive structures, however, are notoriously more tricky than they might appear to people who set them up. Human beings are both finite and creative; that means that the people offering incentives are often unable to predict all of the ways that people will respond to them. Thus, imperfect knowledge and unintended consequences can often make incentives much more complex than the people offering them originally expected, and can lead either to unexpected windfalls or to disasters produced by unintentionally perverse incentives. For example, decision-makers in for-profit firms often must decide what incentives they will offer to employees and managers to encourage them to act in ways beneficial to the firm. But many corporate policies especially of the "extreme incentive" variant popular during the 1990s that aimed to encourage productivity have, in some cases, led to spectacular failures as a result of unintended consequences. For example, stock options were intended to boost CEO productivity by offering a remunerative incentive (profits from soaring stock prices) for CEOs to improve company performance. But CEOs could get profits from soaring stock prices either (1) by making sound decisions and reaping the rewards of a long-term price increase, or (2) by fudging or fabricating accounting information to give the illusion of economic success, and reaping profits from the short-term price increase by selling before the truth came out and prices tanked. The perverse incentives created by the availability of option (2) have been blamed for many of the falsified earnings reports and public statements in the late 1990s and early 2000s.

Incentives in Recession Times

Though bonuses make an integral component of free market practices, continuing to pay them to executives by companies benefiting from US Government financial help as planned and as contracted is facing great criticism and opposition from politicians and media. The case of American Insurance Group is an obvious example of how refused normal bonus incentives have become after the capital market meltdown. A possible solution against the criticism of overpaying executives in boom times and underpaying them in recession times is by linking bonus targets to an Operating Index. By doing so external effects (economic cycles) can be excluded from performance measurement. This makes incentive pay more fair as bonuses are based on performance relative to other companies in the peer universe.

While the notion of a fair system seems to be an equal deal, those who are outperforming by a large margin will feel slighted by this approach; Thus, a system based on individual company performance has been the standard.

See also
Look up incentive in Wiktionary, the free dictionary.

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Incentive programmm
An Incentive Program is a formal scheme used to promote or encourage specific actions or behavior by a specific group of people during a defined period of time. Incentive Programs are particularly used in business management to motivate employees, and in sales in order to attract and retain customers. Scientific literature also refers to this concept as Pay for Performance.
Contents [hide]

1 Program design considerations 2 Types o 2.1 Points program o 2.2 Employee o 2.3 Consumer o 2.4 Dealer/channel o 2.5 Sales o 2.6 Online programs 3 Monetary rewards o 3.1 Cash o 3.2 Non-cash rewards o 3.3 Gift cards/certificates o 3.4 Merchandise o 3.5 Travel o 3.6 Experiential 4 Non-monetary rewards 5 See also 6 References o 6.1 Notes

Program design considerations

If programs are to be effective, all the factors that affect behavior must be recognized, including: motivation, skills, recognition, an understanding of the goals, and the ability to measure progress. Often companies turn to incentive programs to counter failures in meeting targets, poor behaviors or performance, unengaged employees, poor morale or attitude, high turnover or loss of talent, or increases in expectations from management.[citation needed] Many companies mistakenly assume that what works for one organization will work well for all organizations. Companies often attempt to create incentive programs without thinking in detail about how each program feature will best suit their targeted audience. To facilitate the creation of a profitable program, every feature must be tailored to the participants interests. A successful incentive program requires clearly defined rules, suitable rewards, efficient communication strategies, and measurable success metrics. By adapting each

element of the program to fit the target audience, companies are better able to engage program participants and enhance the overall program effectiveness. An incentive program represents a substantial investment to most organizations. Receiving a sufficient return on that investment requires the full participation of the program participants. Incentive programs are based upon the concept that effort increases as people perceive themselves progressing towards their goal. Therefore programs should offer participants a variety of products and services based on their unique interests and diverse needs. Successful programs need to carefully develop their reward methods to keep participants eager to approach a new goal once they have achieved a reward. Objectives should be drawn up on the basis of the organization's strategic goals and should be straightforward and specific so that participants clearly understand the expectations. They should be challenging, yet achievable; if they are viewed as unattainable, the program will be destined for failure. Objectives may include motivating employees, recognizing performance, persuading customers to make a purchase, or even reinforcing a marketing message. Once the program goals have been determined, every aspect of the program must be measured against this goal in order to ensure the program's success in goal achievement. If successful, objectives should provide measurable results allowing the organization to track performance and measure the overall success of the program. However, at its core, an incentive program is designed to lift the performance outputs of a group of people engaged in some activity by increasing their motivation. There is nothing wrong with this approach, but it should be part of a broader Quality Management system.[1] W. Edwards Deming, a leading Quality Management scholar and consultant, taught and demonstrated that motivation efforts are a form of tampering because they try to make improvements to individual components of what is largely common cause variation. He argued that the overall performance of a unit was much more a function of the quality of materials, process design and management, quality specifications and machine performance in other words, the system. Deming went on to demonstrate that the result of an improvement strategy based on trying to lift the performance of each worker one-at-a-time would be no system improvement; rather, it would simply be increased variation in performance. He encouraged management to find ways to lift the performance of the whole system.[2] In addition, incentive schemes will very often create moral hazard. By giving the incentive of hitting specific targets, the targets become the goal, rather than raising the performance of the organization as a whole. This causes reduction in overall performance, even while increasing the rate of hitting targets.

Types
Points program

Points-based incentive programs are a type of program where participants collect and redeem points for awards. Depending on the program type and the organizational objectives, points can

be awarded on a number of criteria including positive employee behavior, the demonstration of organizational values, repeat customer purchases, the sale of new products, increased overall sales, or even the use of proper safety precautions. In addition to point awarding, the levels at which points can be redeemed can be customized by the organization and set at virtually any level. Points programs are a way for organizations to motivate behavior over time while improving the organizations overall performance.
Employee Main article: Motivation

Employee incentive programs are programs used to increase overall employee performance. Employee programs are often used to reduce turnover, boost morale and loyalty, improve employee wellness, increase retention, and drive daily employee performance.
Consumer

Consumer incentive programs are programs targeting the customers and consumers of an organization. In a recent study conducted by Bain & Companys research, researchers found that a simple 5% increase in a companys customer retention rates will increase the average lifetime profits per customer.[3] Consumer programs are becoming more widely used as more companies realize that existing customers cost less to reach, cost less to sell, are less vulnerable to attacks from the competition, and buy more over the long term.
Dealer/channel

Dealer incentive programs are used to improve performance for dealer and channel resellers using sales incentive programs. It can motivate the staff which in turn only helps business. These programs help companies capture market share, launch new products, reduce cost of sales, increase product adoption, and ultimately drive sales.[4]
Sales

These programs are primarily used to drive sales, reduce sales costs, increase profitability, develop new territory, and enhance margins. Sales incentive programs have the most direct relationship to outcomes. A Sales Incentive Plan (SIP) is a business tool used to motivate and compensate a sales professional (or sales agent) to meet goals or metrics over a specific period of time, usually broken into a plan for a fiscal quarter or fiscal year. A SIP is very similar to a commission plan; however, a SIP can incorporate sales metrics other than goods sold(or value of goods sold), which is traditionally how a commission plan is derived. Sales metrics used in a SIP are typically in the form of sales quotas (sometimes referred to as point of sale or POS shipments), new business opportunities and/or management by objectivess (MBOs) independent action of the sales professional and is usually used in conjunction with a base salary.

SIPs are used to incentives sales professionals where total dollars sold is not a precise measure of sales productivity. This is usually due to the complexity or length of the sales process or where a sale is completed not by an individual but by a team of people, each contributing unique skills to the sales process. SIPs are used to encourage and compensate each member of the sales team as he/she contributes to the team's ability to sell. It is not uncommon for the members of such teams to be located in different physical locations (often working in different countries) and for the product introduction to happen in one location and the purchase of such a product to occur in another location.
Online programs

When first emerging in 1996, the use of online incentive programs was extremely rare. According to the Online Incentive Council (OIC, defunct), since its emergence, the number of online programs has almost doubled in size every year. At present, nearly every traditional incentive company offers an online component in programs including employee motivation and recognition, sales performance, channel programs, and consumer promotions. Companies that run their programs online experience efficient communication, reporting, and awards fulfillment. Online incentive programs pose an attractive alternative to traditional offline programs since online programs save money and time and allow organizations to have much greater control.

Monetary rewards
Selecting the appropriate rewards is vital to any programs success. The goal in choosing rewards is to select items that will spark the participants interest or feelings, and support the programs objectives. Effective rewards will both motivate short-term behavior and provide motivation over time. There are several types of rewards.
Cash

While incentive program participants often state that they prefer cash to non-cash rewards, research has shown that cash is a poor motivator due to its lack of trophy value. In a recent study conducted by the Center for Concept Development, three of five respondents agree that a cash payment is perceived to be part of an employees total compensation package and not as part of an incentive program.[5] Additionally, cash is quickly forgotten as many participants tend to spend it on everyday items or use it to pay bills. Given that most people do not generally talk about cash awards, cash programs do little to generate the interest required to create an effective incentive program.
Non-cash rewards

Merchandise and other non-cash rewards are more often perceived as separate from compensation. Accordingly, non-cash rewards tend to stand out as rewards for performance, which enhances their long-term effect. Branded merchandise and other non-cash rewards have high trophy value, bringing greater recognition to the recipient at the time of the award and possessing a long-term lasting effect that can result in increased engagement in the organizations goals.

Gift cards/certificates

Gift cards/certificates are prepaid retail cards or certificates which are redeemed at a later time at checkout. In general, they are available in two types: (1) cards which carry a major credit card brand, commonly referred to as universal gift cards (UGC), and are redeemable at all merchants accepting the credit card brand; and (2) retailer-specific cards, issued by well-known merchants, redeemable only through the issuing retailer. In the 2005 Incentive Federation Study of Motivation and Incentive Applications, gift cards were ranked as the most frequently used type of corporate reward.[6]
Merchandise

Merchandise rewards can range anywhere from small branded key chains to high-end electronics. In a 2005 study conducted by the Center for Concept Development, 73% of respondents agreed that more stimulating, memorable incentive programs can be built around merchandise as opposed to cash rewards.[5]
Travel

Travel rewards can best be defined as a face-to-face event designed to motivate, either directly or indirectly. In a 2005 study conducted by the Center for Concept Development, 51% of respondents perceived that travel is remembered longer than other incentive rewards.[5]
Experiential

Experiential rewards provide program participants with an experience. This form of reward gives organizations the ability to offer their employees and customers interesting experiences as incentives. Examples might include a seaplane flight and lunch, a two hour horse ride on the beach, a day of sailing for two, a chance to meet a star athlete, or the use of a party planner for an occasion of the recipients choice. Experiential rewards allow participants to share their experiences with others and reinforce the reward and the behavior that led to the giving of the reward.

Non-monetary rewards
Non-monetary incentives are used to reward participants for excellent behavior through opportunities. Non-monetary incentives may include flexible work hours, payroll or premium contributions, training, health savings or reimbursement accounts, or even paid sabbaticals. If it comes to environmental behavior, often labeling and recognition certificates are used. This may include stickers, T-shirts with banner logo etc..

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MOTIVATION THROUGH NON-MONETARY INCENTIVES TABLE OF CONTENTS LIST OF TABLES TABLE 1 5 TABLE 2 6 LIST OF FIGURES FIGURE 1 3 FIGURE 2 8 1. INTRODUCTION 1 2. LITERARY REVIEW 2 2.1 COMPARISON OF MONETARY AND NON-MONETARY 2 INCENTIVES 2.2 PROBLEMS WITH MONETARY INCENTIVES 2 2.3 THEORIES WHICH SUPPORT INTRINSIC MOTIVATION 3 2.4 INTRINSIC MOTIVATION BY NON-MONETARY

4 INCENTIVES 2.5 NON-MONETARY INCENTIVES 6 3. PRACTICES IN ORGANISATIONS 7 3.1 FLEXTIME 7 3.2 PROFESSIONAL DEVELOPMENT 8 3.3 FEEDBACK 8 3.4 TANGIBLE REWARDS 9 3.5 WORK ENVIRONMENT 12 3.6 ATTENTIVE EMPLOYERS 12 1 3.7 AUTONOMY 12 3.8 REDESIGNING OF JOBS 12 3.9 RETIREMENT PLANNING 13

4. CASE STUDIES 14 4.1 MOTIVATION OF HEALTHCARE WORKERS FOR 14 BETTER SERVICE 4.2 HOW A UPS MANAGER CUT TURNOVER 15 5. CONCLUSION 17 6. REFERENCES 18 2 1. INTRODUCTION The term motivation was originally derived from the Latin wordmovre, 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 individuals behaviour, holding constant the effects of aptitude, skill, and understanding of the task, and the constraints operating in the environment (Campbell & Pritchard, 1976) Summarising the fore mentioned definitions, Motivation is the process that accounts for an individuals 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 energises, channelises, 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 cant 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 dont have the motivation to do their job to their potential. A recent Gallup poll found that a staggering 55% of employees in the most powerful nation were found to have no enthusiasm for their work. The necessity to motivate the employees is inherent in the primary objective of any organisation-increasing profit. It is an established fact that satisfied and highly motivated employees contribute their best in the workplace. Thus the profits are maximised. Research findings have found many ways to motivate the employees in their workplace. Apart from deploying financial and physical resources, every organisation must utilize its human resources effectively. Motivation enables an organisation to do so. Employees must be attracted to remain in an organisation. They must perform the tasks for which they have been hired must do so in a dependable manner. They must go beyond this dependable role performance and engage in some 3 form of creative, spontaneous, and innovative behaviour at work-a set of behaviours commonly called extra-role behaviour. So for all these we need motivation. Motivation can be achieved extrinsically by monetary incentives, or through punishments and intrinsically through non-monetary incentives. This paper discusses the scope of non-monetary incentives in motivation of employees. 2. LITERARY REVIEW People wont change their behaviour 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. 2.1 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. 2.2 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, Were 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 4 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 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 employees preference. This will ensure high motivational level of the employees which will get reflected in their better performance at work. 2.3 Theories which support intrinsic motivation Various theories that support the concept that intrinsic motivation which is attained through nonmonetary incentives is important and better than extrinsic motivation are as follows: Maslows Hierarchy of needs This theory states that the needs of social, esteem and self actualisation 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. Herzbergs 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 McClellands 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. 5

Figure 1: Matching achievers and non-monetary incentives Cognitive evaluation theory This theory states that allocating extrinsic rewards for behaviour 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 individuals 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 behaviour 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 organisation.

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 organisation. 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 a outcome and on the attractiveness of that outcome to the individual. Thus when expectations from a 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. 2.4 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. Responsibility Moderate risks Feedback Achievers 6

Self management In employees perspective self-management is choosing activities, monitoring competence, committing to purpose and monitoring progress. The intrinsic motivation that energises the work comes directly from the four management events namely activities, purpose, opportunities and rewards. From these four events the employees make a judgement 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 judgements from self-management lead to intrinsic rewards which in turn provide the energy for self- management which completes the cycle. OPPORTUNITY ACCOMPLISHMENT Rewards Rewards From task ACTIVITIES From task PURPOSE Table 1: Intrinsic rewards of

selfmanagement Sense of meaningfulness It is the opportunity that makes the employees feel 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 judgement and act out of their own understanding of task Sense of competence It is the accomplishment that employees feel in skilfully 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 Sense of CHOICE Sense of COMPETENCE Sense of MEANINGFULNESS Sense of PROGRESS 7

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. 2.5 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 (born between 1946-63) Generation Xers (born between 1964-81) Generation Yers (born after 1982) Retirement planning Flexible schedules Job training Sabbaticals Flexible schedules

Professional development Feedback Tangible rewards Work environment Flexible schedules Professional development Feedback Tangible rewards Work environment Attentive Employers Autonomy Table 2: Preferences in non-monetary incentives across generations 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. 8 3. PRACTICES IN ORGANISATIONS Various non-monetary incentives in Table 1 are affected by career stage and proximity to retirement. The older the associate, the more the focus is placed on retirement or supplementing retirement income with part-time or temporary jobs. The younger the associate, the more the focus is placed on job satisfaction and the work environment. Types of non-monetary incentives Various types of non-monetary incentives are as follows. Flextime Professional development Feedback

Tangible rewards Work environment Attentive employers Autonomy Redesigning of jobs Retirement planning and others. 3.1 Flextime Flextime refers to several arrangements that allow the employee to work a non-traditional schedule. The employee and the manager agree in advance on the hours of work. Flextime is a popular option for good reason--it lends balance to busy lives. Fortunately, flextime also benefits the manager too. Allowing employees to work schedules that best suit their lives results in more productive workers. The most common flextime arrangements include: Compressed workweek This arrangement allows the employees to work a full, 40-hour schedule in 4 days by extending the hours they work each day. The compressed week can also be scheduled over 2 workweeks, during which they work 9 longer days and have the tenth off. In any case, the compressed workweek maintains the same overall number of hours, just divided up differently. The workload, benefits, and pay are not affected by the arrangement. Adjusted lunch 9

Working an adjusted lunch schedule doesnt actually allow any additional days off. Instead, he employees can take a longer lunch each day, making up the hours at the beginning or end of the day. For example, he manager may allow the employee to take your lunch from 11-1 so that the latter can run errands, go to a doctors appointment, or work out, but in exchange the employee works that additional hour at the beginning or end of your day. This sort of arrangement may be an unofficial privilege of every worker, especially if its used only occasionally. Core hours Next to the compressed workweek, this is the most popular scheduling strategy because of the flexibility it offers. With this schedule, an employee can work certain hours every day, and as long as the schedule is built around the work time specified. For instance, if the core hours are 10-3, the employee must work 10-3 every day, but the starting and ending times can vary. The employee may choose to work 10-6, or 7-3, or any other combination as long as those core hours are covered. If the employee maintains the same total number of hours, your workload, benefits, and pay remain the same. Flexible hours

Common core Lunch Common core Flexible hours 6 A.M 9 A.M 12 noon 1 P.M 3 P.M 6 P.M Figure 2: Example of a Flextime schedule The only problem with flextime is that it cant be extended to employees involved in production as the work time also depends on the machines which have to be run continuously for a certain period of time. Problems may arise if flextime is offered to employees of other departments and not to those of production department. So it is better not to introduce flextime in organisations where it cant be extended to all the departments. 3.2 Professional development In a broad sense professional development may include formal types of vocational education, typically post-secondaryor polytechnic training leading to qualification or acredentia l required to get or retain employment. Informal or individualized programs of professional development may also include the concept of personalcoaching. Professional development on the job may develop or enhance process skills, sometimes referred to as leadership skills, as well as task skills. Some examples for process skills are 'effectiveness skills', 'team functioning skills', and 'systems thinking skills'. Some examples of task skills are computer software applications, customer service skills and safety training. Examples of skills relevant to a currentoccupation are leadership training for managers and training for specific techniques or equipment for educators,technicians, metal workers,medical practitionersand engineers. For some occupations there is a provision for

accreditation tied to "continuing professional education" and proving competence regulated by a professional body. 10 3.3 Feedback People dont quit organisations, they quit bosses. This can be extended to colleagues too. Improper communication, negative relationship, backbiting etc can lead to inefficiency and counter productivity. To overcome this, organisations are adopting feedback culture. It is the culture wherein all the employees are taught the skills of effectively receiving and giving feedback which is the degree to which carrying out the work activities required by the job results in the employee obtaining direct and clear information about the effectiveness in their job performance. This includes telling each other frankly, honestly and effectively what they think about their behaviour, job performance, ideas etc. Employees prefer being told what others think about them directly instead of in the round about way and they like being given feedback to self evaluate their performance. They also would like to frankly tell their bosses the various problems and issues faced by them. Feedback is of two types positive and negative. Positive feedback improves the morale of the receiver and negative feedback improves the performance of the receiver. Poor feedback can reduce morale, the ability to do the job, confidence of employees and can even lead to conflicts between the management and the employees. Hence great care has to be taken while giving and receiving feedback. So when both the managers and the employees acquire these skills of giving and receiving feedback the feedback culture works out well for the company. The following factors are to be considered while giving feedback: Make feedback specific Ambiguity and vagueness will make feedback ineffective as the receiver might miss out the whole point. It should be made sure that there is no personality clash between the giver and receiver. Both of them should be comfortable with the way the feedback is being given and neither of them should feel attacked or offended. To do away with these problems the feedback has to be specific. Concentrate on behaviour and results Feedback should concentrate on behaviour, results and future prospective and not on personality and attitudes so that the receiver gets the desired message in the desired manner. Take responsibility

The manager/employee should take the initiative of giving feedback rather than putting the blame on others saying that it is not their job. Most often it is due to lack of skills and unwillingness to give feedback. Employees should also be encouraged to take responsibility as there is lot of emphasis on teamwork and empowerment in present days organisations which are becoming flat. Balanced feedback Feedback has to be balanced and accurate. Overstating or understating results will lead to ineffectiveness of feedback. Feedback on periodic basis Feedback has to be on a periodic basis preferably on weekly basis. Delay in giving feedback will render it ineffective. 11

Similarly while receiving feedback the receiver has to listen attentively to all what is said, analyse the feedback and take remedial action. Though difficult to establish, feedback culture promotes teamwork, job satisfaction, employee empowerment, improvement in job performance and so is preferred by most of the employees. 3.4 Tangible rewards It is important to understand how different groups of employees perceive the total reward package offered by the organisation, particularly if the marketing adage 'Perception is Reality' were to be recalled. If the employee doesn't understand the total reward package, how can employee value it? And how can it motivate he employee to perform? Therefore, there is a need to gain an understanding of how managers and employees perceive reward, and, in the case of the Senior Management Team, where they think reward should focus? Perception of reward can be researched using the following tool: Senior Management Team Brainstorm It is always important to involve the Senior Management Team (SMT) in Total Reward policy development. It is best to involve them from the outset to ensure that they understand and contribute to what you are doing. The key reason for conducting management interviews or focus groups is to gain

buy-in from those who will be accountable for implementing the strategy. Interviews can help identify the information that managers will find useful, and begin to develop an action plan. This should focus on the 'big picture' and on priorities, not on detail. Top teams (or other senior groups) are likely to be unenthusiastic about detailed level definitions. The specific organisation and style of the debate will depend on the make-up of the team and the nature of the facilitator's relationship with it. The focus will be on discovering either 'what really matters to people who work here?' or 'based on the kind of people you want to work here, what do you think would really matter to them? The focus in each case will be on discovering either 'what really matters to people who work here?' or 'based on the kind of people you want to work here, what do you think would really matter to them?' Cash vs. Tangible Rewards Why Do Merchandise and other Tangible Rewards Motivate Better Than Cash? Perks programs feature custom-designed rewards catalogues with highly desirable and attainable merchandise as rewards. Our reward items are memorable and reinforce the relationship between the reward earner and the reward provider. They keep on giving each time a merchandise reward is viewed or noticed: recipients relive the special recognition and appreciate the organization that honoured them. Cash rewards on the other hand, often have fleeting impact and more often than not, leave the recipient's mind as soon as they are spent. Cash - unfortunately for those 12 companies that attempt to motivate with it - is the least lasting type of reward, because it's typically confused with other compensation and therefore forgotten. Additional reasons to use tangible rewards rather than cash are summarized below. Comparison between cash and tangible rewards. Cash or Any Cash Equivalent 1. Purely an extrinsic motivator with little emotional involvement; does not provide lasting satisfaction and long-term performance stimulation 2. Creates expectations, leads to entitlement and consequently looses its motivating value 3. A dollar is a dollar; participant attaches no greater emotional or inspirational value to cash. Lacks emotional impact of tangible rewards; thus quickly spent and forgotten 4. No "trophy" value to be a constant reminder and continue to motivate. It is

difficult to show off; thus limits the lasting impact of the reward 5. Difficult to target a particular behaviour because of the lacking association with a particular achievement 6. Recipients often can't recall what they purchased with cash reward which further diminished its impact 7. Minimal association with Sponsor Company due to minimal trophy value of reward which minimizes the potential of goodwill toward the company 8. Not cost-effective; requires three times the incentive investment compared to non-cash, on average 9. Usually spent on necessities thus lacking a positive association with the targeted accomplishment or behaviour 10. Participant feels guilty for not spending a cash award on necessities which taints the reward with unpleasant feelings Tangible Rewards 1. Carry a significant "trophy value" thus continue to reinforce the good performance and behaviours 2. Provide tangible symbol of achievement and serve as an encouragement to other employees 3. Reinforce the association with Sponsor Company and thus increase loyalty 4. Provide guilt-free enjoyment of reward thus increases the motivating impact 5. Both extrinsic and intrinsic motivators; provide strong emotional appeal to participants' personal wants and interests 6. Carry a higher perceived value because of the increased emotional attachment; therefore, stimulate performance better than cold cash

7. Can be attached to a particular behaviour thus stimulating a specific response in a long term 8. Participants family is involved in selecting and sharing awards thus multiplying the emotional value of the reward and its impact on the participant 13 9. Provide a 3-to-1 return on investment compared to cash. On average, cash programs cost 12 cents per incremental dollar netted by increased performance, versus 4 cents per dollar for non-cash programs 10. Do not become an expected part of an employee income or an entitlement; always seen as a reward for a particular accomplishment or performance Based upon the fore mentioned factors it can be observed that after the minimum level of monetary compensation, employees are more and more interested in non-monetary incentives i.e., tangible rewards rather than the cash rewards. 3.5 Work environment Work environment has become a good non-monetary incentive for employees. Present day employees are demanding workplace wherein they can balance the demands of their work and their family lives instead of choosing one over the other. Organisations have also accepted that among many aspirations of employees the demand for a good work environment is quite reasonable. In the era of IT revolution, most of the IT companies are offering air-conditioned rooms and state-of-the-art furniture for the employees. Restrooms, dormitories, good canteens, washrooms are provided by the organisations to their employees. This increases the morale of the employees and thus motivates them. 3.6 Attentive Employers Employees want their bosses to be attentive to their concerns, complaints and be proactive in management rather than waiting for the event to occur. They want recognition for the work that they do. Employee recognition programmes like Employee of the month, even a spontaneous or private thank you and other widely publicised formal programs that encourage specific type of behaviour and the procedure to attain recognition is clearly defined. In Nichol Foods Ltd., a British bottling company there is a different kind of employee recognition programme known as bragging boards, where the accomplishments of various individuals and teams are regularly updated. Monthly rewards are given on the basis of peer evaluation. In another company Applebees restaurants, the president herself leaves appreciation notes and voice messages on the employee desks if the employee performs well. Simple things like sending personalised birthday cards, anniversary cards etc signed by the highest official can work wonders in increasing the morale of the employees. 3.7 Autonomy

Employees want to be able to work independently. They do not want someone constantly watching over them and questioning their every move. They like to receive their assignments -preferable with the time frame required for completion and then have the independence to complete the work given the guidelines and framework you have set on their own merits. 3.8 Redesigning of jobs This is designing of already existing routine jobs into more creative or at least not a boring one. Various ways of redesigning the jobs are as follows Job rotation 14

It is the periodic shifting of an employee from one task to another. This ensures that the employee doesnt do the same thing again and again for a considerably long period of time. Job enlargement It is the process of increasing the number and variety of tasks that an individual performs results in jobs with more diversity. This increases the scope of the job and makes it more interesting. Job enrichment It is the vertical expansion of jobs, increasing the degree to which the worker controls the planning, execution and evaluation of the work. Job sharing It is the arrangement that allows two or more individuals to split a traditional 40-hour-a-week job. This promotes co-operation amongst the employees. Telecommuting

It refers to employees who do their work at home at least two days a week on a computer that is linked to their office. There are other ways of redesigning the job which are very similar to the points in 3.1 to 3.7. 3.9 Retirement Planning Companies are offering various options with regards to the retirement planning or retirement financial planning. Retirement financial planning refers to a collection of systems, methods, and processes which, in their aggregate, support a family unit's (employee's) desire to achieve a state of financial independence, such that the need to be gainfully employed is optional. Retirement planning can be considered a limited or simplified form of financial planning addressing only this one purpose, rather than the attainment of multiple concurrent goals (e.g. college funding for children). Two often desired outcomes of retirement planning efforts are: 1. To assess a employee's current state, here specifically to mean a probabilistic assessment of readiness-to-retire given a desired retirement age and lifestyle, and 2. To identify employee decisions or actions to improve readiness-to-retire. In recent years, producers such as a financial planner or financial adviser have been available to help employees develop retirement plans, where compensation is either fee-based or commissioned contingent on product sale. Such arrangement is sometimes viewed as conflicting to a employee's interest to have advice rendered without bias or at cost that justifies value. Employees can now elect a do it yourself (DIY) approach, given the advent of a large, ever growing body of resources offered by the organisation. For example, retirement software tools from the organisation in the form of simple calculator, mathematical model or decision support system have appeared with greater frequency. With these options, the employee can choose the one that is best suitable. Thus organisations are able to motivate their employees by offering flexible retirement solutions instead of common plan which may not be suitable for certain employees. Besides the fore mentioned types of non-monetary incentives which are common to all the employees, it is equally profitable to go further and offer other tailor-made incentives to employees for high motivation and better job performance. 15 4. CASE STUDIES 4.1 Motivation of healthcare workers for better service The current human resources shortage in the health sector mainly of African countries threatens the realisation of any plan for up-scaling interventions to control the spread of diseases like HIV/AIDS, Malaria and Tuberculosis. The World Development Report 2004 states it clearly: Without improvements

to the human resources situation, the health-related Millennium Development Goals cannot be achieved. In this situation, migration of the highly skilled from the health sector of Sub-Saharan African countries draws its significance from the fact that it is a drain on resources that are extremely scarce already. Migration has its most serious effects where staff shortage is already worst, namely in the remote areas. Low job satisfaction and low motivation do not only reduce performance of the health system. At the same time, they constitute a serious push factor for migration of health workers, both from rural areas to the cities, and to other countries. It is therefore an important goal of human resources management in the health sector to strengthen the motivation of health workers, from heads of health facilities to auxiliary staff. Highly motivated staff will not only perform better and provide a higher quality of health services. Medical doctors or nurses who are motivated in their current job may also be less inclined to leave their job or even their country behind in search of alternatives, such as a higher salary as well as better working conditions and perspectives for career development. The challenge most African countries face is hence how to improve staff performance and how to retain staff. In most of the 18 African countries some kind of financial incentive was provided to retain health staff in remote areas In- kind benefits like free housing or subsidised transport existed in most cases. Some countries offered incentives in form of improved career opportunities like further training and better promotion scores. Also, .release papers are provided after an agreed period of services in rural areas. Among the successful measures to reduce staff shortages in rural areas, decentralisation of training institutions, recruitment of retired staff and contracting of personnel were mentioned. Yet, whereas some management tools are quite widespread, crucial human resources related QM tools, such as feedback, staff satisfaction and clear organisational goals are applied in only few countries. To strengthen the motivation of staff, the majority of respondents suggest that a mix of financial and non-financial incentives be most effective. In particular, the importance of efforts-related payment schemes, performance targets for individuals and groups, individual career development plans was stressed. The introduction of 16 some form of competition, for example by means of benchmarking or award schemes, was recommended. Core aspects of quality management were frequently mentioned, in particular the establishment of a quality culture, of quality circles for participatory problem assessment, teambuilding, supportive supervision, and feedback. A number of good practices could be identified. For example, in Zambia, the introduction of refresher training for medical staff seems to have led to a very high retention rate. In Ethiopia a mix of continued medical education, the provision of housing, the establishment of a clear career structure and a defined number of services in hospitals has led to improved staff satisfaction and retention. An awards scheme, closer supervision and team building efforts has improved both some service output indicators and the motivation to stay in rural districts of Ghana, indicated by a higher antenatal care and EPI coverage and less applications for transfers. The survey also asked about the difficulties with the implementation of incentive schemes. The introduction of performance payment was considered a challenge: it is difficult to define the performance criteria and even more difficult to implement and apply those performance criteria, given political interference and lack of good governance, such as intransparency and corruption as well as nepotism. With respect

to allowances and financial incentives, it was mentioned that their effect on the motivation of staff was often temporary in nature because they are soon considered as part of the general benefit package. Although training is seen as a good motivator, the high staff turnover quickly puts in question the sustainability of staff training. Furthermore, it is very difficult to change old habits and long-term institutionalised norms and rules foremost in a bureaucratic context, such as promotion schemes that are based on age rather than merit. Some respondents mentioned the challenge to overcome cultural norms that may sanction an outstanding individual who is willing to show initiative beyond ones duty. 4.2 How A UPS Manager Cut Turnover In 1998, Jennifer Shroeger was promoted to district manager for UPSs operations in Buffalo, New York. She was responsible for $225 million in revenue, 2,300 workers, and the processing of some 45,000 packages an hour. She faced a major problem when she took over in Buffalo: turnover was out of control. Half of Buffalos work forces were part-time workers who load, unload, and sort packages who were leaving at the rate of 50 percent a year. Cutting this turnover became her highest priority. The entire UPS organisation relies heavily on part-time workers. In fact, it has historically been the primary inroad to becoming a full-time employee. Most of the UPS s current executives, for instance, began as part timers during their college years, then moved into full time positions. The part timers are treated well by UPS. They are given substantial financial aid for college, high pay and full benefits. Inspite of all these incentives UPS were not successful in retaining their workers. Shroeger developed a comprehensive plan to reduce turnover. It focussed on improving hiring.communication and intrinsic motivation at the work place. She bagan by modifying the hiring process to screen out people who essentially wanted full time jobs.She reasoned that unfulfilled expectations were frustrating those hires whose preference were for full time. Next,Shroeger analyzed the large database of information which were with UPS. After studying the database she found that her workers were diverse in age and the amount of work experience they had. So these workers had different needs and interests. Shroeger modified the communication style and motivation techniques she 17 was using keeping the above mentioned diversity in view. For instance, Shroeger found that college students are more interested in building skills that they can apply later in their career. As long as these employees saw that they were learning new skills, they were content to keep working at UPS. So Shroeger began offering them Saturday classes for computer skill development and career-planning discussions. Many new UPS employees in Buffalo were intimidated by the huge warehouse in which they had to work. To lessen that intimidation, Shroeger improved lighting throughout the building and upgraded break rooms to make them more users friendly.

To further help new employees adjust, she turned some of her best shift supervisors into trainers who provided specific guidance during new hires first week. She also installed more personal computers on the floor, which gave new employees easier access to training materials human resource information on UPSs internal network. Finally, Shroeger expanded training so supervisors had the skills to handle increased empowerment. Recognising that her supervisors most of them were part timers themselves were the ones best equipped to understand the needs of part time employees, supervisors learned how to access difficult management situations, how to communicate in different ways, and how to identify the different needs of different people. Supervisors learned to demonstrate interest in their workers as individuals. For instance they were taught to inquire about employees hobbies, where they went to school, their likes. By 2002, Shroegers program was showing impressive results. Her districts attrition rate had dropped from 50 percent to 6 percent. During the first quarter of 2002,not one part timer left a night shift. Annual savings attributed to reduced turnover, based largely on lower hiring costs, are estimated to be around $1million.Additional benefits that the Buffalo district has gained from a more stable work force include a 20 percent reduction in lost workdays due to work related injuries and a drop from 4 percent to 1 percent in packages delivered on the wrong day or the wrong time. 18 5. CONCLUSION Motivation at workplace is very important as it increases job performance. Motivation is of two types: Extrinsic and Intrinsic. Intrinsic motivation is better than extrinsic motivation after a certain minimum level of the latter. Intrinsic motivation is attained through various non-monetary incentives. These incentives aid self- management whose rewards result in intrinsic motivation. Various theories of motivation also support intrinsic motivation over extrinsic motivation. It is found that various nonmonetary incentives given by various organisations motivate the employees intrinsically and improve their performance.