Motivation is an important function of management that affects the willingness of a person to work. In order to get the work done, management is to motive the people. There are certain motives that induce man to work. Such motives are called 'incentives' and these are the basic tools and techniques of motivating people.

It has been experienced that a man ordinarily works only 70 or 75 percent of his capacity to work but if he is given some inducement, he may work to his capacity or in some cases, more than that. It is incentive which induces him to work. Incentives and results are correlated. Inciting is a psychological study of a man's behaviour. To ascertain how and when to induce a man, is the wisdom of the management.


George R. Terry has defined the term as "Incentive means that which incites or has tendency to incite action."

The term incentive means an inducement which rouses or stimulates one to action in a desired direction. An incentive has a motivational power. A large number of incentives the modern organizations use to motivate their employees may be broadly grouped into: (i) financial incentives and (ii) non-financial incentives. There are discussed one by one.

Financial Incentives

Money is an important motivator. Common uses of money as incentive are in the form of wages and salaries, bonus, retirement benefits, medical reimbursement, etc. Management needs to increase these financial incentives making wages and salaries competitive between various organizations so as to attract and hold force.

Money plays a significant role in satisfying physiological needs and security/ social. As money is recognized as a basis of status, respect and power, it also helps to satisfy the social needs of the people. It is important to mention that once the physiological and security needs are satisfied money ceases to be motivator. Money then becomes, what Herzberg termed, hygiene and maintenance factor.

The presence of hygiene factor, of course, prevents job dissatisfaction but do not provide 'on the job satisfaction' to the employees in the organization. In such case, money cannot be considered as motivator. Then, in order to motivate employees, according to Herzberg, it is necessary to provide other incentives for the satisfaction of ego, status and self-actualization needs. However, these needs are experienced generally by employees working at higher levels in the organizations. People in higher positions getting higher monetary rewards are not motivated by increased monetary rewards. Yes, they may be motivated by money only when increase is large enough to raise their standard of living and status in the society to which they belong to.

What follows from above discussion is that money is not the only motivator and also it is not always a motivator. In order to satisfy different kinds of human needs, management needs to provide non-financial incentives such as job enlargement, participative management, recognition, praise, etc. These also motivate employees at their works.

There are several reasons why financial incentives are so much preferred by the workers. The motivating power of money is great because :

(i) It establishes direct relationship between effort and reward.

(ii) It is a means to satisfy not only the basic needs of people but also the status needs.

(iii) Money provides protection against uncertainties, old age, sickness, accident, etc. It is something concrete on which a man can rely in times of need.

c ) It helps a man in setting higher goals for life and self-fulfillment. It develops self-confidence in


(v) It makes people money-minded and money minded people are always responsive to financial incentives.

(vi) It is most controllable variable in the total incentive system.

Monetary incentives are, thus, important in the motivation system for all category of employees. Dale Yoder has rightly remarked that "however fascinating the individual job assignment, in a public agency or private firm the employee expects to be paid. His wage may (and it is generally assumed that it does) affect the way he works how much and how well."

Non-Financial Incentives

As mentioned earlier, man is a wanting animal. Once money satisfies his/her physiological and security needs, it ceases to be a motivating force. Then, higher order needs for status and recognition and ego in the society, emerge. The following non-financial incentives help management satisfy its employees' needs.

1. Appreciation of Work Done : Appreciation or praise for work done, be it at home, at school/university or at work place, serves as an effective non-financial incentive. Appreciation satisfies one's ego needs. However, managers need to use this incentive with great degree of caution because praising an incompetent employee may create a resentment among competent employees.

2. Competition : If there exists a healthy competition among the employees both at individual and group levels, it will prompt them to exert more to achieve their personal or group goals. Thus, competition serves as a non-financial incentive for employees to put in more efforts at their works.

3. Group Incentives : Some times, incentives act as more effective than individual incentives to motivate the employees. Particularly, when the prestige or even existence of group is at stake, the group members work with a team spirit. This results in high morale and, in turn, increase in its productivity.

4. Knowledge of the Results : Knowledge of the results of work done leads to employee satisfaction. An employee derives satisfaction when his/her boss appreciates the work he/she has done just as an MBA student gets satisfaction when his/her Professor appreciates the seminar he/she presented in the class.

5. Workers' Participation in Management : Inviting workers to participate in management gives worker's a psychological satisfaction that their voices are also heard. This imbibes a sense of importance among the workers.

6. Opportunity for Growth : Man is not only a wanting animal but an ambitious creature also. People always need to grow in their career. So, if the employees are provided proper opportunities for growth and career advancement and chance to develop their personality, they feel much satisfied and become more committed to the organizational goals.

7. Suggestion System : Suggestion system is yet another non-financial incentive to be used to motivate employees. Following this, some organizations make use of cash awards for giving useful suggestions. They sometimes publish the worker's name with his/her photograph in the company's magazine with a motive to motivate other workers to search for useful suggestions for the company. Thus, suggestion system acts as an incentive for the workers to be in search of something useful for the company.

8. Job Enrichment : Job enrichment simply means adding the contents to a job leading to increased responsibility, scope and challenge in its performance. Particularly, the executives working at the higher levels often prefer to job enrichment because it makes job more challenging. They derive higher satisfaction by performing more and more challenging jobs. Thus, job enrichment as an incentive motivates the executives to exert for accomplishment of their goals. Job enrichment is a by-product of job design.

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