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Non-monetary rewards: employee choices & organizational practices.

Scope of Non-monetary Rewards

A study on work rewards touches the life of every individual associated either directly or indirectly with work. Since rewards get extended beyond the workplace their impact on families is certain. The use of recognition as a means of influencing behaviour is not a novel idea. As one of the basic needs of human beings, recognition has found ample place in literature. Every single motivational theory has discussed its relevance and impacts on individual behaviour. The increased emphasis in recent times, however, owed to the changes in work life due to environmental pressures, both internal and external. The challenge of retaining the talent has led organizations into experimenting with fresh ways of rewarding. With increased salaries becoming entitlement for employees, the extensive scope of non-monetary rewards presents varied options for use.

Human Relations School

Human beings have constantly endeavoured to stretch beyond potential. Issues related to improving efficiency have always intrigued the human mind and whether it is Adam Smith's Division of Labour or Taylor's Scientific Management, theories have been conceived towards improving efficiency. The use of non-monetary factors, however, could be traced to the post Human Relations School of management thought. The serendipitous results of the Hawthorne experiments indicated the presence of factors other than monetary and physiological variables and their impacts on employee productivity. These findings opened a new chapter and revolutionized the field of management research.

Lindhal (1949) conducted a series of researches where employees consistently ranked items such as "full appreciation for work done", "feeling in on things", and "interesting work" as being more important to them than the traditional incentives (cited in Nelson 2001). Other researchers like Kovach (1980) and Wilson (1988) later replicated these findings. In their survey of sixteen studies including over eleven thousand employees, Herzberg et al. (1957:46) concluded that the average worker ranks pay sixth in importance behind security, interesting work, opportunity for advancement, appreciation, company and management, and intrinsic aspects of the job. Keller's (1965) study to identify the job factors important to employees found eight factors none of which related closely to monetary rewards. The eight factors were job satisfaction, pride in organisation, relation with fellow workers, relations with superiors, treatment by management, opportunity to use ideas, opportunity to offer suggestions at work and appreciation of one's efforts. In another study by W.W. Ronan (1970) it was found that the job characteristics that were important to a diverse group of employees were related to the nature of work they do and satisfaction that they obtain from it.

Meaningful Work

According to researches conducted in the field of 'meaningful work', a job is meaningful for employees if it involves them in the identification and solution of the problems that affect them. It is said that if the worker could voice his/her opinion, it would bring positive results for both the worker and the organisation. (Roche & Mackinnon 1970)

A study on job preferences of over fifty-seven thousand job applicants, conducted over a period of thirty years, indicated security, advancement opportunity and type of work, as the job factors most important to men. Women employees considered type of work, company and security as the most important job factors in deciding whether their job is good or bad. Both men and women ranked pay lower to advancement opportunity and type of work (Jurgensen 1978).

Kovach (1980) reports of studies that compared manager's ranking of what they wanted from their jobs with what their bosses thought were important to the managers. At the top of the managers' list was interesting work, followed by appreciation of work, a feeling of being "in on things", job security and good wages. The employers however thought good wages, job security, promotion/ growth, good working conditions and interesting work as most important to their employees (cited in Bessell et al. 2002). A study of 1385 workers representing five occupational groups indicated that intrinsic rewards were the most powerful determinants of work satisfaction, followed by extrinsic social rewards and extrinsic organizational rewards. Extrinsic organizational rewards were important only to workers in lower level occupations. The findings of the study suggested that all classes of workers were demanding more from their work than the traditional rewards of good pay, safe and comfortable conditions and opportunities for getting ahead. Autonomy, meaning and challenge in work were sought more than the traditional rewards (Mottaz 1980).

In another study of 51 organisations in India, Sharma (1989:167) defined Organisational Climate as a set of nine factors viz. Scope for Advancement, Grievance Handling, Monetary Benefits, Participative Management, Objectivity and Rationality, Recognition and Appreciation, Safety and Security, Training and Education, and Welfare Facilities. It was found that employers believed Safety and Security, and Monetary Benefits as the most important needs. In his book Not by Bread Alone, Sharma (1989:129) insisted that there was the need by Indian public sector organisations to focus on employee Advancement Opportunities, Training and Education and Participative Management to improve on their organisational climate scores. These were imperative for improving the employer-employee relations.

Studies quoted above were conducted over a period of five decades (1940-1990) and attended largely to a general enquiry into job factors important to employees. However with changing times and ever changing needs of employees, more focused enquiry in the field of non-monetary rewards was initiated in the last one and a half decades (1990-2005). Graham (1990) conducted a study illustrating the significance of non-monetary rewards. After examining and asking employees about 65 potential incentives in the workplace, the top five incentives as initiated by managers and based on employee performance were found to be non-monetary in nature (cited in Nelson 2001).

Positive Reinforcements

Fred Luthans has been instrumental in establishing positive reinforcement effects of recognition on performance. A meta-analysis of all the studies conducted over a period of 20 years, found an average of 15 percent performance improvement in service applications. When recognition was combined with performance feedback an average increase of 41 percent was reported in manufacturing and 30 percent in service organizations (Luthans & Stajkovic 1999, Stajkovic & Luthans 1997). The use of monetary incentives however also had the same impact as recognition in service organisations, although recognition combined with performance feedback, had a double (30% vs. 14%) impact in comparison to monetary incentives in service organisations (Luthans & Stajkovic 2000:3). The findings of the 1993 study of changing US workforce also indicated a rise in the importance of non-monetary rewards. When employees were asked the reasons that were 'very important' in deciding to take a job with the current employer, the top variable listed by 65% of respondents was "open communication", followed by "effect on personal/family life", "nature of work" and "management quality". Wages ranked 16th on the list (cited in Nelson 2001:8). According to another survey of executives by Robert Half International (1994) more than 34 percent of executives reported that lack of praise and recognition was the number one reason why people left their jobs (cited in Nelson 2001:8). Barkema (1995) conducted an econometric study in 1985 on 116 managers in mid sized firms and tried to assess the role of external intervention on work performance. The findings indicated that in the case of impersonal supervision, there was a positive influence of monitoring. While in cases where there was strict regulation there was a negative influence on work performance. Extrinsic interventions made the employees feel that the managers did not have faith in their abilities (cited in Frey & Jegen 2000:13-14).

Motivating Language

According to Mayfield et al. (1998), supervisor's use of motivating language correlates significantly with subordinate's performance and job satisfaction. A survey conducted on nursing staff proved the hypothesis that the superior's use of motivating language had a positive effect on the subordinate's performance and job satisfaction (Mayfield et al. 1998). Role of line managers is also considered important in motivating employees by reinforcing behaviour through the non-financial rewards like praise and feedback (Fisher 1996). It has been confirmed by Newcomb (1999) and Ballentine et al. (2003) that non- monetary rewards play an important role in controlling staff turnover. Banker et al (2000) confirm that firms are increasingly adopting non-financial incentives. Mushrush (2002) identifies lack of non-monetary rewards as an important cause for employee turnover. (cited in Strategic Rewards Survey done by Watson Wyatt of about 410 employers in 2000 found that employers were using non-monetary rewards more than what they used a year ago (Watson Wyatt, 2006). The three most prevalent non-monetary rewards identified were Advancement Opportunities (76%, up from 60% in 1999), Flexible Work Schedules (73%, up from 64%) and Opportunities to Learn New Skills (68%, up from 62%). Nelson (2001) explored the conditions that enabled or inhibited the use of non-monetary rewards by managers. His findings suggested that managers who were high users of non-monetary rewards, had an initial positive experience with the behaviour, which had made them more likely to use non-monetary rewards with their employees themselves and other colleagues. Sheryl and Don Grimme from the Employee Retention Headquarters (US) have worked on projects which emphasize the importance of non-monetary rewards (Sheryl and Don Grimme 2001).

Studies conducted in India in the field of organizational commitment show non-tangible extrinsic rewards to be critical in determining organizational commitment. A study in a manufacturing organisation in the private sector reported job content and performance appraisal as the two critical determinants of organisational commitment (Sharma & Joshi 2001). This was despite the fact that the respondents had asserted 'money' and 'welfare' as the most neglected dimensions of human resource management in the organisation.

The use of rewards to motivate performance has also been studied. In a meta-analytic review of researches (45 researches conducted over a period of 40 years), it was claimed that the average effect of incentives on all tasks in all work settings was a 22% gain in performance. The study reported that monetary rewards tend to influence performance more than non-monetary rewards. The performance gains for money were (27%) twice the average gains from non-monetary rewards (13%). However, it was asserted that the findings should be "viewed with caution", since the number of monetary rewards studies were four times the other studies. Moreover, the actual cash value of the non-tangible gifts was not ascertained (Condly et al. 2003:46-63).

Major Benefits

Jeffrey (2003) cites three major benefits of non-monetary rewards; Separability, Memory Value and Trophy Value. A study conducted in a public sector organisation in Turkey suggested that employees valued non-monetary rewards as much as monetary rewards. The employees claimed that the usage of non-monetary rewards was inadequate in their organisation and that they look forward to such initiatives. It was claimed that employees prefer job related non-monetary rewards more than social or any other tangible non-monetary incentive (Yavuz 2004). A theoretical attempt to establish the significance of non-monetary rewards was made by Crifo and Diaye (2004) who developed a principal-agent model using both monetary and non-monetary incentives and showed how non-monetary incentives could compete with monetary incentives and could perform better in increasing the intrinsic motivation of the agent. An online poll by Martiz Research Inc (2005), conducted in United States of America over 1,002 randomly selected, full-time, employed adults (502 male, 500 female) aged 18--65+ identified significant gaps between how employees are recognised and how they want to be recognised. The study also indicated that the employees who were satisfied with their organisation's recognition programs were also more satisfied with their jobs and were more likely to remain with their company than those who were not satisfied with their organisation's recognition programs. Research revealed that satisfied employees were more likely to invest in their own company and felt more valued as employees. Moreover, 55% of employees were found to agree or strongly agree that the quality of organisation's recognition efforts significantly influences their job performance. Chronology of researches on non-monetary rewards is listed in Table 1.

Conceptual Framework

The framework as depicted through the conceptual map (Fig 1) presents the research suppositions and lines of enquiry from the organization's and employee's perspectives. It is assumed that an organization's profile will have an influence on its philosophy which in turn will monitor the practices. Likewise an individual's characteristics will determine his/her needs which will be manifested through the choices that they make. Role of the superior is assumed to have an impact on how the rewards are practiced within the organization. The past experiences of the individual employee with non-monetary rewards are said to impact their needs and the same is expected of the organization and superior. Finally, some differences are expected between employee choices and organizational practices which when resolved may lead to positive outcomes for the organization as well as the employees.


This research work endeavoured to develop a holistic comprehension of the phenomenon of non-monetary rewards by exploring the related issues. Two different organisations (one Indian and another foreign) were studied. The different factors influencing reward philosophy and practices were questioned. Employee perceptions and choices were studied with a focus on the factors influencing them. Moreover, differences between organisation practices and employee choices were analysed to identify the intricacies of employee motivation. Finally, the research aimed at presenting an intra and inter-organisation perspective of non-monetary rewards.


Objectives of the study

1) To explore the meaning of non-monetary rewards and identify factors that influence reward philosophy and practices.

2) To identify the factors that shapes an individual's perception and choices towards a particular reward.

3) To explore differences between the choices of the individuals and the practices of the organization.

4) To explore how can the gaps between the employee choices and organisation practices be judiciously reduced.

The study was placed in qualitative paradigm with the ontological assumption of reality being subjective in nature. Epistemology of the study entailed studying individual perceptions of the employees and the organization. Two organizations were identified with the inclusion criteria of having an existing system of non-monetary rewards (minimum five years of operation). Theoretical sampling was adopted to select the employees within the organization. Inductive logic of enquiry was used to arrive at a set of concepts as regards non-monetary rewards and data was collected through in-depth interviews with the help of an interview guide. Data analysis aimed at to build concepts and themes from the data collected through interviews. The objective was to describe the phenomenon, classify and interconnect the concepts to arrive at 'thick description' of the issues under consideration.


The foremost learning that was critical to this study and to various other future endeavours was the operationalisation of non-monetary rewards as they function in the corporate. Non-monetary rewards as recognized by the organisational representatives can be defined as 'the formal reward platforms whereby a token is given to employees for recognising their efforts or/and achievements.' The emphasis was on the formal nature of the programs, (said to have a better impact than informal initiatives), the token which may be monetary or not, and recognition, which was the underlying premise for the success of any reward program. Praise and appreciation were viewed as informal recognition opportunities whereby managers could build employee motivation and sustain performance. However, it was asserted that since these were not institutionalised into the system, their impacts and subsequently the perceived value were low. These were also under the discretion of the individual manager, whose characteristics influenced the usage of such rewards. Employee's perception of such rewards remained unclear as every positive aspect of work was referred as a non-monetary reward. From a promotion to a praise, from a paid vacation to a training program, all were perceived to be non-monetary rewards. No strict definition of non-monetary rewards was possible from the employee's standpoint since these rewards were perceived to have an indefinite scope.

Top management's views and the values of the organisation were found as the two key determinants of an organisation's reward philosophy. It was found that belief of top management in the power of recognition was crucial in ensuring that organisation practiced such non-monetary rewards. Moreover, when an organisation espoused people oriented values, it would have a better focus on rewarding and hence would initiate a more robust reward system. Thus, the role of the managers at high echelons of an organisation is significant in influencing the reward philosophy of the organisation.

While designing the non-monetary reward practices, employers took note of the work role of employees. For a sales function, a set of rewards were used which was different from what were used in a corporate role. This was done due to the different job profiles of the employees.

Another important factor in determining the reward practices was the role of the immediate superior. An individual who finds appreciation and recognition as important for employee motivation would use the non-monetary reward platforms to recognize his/her subordinates. Moreover, it was found that the relationship that an employee shares with his/her manager was critical for the employee to perceive the reward as valuable. Sharing good relations with the superior tends to increase the perceived value of recognition/reward provided by the superior. This was true for praise and appreciation also; employees did not perceive recognition as sincere when given by an estranged senior. Thus, the role of the superior influences the way non-monetary rewards are practiced and perceived in an organisation.

It was observed in the two cases (Indian and Foreign multinational) that employee characteristics (Age, Sex, Functional Role, Marital Status, Years of Experience), did not influence their needs. Career Advancement Opportunities emerged as the most prominent need in majority of the cases. A very limited influence of employee characteristic on employee reward needs was established when married women demanded better timing at work and other facilities for managing home from the office. As regards employee perception and choices, inter-linkages were found between organisation's reward philosophy and employee choices. It was observed from the two cases that when an organisation's reward philosophy supported an extensive configuration of non-monetary rewards and when the organisation believed in recognising and celebrating achievements, the employees also tend to value the rewards more. However, when the reward philosophy did not advocate recognition and celebration and when the organisation put low emphasis on non-monetary rewards, employees also subsequently take the rewards frivolously. Thus, the organisation's rewarding philosophy influences the employee's perception and choices towards the non-monetary rewards. Fig 2 summarises the findings of the study.


Diverging & Converging Issues

There were no prominent differences between employee choices and organisational practices. However, some areas of incongruity were identified. The first divergence was in their opinion on scope of rewards. While the organisation considered formal reward platforms as non-monetary rewards, employees brought every rewarding aspect of work within the scope of such rewards. There were no issues regarding the 'token' used in rewarding. Employees asserted that gift vouchers or items worth a few thousand rupees did not make any difference to them; it was the value of recognition attached with these rewards which was significant. An important area of divergence was identified in the perceived value of informal reward programs for the employees and the employers. Employees held informal recognition like praise or a note of thanks from senior manager as important to them, while the organisation found formal platforms as more significant in terms of the impact on employee motivation. This discrepancy can have serious impli-cations for the employer-employee relations. The importance of informal programs for employees indicates that there should be more emphasis on informal ways of rewarding.

As regards customization of rewards, employees were keen on it while organizations felt that it would entail losing objectivity. Since customization to individual employee needs was open to subjective interpretations and could challenge the neutrality of the system, organizations preferred setting standards and maintaining uniformity across the system.

Difference of opinion was also observed towards the issue of employee involvement in designing of reward programs. While employees were willing to participate, employers were apprehensive of the feasibility of such an initiative. Congruence between employees and the organization was identified in their opinion towards monetary rewards. Both agreed that monetary rewards had to be competitive and that no organization could afford to pay less than the market rate. In the words of a manager, "if you are not competitive as a pay master, there are so many hunters waiting for good talent." However, emphasizing the importance of non-monetary rewards, both asserted that such rewards were equally important and that both the reward types had to act in close association. To quote a sales-HR manager, "Non-monetary, or monetary, both are extremely important; I can't do one without the other. They have to go hand in hand. I don't think one can say, do only monetary or non-monetary." Non-monetary rewards were said to reinforce the organizational values in employees and make the working pleasant and easier. These rewards presented platforms where desired behaviours could be reinforced in the employees. Recognition at various forums, made employees feel that the organization cared for them and that their efforts were being acknowledged. It was asserted by the managers that such feelings of belongingness and loyalty could be developed only through the use of non-monetary rewards.

Monetary rewards, on the other hand, were satisfying/hygiene factors and their impact on employee motivation was short-lived. In the words of an HR manager, "if you really ask me how much time it takes for people to digest a monetary reward, it takes less than one minute. Even a promotion letter or an increment letter would take a minute to digest and the person would assume that he was on this salary for the past fifty years. It just takes that much time." Employees did not think of monthly salary while doing the monthly targets. It was the small card given by the senior or an appreciation in a meeting that influenced the everyday working the most. Non-monetary rewards were thus important in day-to-day functioning of employees while monetary rewards were important for doing justice to the transaction contract between employee and the organisation.

Inter-organization Differences It was observed that the apparent differences between employee choices and organizational practices were more rampant in the case of the Indian organization and rare differences were observed in the foreign company. The Indian organization espoused a culture which was low on recognition while the foreign company advocated a high profile recognition structure. The inter-organization differences are summarized in the Table 2.

Seeking Congruence

In order to abridge the gap between the existing employer-employee differences, employees suggested three steps: a small survey of employee opinions, initiation of an employee involvement program and regular 'skip-level meetings'. From the results of the study seven pointers to the designing of recognition programs can be made. A people-oriented work culture adds to the perceived value of any effort made by the organization towards employee recognition. Celebration as a part of every event energizes the workplace and creates fervour around programs. Proper communication of the program eliminates misinterpretations and presents transparency. Sincere and timely delivery adds to the meaning-fulness of recognition. Customization to the plausible extent develops within employees feelings of being cared by the organization. Emphasis on informal recognition helps develop a culture of recognition; with the onus of recognition on the individual employee, informal programs present a great opportunity to build excitement and add fun to the workplace. Finally, good superior-subordinate relationship at workplace is the harbinger of success of not just the recognition program but every single effort towards creating a healthier workplace.

Future Concerns

Some issues remain to be dealt with in future researches. The present study touched upon the individual demographics as a factor influencing the individual choices; it however remains to be seen as to how psychological factors can play a role in determining employee choices as regards non-monetary rewards. Moreover, limited generalizations from the present study leave scope for a quantitative study to be initiated in the field so as to provide generalizations in other contexts as well. In addition to this a comparative analysis of different sectors may add significantly to the domain of employee recognition. Improvement in any field comes with sustained efforts.


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Pragya Sonawane is from Tata Institute of Social Sciences, Mumbai 400088
Table 1: Chronology of Researches on Non-monetary Rewards

Researcher Period STUDY

Lawrence Lindhal 1949 Ranking of job factors
Frederick Herzberg et al. 1957 Survey of sixteen studies on
 job factors
Ellis O. Keller 1965 Importance of job factors
W.W. Ronan 1970 Job characteristics
William J. Roche &
Neil L. Mackinnon 1970 Meaningful work
Clifford E Jurgensen 1978 Job preferences
Kenneth Kovach 1980 Ranking of job factors
Clifford J Mottaz 1980 Importance of intrinsic and
 extrinsic rewards
Baldev Raj Sharma 1987 Organisational climate
Merchant 1989 Honorary recognition
Gerald Graham 1990 Incentives at workplace
Study of Changing Workforce 1993 Reasons for taking a job with
 a particular employer
Robert Half International 1994 Reasons for leaving the job
Barkema 1995 Influence of supervision
Jacqueline Rowley Mayfield,
Milton Ray Mayfield &
Jerry Kopf 1998 Supervisor's use of motivating
 language & its effect on
Newcomb 1999 Staff turnover
Fred Luthans &
Alexander D. Stajkovic 2000 Effect of recognition on
 performance meta-analysis of
 studies conducted over a
 period of 20 yrs.
Watson Wyatt 2000 Strategic rewards survey
Bob Nelson 2001 Characteristics of managers who
 are high users of
 non-monetary rewards.
Sheryl & Don Grimme 2001 Importance of non-monetary
Baldev Raj Sharma &
Rama J Joshi 2001 Determinants of organisational
Steven J Condly, Richarde
Clark & Harold D Stolovitch 2003 Effects of incentives on
Scott Jeffrey 2003 Non-tangible rewards
Nilay Yauz 2004 Non-monetary rewards in a
 public organisation in
Patricia Crifo & Marc-Arthur
Diaye 2004 Theoretical model comparing
 monetary & non-monetary
Martiz Research Inc 2005 Online poll comparing reward
 practices to employee

Table 2 Inter-organization Differences

 Indian Organization Foreign Organization

Top Management's Monetary Rewards Equally on Monetary
 Emphasis Rewards and
Non-monetary Rewards
Values Work Oriented People Oriented
Non-monetary Rewards Limited Extensive
Celebration Low Emphasis Huge Emphasis
Recognition Rare Phenomenon Common Phenomenon
Employee's View Non-monetary Rewards Non-monetary Rewards as
 as mere 'Add-ons' Critical for Performance
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Author:Sonawane, Pragya
Publication:Indian Journal of Industrial Relations
Geographic Code:9INDI
Date:Oct 1, 2008
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