Are Bonus Schemes an Effective Way of Motivating Employees

The definite development of interest in employee motivation can be traced back by about a hundred years to the beginning of the twentieth century, when in essence behavioural scientists studied the behaviour and the response to stimuli, with particular emphasis on material benefits derived from work, for the initial studies had led to the belief that workers increased their effort, based on the monetary benefits received. This led to material benefits and its impact on employee motivation becoming the focus of studies and the basis of motivational action within business environments during approximately fifty years of the history of employee motivation (Latham, 2006). 2. Literature Review Several content and process theories on work motivation have emerged from the efforts put in by work motivational theorists, leading to the requirement of further classification in any study of work motivational studies. This classification is based on human behaviour and that which underlies human motivation in the form of needs, reinforcement, cognition, job characteristics and feelings or emotions (Ramlall, 2004). In 1954, the behavioural scientist Maslow published his theory in motivation called Maslow’s need hierarchy theory or the hierarchy of needs theory. In this theory, Maslow postulates that the main driver in human behaviour is the satisfaction of an individual’s needs and he categorised these needs consisting of physiological needs, safety needs, social needs, esteem needs and self-actualization needs and put them into five levels (Halepota, 2005). Incentive schemes in business organizations are set up with the purpose of enhancing performance through meeting the needs of the employees. The success of incentive schemes would be high or low depending on the personal context of the employee. In the case of employees at the lower levels of Maslow’s need hierarchy cash rewards by itself act as a means to meeting these basic needs, Those at the higher levels of Maslow’s need hierarchy may require in addition to cash rewards other rewards, which we could term as ‘satisfaction income’ in terms appreciation, interesting work, freedom at the work and empowerment for satisfaction at the workplace. Such rewards have to be fair and irrespective of the various other aspects of motivation at the workplace cash rewards still remain a key incentive for employee performance (Rai, 2004). Kauhanen and Piekkola, 2006, evaluating the motivational effects of performance-related pay schemes and bonus schemes on upper white-collar employees in Finland found several important features. Among these features was the finding that for performance-related pay schemes and bonus schemes, the levels of these schemes should be high and frequent enough for positive motivational effects. Lower levels of performance-related pay schemes and bonus schemes do not bring about the desired increase in motivational levels for higher performance behaviour (Kauhanen amp. Piekkola, 2006)