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« Questionnaire - Level Of Work Responsibility | Main | Thesis Chapter 2 - Factors That Affect Employee Motivation, Employee Retention And Employee Turnover »


Thesis Chapter 1 - Factors That Affect Employee Motivation, Employee Retention And Employee Turnover



I.              INTRODUCTION

Effective work force is the key to a company's success. The most successful companies in the world include in their mission statements the welfare, recognition and development of its employees. In return, these companies expect to obtain better work performance and loyalty from its workers. The satisfaction they give to their employees equate to better working attitude, output and income, and therefore, survival (Smith, 1994) and success for the company.

However, many companies still encounter problems in the area of human resource. They experience frequent turnovers and mediocre job performances from its employees.  Usually, the main problem is employee dissatisfaction, both personally and professionally. They are unmotivated to meet desired outputs.

To be able to keep up with the competitive market, firms have to devise a way to increase their manpower productivity. The corporate world is constantly seeking innovative ways to motivate their employees to be effective units of the company, to retain good employees and to reduce turnovers that interrupt workflow and production. 

Numerous productivity studies have found that motivation is the largest single contributor to productivity (Boehm, 1981).  This is illustrated by the fact that the most successful software company in the world has continually succeeded in motivating its development teams to extreme degrees. McConnell (1996) culled stories of 10-, 14-, even 18-hour days, which are common at Microsoft, as are stories of people who live in their offices for weeks at a time. This observation is further complemented by Nass (2000), pointing out that when employees know what is expected of them, they are better able to perform.

The reward system is most commonly applied to motivate workers to perform and produce more. Like the "stick and carrot" mentality, they give equivalent rewards to every performance level of an employee. Companies aim to effectively motivate the workers since it is said that effective motivation improves profitability since it increases output and reduces costs (Davidmann 1989). 

According to Davidmann (1989), effective motivation improves profitability since it increases output and reduces costs. However, the need-level of one individual, may not be the same as that of another. How one appreciates a reward depends on how one desires it. The level of satisfaction to the rewards, hence, affects the level of motivation to perform.

In order for an incentive plan to be successful, employees must have a want or need for the reward. If the rewards offered by the company are not beneficial to the employees, the plan will likely fail the purpose. (Bohlander 401-403)  

Most managers believe that their employees are only motivated by money.   (Nelson, 1998). Richardson (2000) countered this statement by asserting that there is no evidence to support the idea that recognizing good performance can be done only, or even best, through performance-related pay. 

Rewards, as performance motivators, may be extrinsic and intrinsic. Intrinsic rewards include accomplishment, increased self-esteem, and new skills; extrinsic rewards include bonuses, praise, and promotions (Stoner, et al, 1995).

Reward can act as the 'catalyst' for improved performance and better productivity. Nevertheless, reward is not a substitute for good management. Rather, it is a part of management. Certain basic criteria are essential for rewards to be effective.  Furthermore, to be effective, the rewards must be 'tailored' and changed to suit the specific conditions.

However, there is also a downside to rewards and incentive programs.  Scholtes (2000) points out what they are.  First, there are no credible data to show that any long-term benefit results from such programs. There are data, however, that show that they do harm.  They often set up a form of internal competition in which people strive to look good and look better than their fellow employees.

The business world today rewards employees based on different standards.  The right implementation of an incentive plan will effectively motivate employees to do their jobs and even go beyond the work required from them.  An incentive plan is successful when employees respond to it positively because it fits their needs and wants.


Companies provide rewards to its employees as an incentive for desirable performances. With incentives, they aim to motivate their employees to produce more and to stay with the company. Thus, they devise various ways in stimulating employee performance through incentive schemes. On the other hand, some incentive systems may prove to be effective for some and may only create modest results for others. The management has to tests dilemmas such as:

1.    Do motivation strategies such as commendation and appreciation of employee performance works better than monetary rewards on all positions levels?

2.    Does monetary rewards is more preferred by rank and file employees whereas top management executives prefer promotion and recognition?

3.    Is there a significant difference on the reward system by female employees and male employees, managerial levels and rank and file employees?

These are just few of the considerations that the company management must address in order to find out the best motivation strategy among their employees. Moreover, the choice to lean on monetary rewards may not work in all position levels. For instance, there may be a difference in the reward preference of regular and probationary employees, while regular employees may prefer monetary rewards, while for probationary employees; this is just a secondary motivation. Further, a singular generic strategy of reward system may be desired by others but may prove to have deterrent effect on some employees. 

However, despite the incentives, employees may still experience dissatisfaction with the company. This maybe due to the culture, the environment, the amount of incentive relative to their amount of output, and the job itself.

This paper will seek to investigate the relationship of these factors in determining, assessing and evaluating the most effective motivation scheme by companies, using employee productivity and satisfaction as the measuring variables.


This study aims to assess the factors that affect employee motivation, employee retention, and employee turnover.

An element that motivates one worker may be meaningless to another. To one person, being esteemed by peers would be more rewarding than the amount of his pay. On the other hand, monetary benefits could be more important than certificates of recognition.

A motivator for one person may not be a motivator for a co-worker (Bowey, 1997). Different things motivate people. What drives one person to excel may have no effect at all on another's efforts.

There are factors that could determine how employees could be motivated to increase their productivity and stay long with the company, and therefore increase the survival and success rate of the company.


Hourly employees prefer money as a reward, and people in management prefer a plaque for their office wall.

This study assumes that low-wage or blue-collar workers are more motivated by rewards relating to lower needs such as financial rewards to sustain their needs for food, leisure, and other matters that has monetary equivalents. White-collar workers, on the other hand, are motivated by recognition of their works thus increasing self-esteem and esteem from others. They are driven by their desire for advancement to meet their need for self-actualization.

This study shall test the following hypothesis:

  1. There is a significant difference in the performance of employees and non-monetary rewards such as better benefits (car loan, housing mortgage, medical benefits)
  2. Monetary benefits in employees does not affect performance as oppose to the improved performance when recognition and motivational strategies is applied
  3. There is a significant difference in the priority and preferences of male and female employees regarding reward


Nelson, Bob. (1998). 1001 Ways to Reward Employees. Workman Publishing: New York.


Nass, Leonard. (2000). Job Design Processes and Theories: Effects on Motivation. Monmouth University: New Jersey.


McConnell, Steve. (1996). Microsoft: A Highly Motivated Environment. Software Practitioner. September/October 1996. Vol. XXII. No. IX.


Boehm, Barry. (1981). Software Engineering Economics. Prentice-Hall: New York.


Richardson, Ray (2000). Study Commissioned by The National Union of Teachers on Payment by Performance.  London School of Economics: London.




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