Financial Incentives as a Performance Motivational Tool: Best Practice?

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From management theory to best practices financial incentives as rewards to enhance employee or salespersons' performance, and gear up motivation, continues to be a driving focus in business today.  Of course, the key question remains: How are financial incentives effective rewards for employees as motivation in a sales environment? The fact of the matter is that all businesses are about sales per se, so in reality it all boils down to performance rewards in the context of management practices within the organization. Despite the age-old and familiar management model and theory, borrowed from personality theory experts such as Maslow, in one experimental study from researcher Brian Earn it was determined that “high pay undermined the intrinsic motivations” of working individuals (1982, p. 360). Obviously then, there must be other factors which are inextricably tied to the idea of purely focusing upon financial rewards as motivation in an organization.

In either case, the organization Google bears watching and has earned the respect of management in organizations across America and the world. In this examination, Google's management practices and incentives of financial and other rewards model shall be observed and how it compares to other organizations in terms of sameness, differences, strengths, weaknesses, and impact upon success. After all, success is the goal and boosting company reputation and revenues are what sales are all about. Looking at models and theory helps to determine the value of financial incentives as a motivation, as well as perhaps offering a comparative review of the situation. At the outset it is vitally important to recognize that while Google began from a small group at Stanford University, it has grown to be deemed by Harvard Business Review authors Iyer and Davenport (2008) as “the internet-era heir to such companies as General Electric and IBM as an exemplar of management practice” (p. 60). This alone is extraordinary.

Management practices within the Google organization seem to embrace a balance of both intrinsic and extrinsic rewards for its employees in its management practice style. Across the board it is no secret that many, if not most, business enterprises utilize financial rewards as a prime motivator for their sales employees. A shift to other means of other non-financial motivational incentives has been a-buzz as of late in the management world. In terms of management practices within the firm, Google has  understood this paradigm shift and rebel away from the “stagnate form of management where employees are stuck in cubicles, crowded under fluorescent lights, and riddled with old school micromanagement techniques that do not produce the best products” announces Joshua Cook (2012, para. 2). The amazing part is that the Google organization management philosophy and practices seems to mesh with recent theory on the subject. 

Moving beyond the general management practices at Google, the main focus herein is to study the organization's focus on financial rewards as motivation. The management team at Google seem to understand that motivation is a human trait central to the learning process, and know the difference between financial incentives and non-financial incentives. Researchers from journal article “Interdisciplinary Journal Of Contemporary Research In Business” declare the distinction between monetary and non-cash rewards as the following: a) Financial incentives are powerful, and have been traditionally used to motivate; Financial incentives may involve the transfer of money, salary or bonus increases or other allowances such as health premiums, b) Non-financial incentives may be defined as non-monetary values such as based upon “holidays, token awards or recreational activities” and “opportunities for creativity” like advancement, or simply praise and civilized treatment (Zani et al., 2011, p. 329). Now is the moment to summarize some of the specifics of what the Google organization practices. 

According to a 2010 interview at National Public Radio (NPR) with author of the book “Googled” by Ken Auletta, the main management style is to embrace innovative projects and every engineer gets to spend “20 percent of their time, to work on any project of their choice” explains the interview conversation (NPR, 2010). When you think about it this is pretty good. Many salespersons are aware of creative improvements that could be made in organizational operations or incentives since they are at the front lines of bringing in more capital flow for them. How many times has you or someone you know who works as part of a salesforce in an organization had creative ideas to boost innovation or better incentives, and have been encouraged and given one-fifth of their time to explore such?

Google gives its employees a plethora of perks, and also was voted and ranked by Fortune magazines within recent years – as one of the best companies to work for. This is commonly reported in such news listings. Google employee perks and financial incentives include a $500 cash incentive for new baby during the first three months after the child's new arrival, will reimburse employees who want to adopt up to $5000 in associated legal expenses, and up to the same amount in purchase of a hybrid car. Predictably, however, Google does offer its sales and all employees standard fringe benefits packages the same as you would expect from other organizations, which obviously makes it comparable in terms of sameness to companies. How Google is different is becoming apparent, making them one of the most valuable companies in the world. 

It seems as though the basis for some of Google's incredible perks is their philosophy of management theory being applied in practice. If you think of an organization as a macrocosm or larger and more vast version of an individual human being, this illustration might be apropos. In a Journal Of Financial Planning article, the author discusses financial planning as a three-tiered affair with the goal of helping “clients gain a sense of subjective well-being, balance, and abundance” (van Zutphen, 2010, p. 54). Think about this. An organization seeks these principles for its operational workforce for motivation and revenue goals, thereby using financial incentives, or non-financial incentives whatever the case may be. Google perks also include a structure of tiny workgroup pods, with no clear hierarchy because the founders wanted to retain an “entrepreneurial culture” although project managers exist (Cook, 2012). How cool is that? 

Management models and theories are more than abundant in the study of business practice and philosophy, with the attainment of best practices always at the helm of progress. Author Kenneth W. Thomas of the Ivey Business Journal Online discusses how rewards can be used to generate high performance and to use financial rewards as a management tool to motivate employees with bonuses, salary pay raises, and benefits packages in a way to promote or inspire more productive drives. In doing so – that is in engaging in his investigation – Thomas found there are what he calls four intrinsic rewards to drive employee engagement. In the development of his theory and model he arrives at the conclusion that given the earlier models were considered outdated, “intrinsic rewards have become more important and more prevalent in the workplace today” (Thomas, 2009, p. 1). Deeming extrinsic rewards as examples of financial incentives bestowed upon sales employees, in accordance with the same immediately aforementioned source, Thomas (2009) convinces that “extrinsic rewards played a dominant role in earlier eras, when work was generally more routine and bureaucratic, and when complying with rules and procedures was paramount” (p. 1). The four keys are in the next paragraph.

Moving forward, Thomas has designated four keys or four intrinsic rewards which are key to recognize as activities whereby organizations may accomplish their goals pertaining to incentives. They are directly quoted next and include: a) Committing to a meaningful purpose, b) Choosing the best way of fulfilling that purpose, c) Making sure that one is performing work activities competently, and d) Making sure that one is making progress to achieving the purpose. The idea is to connect each sub-goal and purpose to a feeling or motivation associated with the suggested intrinsic reward. For example, the first one, a commitment to meaningful purpose relates to the non-financial rewards as giving a real feeling of being part of something important and valuable, helping rising star employees to develop a strong sense of being on the right path and that they are neither being taken for granted or wasting their energy. The second intrinsic value of choice speaks to making people feel like the accomplishment of their tasks involves personal input of using one's best judgment in a situation to improve or help whatever performance is at hand, while giving him or her a sense of ownership, pride, and individual responsibility in carrying out organizational priorities. The third non-financial and intrinsic reward Thomas names of competence relays the idea that the quality of the work being engaged in reflects an effort to standards that may exceed the business's expectations, and somehow urges or inspires the person working to attain an attitude of satisfaction that they contributed to high-quality work. The fourth intrinsic reward of the idea of progress coupled with the idea that you feel encouragement because in track-able ways goals are being met which you contributed to and confidence grows because you sense things moving in the right direction to feel more comfortable about future outcomes. 

Google certain is not heaven on earth. No organization or company is. Therefore there are both strengths and weaknesses in the way it’s company's financial incentives act as motivation for performance in a sales environment. The strengths seem fairly obvious such as previously mentioned about the $5000 reimbursement for child adoption expenses or purchase towards a hybrid vehicle. That much is clear, as well as the perks of one-fifth of employed engineers' time being spent as they wish. Now take a look at the other side of the coin. For one thing, the salespersons at Google are not necessarily engineers so they won't get those particular perks, in terms of absolute freedom to veer off the direct goals as the engineers do. Also, not everybody is looking to adopt children or a child which makes that particular Google financial incentive as not applicable to everyone. Additionally, maybe some individuals for whatever personal reasons he or she might have preferred to drive an automobile that is not necessarily a hybrid gas-saving car, which automatically dismisses their opportunity to take advantage of the nearly $5000 offer to buy such a car. 

In any workplace or organizational situation, how the impact of its practices management success is the bottom line. Beyond any number of principles, strategies, models, or theories people have come together to increase a collective cooperative for the purposes of commercial goals on some level. Despite Thomas' well-thought-out review and explanation of how valuable intrinsic (non-financial incentives) rewards are and even though they promote a strong win/win format for businesses connecting meaningful purpose to higher performance, financial rewards do have value and mean a lot to employees. Purely financially based incentives may not inspire people to perform at their best, but maturity and integrity certain are personality qualities of some individuals to press forward and do the best work that they can do no matter what. In an atmosphere of abuse of workers this attitude may diminish, but overall if a person has a good work ethic financial incentives are still important to people. 

The reason why financial incentives are still important to people is that the globally based economic situation and competition presented during the last decade has only gotten more intense. Jobs have seemingly become more scarce. Salaries have become lowered as simultaneously costs of living have risen, particularly in the United States. With all the talk of big banker and Wall Street bailouts people have become discouraged, with feelings among both high-level executives, professionals, and the rank-and-file worker. It is clear to all that the odds have changed and somehow rearranged. No longer is it promised for anyone to land a great job if he or she gets a college degree or university education. 

Financial incentives are not merely associated with rewards, but also punishment. If a person does not make the top of the sales goals list the individual by not receiving a financial incentive by default, has effectively been punished. Everyone knows that. This is an unspoken reality. In other words, the point here is that financial incentives and monetary rewards are not ineffective. In fact notwithstanding, financial incentives have been shown in studies by professional-level research to carry the key factors in motivation and work performance quality. Case in point, J. L. Kanaar (2006) in Effects Of Group Financial Incentives and Individual Evaluation Upon Group Performance discovered from a previous study by Clark, Stolovitch, and Condly that “when external incentives in the form of money or gifts are given, work performance in both quality and quantity increases” (p. 44). A case example can be seen with the Texas Roadhouse incentives. The intrinsic motivational rewards and incentives are described and acknowledged as “internal incentives work[ing] through a self-evaluation process, since people are not just concerned with favorable evaluation by others, but are also concerned with evaluating themselves favorably” – this last quote attributed to the work of Harkins and Szymanski (Kanaar, 2006, p. 44). Either way, the Kanaar dissertation gives much food for thought in the way of management best practices observances regarding financial incentives, external rewards, and employee motivation and satisfaction. 

It is important to note that the salesperson's world, or paying attention to financial incentives as motivation for best performance in a sales environment presents a special scenario in one primary respect. The salesforce or sales environment is perhaps more intensely driven by management, therefore putting more pressure on salespersons as individuals than upon other categories of workers. Although the organization may work together as a whole toward the achievement of its overall goals, the sales environment can be – and has been known – to be difficult at best and even cut-throat at worse. Common sense would dictate a balance in understanding the idea of theories, models, and practices presented thus far. Google is perhaps a good comprehensive example of an organization to consider pertaining to the topic. One reason why is how the nature of the company. It has to make money somehow, although Google is not traditional in the factors of large conglomerate corporations of eras gone by. To explain consider the following. 

No matter how you slice it business is different nowadays. Almost from every aspect in today's world in marketing activities, management models, and salesforce techniques altogether. Google has certainly striven and been successful as an organization at meeting with financial success in this “paradigm shift [that] has occurred in American culture where talented people from top-rated schools are seeking employment from organizations that give perks and benefits other than just pay incentives” notes Cook (2012, para. 4). And just as was learned before financial incentives are valuable and can result in better quality and quantity of job performance, the conceptualization of any studies or theories about its benefits should be viewed in balance. For example researchers Stone, Bryant, and Wier (2010) in their peer-reviewed journal article “Why Are Financial Incentive Effects Unreliable? An Extension Of Self-Determination Theory” declares that “research shows that in both controlled laboratory and field studies, financial incentives fail to produce desired behaviors about as often as they succeed” (p. 106). If you think about it this makes perfect sense. 

In the Google organizational example, the nature of their industry almost demands creativity in freedom as a web-based protocol of services and products whose environment fits the flexibility of its uniqueness. After all, search engines, social media, and websites were not around fifty years ago. And as Cook (2012) explains once again, the Googleplex Mecca “where the best and brightest could congregate like a college campus and brainstorm and collaborate on ideas that will change the world” has formed a sort of incubator if you will, of a fun environment that lets people not only work but “dream big and get rewarded for hard work” (para. 12). How many can say they truly adore their work, get paid generously, and while having the fun and freedom to pursue innovation of one's personal interest all with the blessing of the organization? One suspects not many, so therefore Google is unique in several aspects. 

Having presented an overview of both the positives and potential negatives of financial incentives as motivational tools for employees and workers within a sales environment, Google does recognize both sides of the coin. Cook (2012) interjects, as Google itself admits that it provides the means to “strip away everything that gets in our employees' way,” it is also true that Google promotes both financial incentives and monetary rewards with extrinsic rewards such as 401K plans, insurance, and vacation packages (para. 14). Google's dental and health benefits are free yet the fact remains that Google has extra added perks and benefits.

Some of these perks may surprise you. Google offers the ability for workers to switch teams if they want to without asking permission. Employees may arrive at work whenever they want to in pajamas, house slippers, enjoy free gourmet food, and more. The Google organization even provides on-site laundry facilities, allowances to bring their dog, free espressos, and free fitness trainer and center in which to exercise. At the end of the day, it seems that the best practices for any organization are to tailor its services and production style with how to reward its salesforce or anyone in its workforce. The Google organization model and environment are certainly interesting, presenting a myriad of unique issues and ideas from which to consider concepts of financial perks and rewards. 

The best practices for management to engage with forming the most adequately effective and efficient ways to reward its workers in a sales environment must adhere to the style and cultural climate of the organization. To clarify consider the following. While Google offers free health and dental benefits, the workforce population is probably comprised of a very youthful age group. Google speaks of encouraging their employees to be able to retire at the ripe old age of 40 years. Apparently then, the percentage of the sickness of employees is not likely to be as much of a financial strain on the company if the workforce were an older population group. 

It may seem like a small detail but when you recall all the components behind Google's success in blending the extrinsic financial incentives with intrinsic rewards that mean a lot to people, the overall management protocol of the company must be taken to consideration. Certainly, one of the most interesting organizations to investigate, Google has seemed to achieve its best practices for achieving motivational performance. Three cheers for its management implementations! What other organizations can learn from Google's model is to think about what kind of organization they have. The culture, style, product, and services must match the way any incentives are presented to workers. 

It may be a wise and generous motivational tool to give financial incentives that make sense and fit the population of the workforce. For example, if it is a publicly owned company with stocks give perks of goodly discounted stock option packages. Other ideas to customize and fit an organization's management mode could include giving team bonuses as well as individually recognize financial incentives. Maybe the company could pay the better amount for employee's major surgeries, and loosen the hours of having to adhere to strict time schedules of reporting to work. This writer thinks Google got that part right. The bottom line is for an organization's management to form a unique financial incentives system. 

References

Cook, J. (2012, May 27). How Google rewards their employees. ThinkingLeader – HubPages. Retrieved from http://thinkingleader.hubpages.com/hub/How-Google-Motivates-their-Employees-with-Rewards-and-Perks  

Earn, B. M. (1982). Intrinsic motivation as a function of extrinsic financial rewards and subjects locus of control. Journal Of Personality, 50(3), 360. doi:10.1111/1467-6494.ep7379391

Iyer, B., & Davenport, T. H. (2008). Reverse engineering Google's innovation machine.Harvard Business Review, 86(4), 58-68.

Kanaar, J. L. (2006). Effects of group financial incentives and individual evaluation upon group performance. (Order No. 3233810, University of Southern California). ProQuest Dissertations and Theses 1-241 p. 

Nation Public Radio NPR. (2010). The Google business model [Data file] Retrieved from http://www.npr.org/templates/story/story.php?storyId=130518412  

Stone, D. N., Bryant, S. M., & Wier, B. (2010). Why are financial incentive effects unreliable? An extension of self-determination theory. Behavioral Research In Accounting, 22(2), 105-132. doi:10.2308/bria.2010.22.2.105

Thomas, K. W. (2009). The four intrinsic rewards that drive employee engagement. Ivey Business Journal Online. Retrieved from http://search.proquest.com/docview/216176406?accountid=8289

van Zutphen, N. (2010). A visual aid for successful financial planning: The happiness risk/reward pyramid. Journal Of Financial Planning, 23(1), 54-62.

Zani, R. M., N. A. Junos, S., Samanol, S., Ahmed, S. S., Merican, F. M. I., ...Ahmad, I. N. (2011).Comparing the impact of financial and non-financial rewards towards organizational motivation. Interdisciplinary Journal Of Contemporary Research In Business, 3(4), 328-334.