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Vol. 7(38), pp. 3929-3935, 14 October, 2013
DOI: 10.5897/AJBM2012.1381
ISSN 1993-8233 © 2013 Academic Journals
http://www.academicjournals.org/AJBM
African Journal of Business Management
Full Length Research Paper
The Impact of Monetary and Non-Monetary Rewards on
Motivation among Lower Level Employees in Selected
Retail Shops
Martha Harunavamwe and Herbert Kanengoni*
Department of Industrial Psychology, University of Fort Hare, P. Bag X1314, Alice, 5700, South Africa.
Accepted 4 October, 2013
The present study investigated the effects of monetary and non-monetary rewards on motivation with
respect to lower level employees in the retail industry. An empirical investigation was undertaken using
a sample of fifty (50) lower level employees drawn using the random sampling technique. A
questionnaire adjusted to suit the retailing environment was employed to collect data. The findings of
the study indicated a moderate significant relationship effect of non-monetary rewards on lower-level
employee motivation (r = .607, p< 0.01). There was no significant relationship between monetary
rewards and motivation (r = .161, p >0.01). There was a positive but weak significant relationship
between rewards in general and work motivation (r = .436, p< 0.01) in all cases, demographic variables
such as gender and occupation played a significant role in the relationship between rewards and
motivation.
Key words: Motivation, monetary rewards, non-monetary rewards, lower-level employees.
INTRODUCTION
Many retail organisations in South Africa are adopting a
strategic approach to motivation management in order to
improve their competitiveness, profit and sales. Common
strategies employed include ensuring employee loyalty,
organizational citizenship behavior, and appropriate
rewards (Bateman and Snell, 2007). The design and
management of motivational reward systems present
managers with one of the most difficult human resource
tasks. Bagraim et al. (2007) noted that, there is need to
find out the needs and goals of employees in order to
address them and achieve the required motivation.
Thompson et al. (2005) indicate that a properly designed
motivational reward structure is management‘s most
powerful tool for mobilizing organizational commitment to
successful strategy execution and productivity.
Arnolds and Venter (2007) stated that there is a huge
crisis of motivation in most large corporations. Their
findings show that, business firms spend billions of
money each year on courses and incentives, to increase
employee motivation, but these interventions do not
always translate into higher levels of employee motiva-
tion. This is as a result of the different perceptions
between management and subordinates on the way
organizational goals should be achieved. Employees and
managers give different levels of importance to various
motivational rewards depending on the situation. Delany
and Turvey (2007) noted that, managers want a
workforce with speed, high productivity and adaptability
to change.
Employees on the other hand want an entrepreneurial
environment, strong skill development and opportunities
for growth and competitive compensation to be motivated.
A body of experience, research and theory has been
developed to study motivational rewards. Some of the
*Corresponding author. E-mail:- hkanengoni@gmail.com.
3930 Afr. J. Bus. Manage.
researches focused on non financial motivational
techniques. An example is the research by Arnolds and
Venter, (2007) on the strategic importance of non-
financial motivational rewards. However other research
for example Ramms (2007) focused on money as a
motivator on all levels of employment. This presented
challenges and misconceptions regarding money as a
motivator since different levels of employees are
motivated by different factors. For example, it is possible
that lower level employees whose needs fall under lower
order needs according to Maslow’s hierarchy of needs
can be highly motivated by monetary rewards depending
on how these financial rewards are administered.
According to Robbins et al. (2003) one of the most
challenging motivational problems in industries such as
retailing and fast foods is how to motivate individuals who
work for very low wages and have little opportunity to
increase their pay in either their current jobs or through
promotions. These jobs are filled with people who have
limited education and skills and whose pay levels are little
above minimum wage, thereby dominated by lower
order needs. The only choice left to motivate these lower
level employees is the significant increase of pay and
benefits to reduce turnover and boredom.
As far back as 1911, Frederick Taylor described money
as the most important reward to motivate lower level
employees to achieve high productivity. However, there is
lack of conclusive evidence on the motivational impact of
monetary rewards on job performance of employees.
Research by Arnolds and Venter (2007) indicated that
frontline employees and blue collar workers rate
recognition as their best rewards hence relying only on
money can cause problems because people are motiva-
ted by different rewards. According to Bagraim et al.
(2007), some employees have financial goals, others
have professional goals, and others have personal goals.
The same incentives cannot work for all.
As a result of the above, there are debates, miscon-
ceptions and empirically unsupported opinions on
whether managers should consider money to be the best
choice to motivate lower level employees and neglect
non-monetary rewards. Thus, it is not surprising that
money alone is less an effective motivator for lower level
employees than when it is used in conjunction with non-
financial reinforcements. Bates (2006) noted that, lower
level group of workforce is difficult to motivate because,
they neither enjoy their jobs nor feel good about
themselves they lack motivation and organizations do not
want to invest much in them. Hellriegel (2004) stated,
traditionally motivating these people have focused on
providing more flexible work schedules and filling these
jobs with teenagers and retirees with less financial needs
but all the same statistics indicated dissatisfaction among
the lower level employees. It is therefore important to
investigate whether lower level employees are motivated
by rewards both monetary and non-monetary and if so
which are the best rewards for them. In this regard, the
study addresses the concern raised by Iglans and
Roussel (1999) that, assumptions that underpin the com-
pensation policies of managers have not yet been
adequately and conclusively tested by field research
especially among the lower-level employees.
OBJECTIVES OF THE STUDY
(1) To investigate the effectiveness of financial incentives
on lower level employees’ motivation.
(2) To investigate the importance of non-monetary re-
wards on lower level employees’ motivation.
(3) To determine which reward best motivate lower level
employees.
Lower level employees in Organisations
Robbins et al. (2003) postulate that low-level jobs; pos-
sess characteristics such as jobs with low entry, low skill
requirements and no chance for upward mobility. Lower-
level employees are defined as that category of
employees that Hellriegel (2004) label as non-managers.
In the retail industry, these include blue-collar workers,
such as till operators, process controllers, and techni-
cians, frontline workers such as service attendants,
drivers, cleaners and sales personnel.
Odendal et al. (2003) noted, low level employees are
relegated to the least demanding jobs at the back of the
labor queue and their pay levels are little above minimum
wage. These include inexperienced youths and voluntary
workers for whom these jobs are transitory employment
before moving on to permanent work. There are also
those with relatively greater skills who are trapped in low
level jobs by discrimination of geographic isolation from
ethnic minorities, immigrant groups, female, or econo-
mically depressed areas. To ensure high productivity, this
group of employees needs to be motivated.
Theoretical Explanations On Employee Motivation
And Rewards
Herzberg (1957) proposed that employees are influenced
or driven to work by two factors (motivators and hygiene
factors). Hygiene factors ensure that employees do not
become dissatisfied but does not lead to high motivation,
but without them; motivators cannot achieve their goal
since the employees will be dissatisfied. Hygiene factors
involve the process of providing rewards or threats of
punishment to cause someone to do something. Salary is
one of the hygiene factors hence money does not lead to
high levels of motivation but impact on motivation in a
way. Motivator factors are needed to drive an employee
into higher performance. These factors result from inter-
nal generators in employees. As stated in Value based
Management (2008) a combination of the two factors
results in four scenarios which are important in the rela-
tionship between employee motivation and rewards.
These include,
High hygiene + High motivation= employees highly
motivated with few complaints and high performance.
High hygiene + low motivation = employees have few
complaints but are not highly motivated.
Low hygiene +High motivation = employees are
motivated but have a lot of complaints, job is exciting and
challenging but salaries and work conditions are poor
hence motivation keeps on diminishing as a result of
complaints.
Low hygiene + low motivation = result in unmotivated
employees with lots of complaints and consequently
performing poorly.
Wallace and Zeffane (2001) noted, management depend
upon rewards like money as the main factor of motivation
because according to Maslow’s hierarchy of needs,
money is a unique reward that can satisfy different needs
such as physiological need for food. In McClelland’s
acquired needs theory, money is an important source of
performance feedback for high –need achievers. Non-
monetary rewards on the other hand attract persons with
a high need for affiliation through verbal recognition, and
high achievers through challenging jobs. Skinner (1953)
argued that, the use of rewards in the classic work
performance paradigm is based primarily on the
reinforcement theory which focuses on the relationship
between a target behavior such as high performance and
its consequences for example pay. This study was
framed from Herzberg’s two factor theory and Skinner’s
Reinforcement.
Employee motivation and rewards
Rewards are divided by Armstrong (2007) into two
groups; these are monetary and non- monetary rewards.
The monetary rewards include base pay, merit pay,
incentives, commission, bonus and healthy allowances.
Non-monetary rewards include recognition, decision
making roles, promotion, flexible working hours and com-
pany uniforms. Armstrong (2007) indicated that employ-
yees are rewarded in accordance with their contribution,
skill and competence and their market worth.
The importance of money as a motivator has been
consistently downplayed by most behavioral scientists
like Herzberg who point out the value of challenging jobs,
feedback, cohesive work teams and other nonmonetary
factors as stimulants to motivation. However, money is
the crucial incentive to work motivation because it is the
vehicle by which employees can purchase the numerous
need-satisfying things they desire (Robbins et al. 2003).
Researches reaffirm that for the vast majority of the
workforce, regular pay is absolutely necessary in order to
Harunavamwe and Kanengoni 3931
meet basic physiological and safety needs, hence, lower
level employees are caught in the trap. Furthermore,
money also performs the function of a scorecard by
which employees asses the value that the organization
places on their services, hence an element of being a
valuable assert in the organization results in personal
motivation resulting in money having a positive impact on
motivation (Langton and Robbins 2007).
Armstrong (2007) also point out that rewards can act
as a goal that employees generally strive for, and as an
instrument which provides valued outcomes. It is also a
symbol which indicates the recipient’s value to the
organization and can act as a general reinforcer because
it is associated with valued feedback (Langton and
Robbins 2007). Many organizations face problems when
trying to understand the relationship that exists between
rewards and motivation, however, Langton and Robbins
(2007) argued that for rewards to motivate an individual
certain conditions must be met, that is, the type of reward
must be important to an individual and should be
perceived as a direct reward for performance; if it is
money, the marginal amount should be perceived by the
individual as being significant, therefore, for money to
motivate, the marginal difference in pay increases
between a high performer and an average performer or a
high skilled and a low skilled should be significant.
The concept of Monetary and non-monetary rewards
Bates (2006) indicates, for money to motivate, merit pay
rises must be at least seven percent of base pay for
employees to perceive them as motivating and to catch
anybody’s attention. Recent studies for example by
Locke (1998) on the four methods of motivating
employees indicated that money rated the second among
lower-level employees. Such evidence demonstrates that
money may not be the only motivator, but it’s difficult to
argue that it doesn’t motivate. This therefore opens up
the debate that non-financial rewards such as recog-
nition, decision making and job security have a role to
play in the internal motivation of employees that mone-
tary rewards cannot address. To assume that financial
incentives will always motivate people to perform better is
therefore as simplistic as to assume that they never
motivate people to perform better. The only issue that is
certain about this is that multiplicities of interdependent
factors are involved in motivating employees ranging
from money to non-monetary.
Another stream of analyses points out that people
never rate money as their main motivator, most achieve-
ments are reached for reasons other than money, and it
is a factor that attracts people but does not play a big role
in retaining and motivating. Robert and Shen (1998)
point out, salary and other hygiene factors yielded dis-
satisfaction and only motivators directly influence motiva-
tion beyond the psychological neutral level.
In a recent survey, by (Ellis and Pennington, 2004)
3932 Afr. J. Bus. Manage.
direct financial reward played a critical role in attracting
talented employees, but they have only a short term
impact on the motivational levels of employees. Kohn
quoted by Armstrong (2007) challenge what he calls the
behaviorists dogma about money and motivation. He
claims that, no controlled scientific study has found a
long-term enhancement of the quality of work as a result
of any reward system. Slater quoted by Armstrong (2007)
also argued that the idea that everybody wants money is
propaganda circulated by wealth addicts to make they
feel better about their addiction.
Armstrong (2007) further argued that, a closer look on
how employees are motivated indicates that it becomes
disturbingly clear that the more you use rewards to
motivate, the more employees tend to lose interest in
whatever they had to do to get the rewards. The more
reinforcing the reward is, the more it erodes intrinsic
interest. Therefore, various devices can be used to get
employees to do something, but that is a far cry from
making people want to do something in this regard, non-
monetary rewards apply. Theorists therefore point out the
value of challenging jobs, feedback, cohesive work teams
and other nonmonetary factors as stimulants to motiva-
tion which should never be left out when addressing the
subject of motivation in the workplace.
Pfeffer 1998 as quoted by Armstrong (2007) also
contends that employees do work for money but they
work even more for meaning in their lives. Where there is
no meaning of work, there is greater loss of loyalty and
commitment and pay should therefore not substitute for a
working environment high on trust, fun, and meaningful
work. The above simply mean, money should be used in
conjunction with other motivating factors in order to win
the attention of employees.
However, according to Armstrong (2007), in a much
publicized study, Gupta and her colleagues analyzed
thirty-nine studies conducted over four decades and
found that cold-hard cash motivates workers whether
their jobs are exciting or mundane in labs and real world
settings alike. But the research team acknowledges that
money is not the only factor that concerns employees
noting that beyond a certain point higher salaries will
make employees happier, but it will not buy better
performance and motivation. Still, Gupta warns that
employers who dole out small merit raises-less than
seven percent of base pay –may do more harm than
good. According to her, small raises can actually be
dysfunctional in terms of motivation because employees
become irritated that their hard work yielded so little.
Therefore there are mixed feelings among scholars on
whether money has a positive or negative impact on
motivation and such a question can only be addressed
through an empirical study.
Research hypothesis
In light of the objectives and related literature, the
following research hypotheses were operationalised:
H1 –There is no significant effect of monetary rewards on
employee motivation.
H2- Non-monetary rewards have a significant effect on
employee motivation.
H3- Recognition is the best motivating factor for lower
level employees.
MATERIALS AND METHODS
Population and Sample
The population of the study consisted of 254 employees from three
selected retail shops. The sampling frame was 106 lower-level
employees. Using the cluster sampling technique, 50 lower-level
employees were picked from different departments to participate in
the study. This sample represented 47.1% of the total lower level
employees.
Measuring instruments
A structured questionnaire with reward items as developed by
Luthans (1998:65) was used to collect data from the respondents.
This questionnaire was used to determine the relationship between
rewards and employee motivation. The three variables under study
which are monetary rewards, non-monetary rewards and motivation
were each asked in separate sections. Section A asked employees
their demographic information. Section B asked the employees the
extent to which the organization’s use of selected monetary rewards
was driving them to work hard with direction. These rewards
included base pay, merit pay, bonus, commission, allowances and
incentive pay. The items were measured on a five point itemized
likert scale that ranged from to a large extent to a smaller extent.
The second question was dealing with non-monetary rewards,
respondents were asked to evaluate how likely they were inspired
to perform their best when they receive rewards such as
recognition, promotion, pension benefits, uniforms, flexible working
hours and decision making roles. The response categories were
from very likely to very unlikely in a five point likert scale. The third
question then examined the employees’ level of motivation taking
into consideration (Herzberg, 1957)’s tangible measures of motiva-
tion ranging from, meaningfulness of the job, enjoying the job, love
the job, freedom in doing the job, main goal of working
accomplished, and overall work environment satisfying or not.
Lastly, the questionnaire provided a section for the employees to
indicate their best reward.
Administration of questionnaire
The questionnaire was distributed among lower level employees
such as cashiers, shelf packers and kitchen staff by different
section managers in the shops. Most of the employees were given
time to complete the questionnaires. Shop stewards who were
randomly picked by the section manager of each shop department
to collect the filled in questionnaires.
Statistical analysis
Level of motivation was measured using motivational factors such
as meaningfulness of job, sufficient rewards, satisfying environ-
ment, job security and freedom in doing work. A correlation between
Harunavamwe and Kanengoni 3933
Table 1. Correlation Results for effect of monetary rewards and motivation
Financial Reward
Non Financial Reward
Motivation
Financil
Reward
Pearson Correclation Sig.(2-tailed)
N
1.000
50
.278
.083
50
.161
.321
50
Non Financial
Reward
Pearson Correclation Sig.(2.tailed)
N
.278
.083
50
1.000
40
.607***
.000
50
Motivation
Pearson Correclation
Sig.(2-tailed)
N
.161
.321
50
.607**
.000
50
1.000
50
**Correlation is significant at the 0.01 level (2-tailed).
Table 2. Correlation Results for effect of non-monetary rewards and motivation
Non Financial Reward
Motivation
Non Financial Reward
Pearson Correlation
Sig. (2-tailed)
N
1.000
50
.607**
.000
50
Motivation
Pearson Correlation
Sig. (2-tailed)
N
.607**
.000
50
1.000
50
the three variables was calculated using the Pearson Product
Moment Correlation.
RESULTS
Research hypothesis 1: There is no significant effect of
monetary rewards on employee motivation.
As indicated in Table 1, there was no significant relation-
ship between monetary/financial rewards and employee
motivation (r = .161, p >0.01). The research hypothesis
was therefore not rejected.
Research hypothesis 2: Non-monetary rewards have a
significant effect on lower-level employees’motivation.
As indicated in Table 2, there is a moderate significant
relationship between non-monetary rewards and motiva-
tion with a correlation of (r = .607, p< 0.01) this means
that, non-monetary rewards are good motivators among
lower-level employees. This concurs with Herzberg‘s two
factor theory of motivation. The research hypothesis was
therefore not rejected.
Overally, Table 3 shows that there is a significant but
weak relationship between rewards in general and
motivation (r=.436p<0.01).
Research hypothesis 3: Recognition is the best motiva-
ting factor for lower level employees.
Figure 1 shows that, research hypothesis 3 was rejected.
Most of the lower level employees indicated flexible
working hours as their best reward (40%), followed by
merit pay/pay for performance, (33%), then recognition
(12%).
DISCUSSION
The empirical results showed that, non-monetary rewards
were given number one ranking by the lower level
employees especially. These results are in agreement
with Herzberg’s two factor theory of motivation by Nelson
(2004) which shows that 78% of employees indicated that
it was very or extremely important to be recognized by
their managers when they do good work but contradict
with the general perceptions for example, in a much
publicized study, Gupta and her colleagues analyzed
thirty-nine studies conducted over four decades and
found that cold-hard cash motivates workers whether
their jobs are exciting or mundane in labs and real world
3934 Afr. J. Bus. Manage.
Table 3. Correlation for all rewards and motivation
Overall Rewards
Motivation
Overall Rewards
Pearson Correlation
Sig.(2-tailed)
N
1.000
50
.436**
.005
50
Motivation
Pearson Correlation
Sig.(2-tailed)
N
.436**
.005
50
1.000
50
**.Correlation is significant at the 0.01 level (2-tailed).
salary
7%
recognition
12%
job
security
8%
merit pay
33%
flexible
hours
40%
Figure 1. Shows that, research hypothesis 3 was rejected
settings alike. Armstrong (2007). These results also con-
tradict with Arnolds and Venter (2007) whose results
indicated that financial rewards are the best motivators.
The empirical results also indicated that wage increa-
ses and cash incentives are not important motivational
rewards for lower level employees. This contradict with
previous studies like the American survey of 612
employees (http://www.opm.gov/perform/articles/
011.asp) reported that cash incentives like year bonuses
and market related salary are among the top five
motivational rewards (Workplace changes employees
want to see, 1999). The notion that money is not a
motivator among lower level employees has been
regarded as more theoretical than practical, however, the
results of the study suggest that ,managers who
implement motivational strategies will definitely reap the
benefits in terms of improved employee job performance
and morale.
There is an indication on the results that low- level
employees especially blue collar workers want more
responsibility in their work ,they want their jobs to be
enriched with more freedom of decision making ,space
for creativity, skill variety and task significance. This
would increase meaningfulness of their jobs and result in
higher internal work motivation and, high-quality work
performance. (Daft and Marcic, 2007). It is however often
found that, additional work responsibility is not a notion
generally linked to lower-level employees.
Results have shown that, lower level employees prefer
flexible working hours, merit pay and recognition, in
particular as the top three motivational rewards. This is
an indication to management that monetary rewards one
by one combined with non-monetary rewards would
deliver better motivational results than monetary compen-
sation alone which might be the case in many firms. In
this regard, it is however important to heed Glassock &
Grams’ appeal as quoted by (Daft and Marcic, 2007) that
monetary rewards should not be confused with non-
monetary rewards such as recognition. According to
these two, monetary rewards are impersonal in nature,
geared toward supporting short-term objectives of the
firm, based on the corporate budget of the firm and are
infrequently distributed. Therefore, organisations should
consider balancing the monetary and non-monetary
rewards especially among blue collar workers, such as
flexible working hours. This can be as a result of the new
trends in the working world which encourages individuals
to live a healthy life. There has been a visible increase in
the value of flexibility in one’s working hours so as to
maintain and improve the well-being of employees.
Managerial Implications
For the retail human resource managers, non-monetary
rewards according to this study, have proved to be effec-
tive on lower-level employee motivation, therefore there
is a cheap way of keeping the workforce highly motiva-
ted? In order to achieve this, non-monetary rewards must
be used to create a sincere focus of appreciation and on
the other hand, money should be used as a reward linked
directly to compensation not necessarily motivation.
Secondly, the results have indicated that, flexible
working hours are highly motivational, to this extent;
managers should adopt the new Shamrock organization
planning to allow flexibility in the workplace. Lastly, retail
organizations should aim to have a highly motivated
workforce which will ensure high productivity and high
levels of customer satisfaction. All this can be achieved
through strategic implementation of motivational techni-
ques to meet the needs of the workforce.
Limitations and future research directions
The direct focus of this investigation on only the retail
industry and strictly among lower level employees raises
concerns about limited generalisability an as a result of
this, the study remains in reality , not representative of all
other industries and all other levels of employment in
organizations. There are huge complex areas under
employee motivation which have not yet been empirically
investigated and even, additional replications of studies
will provide a great deal of future studies. Comparative
study between monetary rewards and non-monetary
rewards for managerial staff can provide rich advances
for future studies.
ACKNOWLEDGEMENT
This research was funded by the Govan Mbeki Research
and Development Centre from the University of Fort
Hare.
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