1.4.4 - Advantages and Disadvantages

Advantages of financial methods of motivation

• Rewards employees for meeting or exceeding targets, so they will likely work more efficiently to achieve business goals

• Attracts and retains skilled workers who may look for competitive salaries and financial rewards, lowering recruitment costs whilst keeping quality and innovation high

• Employees feel valued when their efforts are recognised financially, improving satisfaction and motivation

Disadvantages of financial methods of motivation

• May create a short-term focus as financial rewards focus on immediate results over long-term goals or quality. This can lead to rushed work - reducing quality long-term

• Regular bonuses or commissions can become expensive for a business, which will have an impact on their profit margins

• Employees may become discouraged if they feel that targets are unachievable - may lead to lower performance and higher labour turnover

Advantages of non-financial methods of motivation

• Cost-effective as these methods require little financial cost. The business can motivate without straining its budget.

• Employees are motivated from within by being challenged, valued and trusted, not just by money. This leads to higher quality work and innovation.

• Improves long-term employee engagement as these methods foster deeper emotional commitment. Therefore employees are more likely to stay, reducing labour turnover

Disadvantages of non-financial methods of motivation

• May not appeal to all employees, some will be mainly motivated by financial rewards, so motivation may remain low with certain staff

• Takes time to implement and see results - implementing a culture of recognition, teamworking and job enrichment will take time. There may be some pressure in the short-term

• You need skilled leadership and communication in order for these methods to be implemented effectively. Poor implementation could cause confusion, frustration which may lead to reduced motivation