Effects of Monetary Rewards, Incentives and Benefits on Nurse Managers
Abstract
This study will investigate the effects of monetary components of a compensation package namely rewards, incentives and benefits on Nurse managers’ motivation and retention.
Introduction
The purpose of this study is to describe the effects of financial rewards and benefits on nurse leaders in terms of motivation and retention. This study aims to contribute to the existing literature by providing a new perspective in the subject of rewards and benefits and the degree by which financial elements of the compensation program affects motivation and retention of nurse leaders.
Nurse leaders and managers play an important role in the success of the hospital. Even though their contributions to the hospital are large, they are often caught in a crossfie. Nurse managers and leaders need to balance their time and effort in fulfilling the needs of the patient, the staff and the administration. Nurse leaders and managers do not only need to have the necessary knowledge, skills and expertise in nursing and healthcare, they also need to be competitive in business management. As a result of these multiple challenges, many nurse leaders and managers experience work-related stress, burnout and they often leave their work. This paper aims to provide a fresh perspective on motivation and employee retention and to gauge the degree of influence of financial rewards and benefits to the nurse leaders.
Research Problems
The research aims to answer the question “What are the effects of monetary rewards, incentives and benefits on nurse managers?” Specifically, the research aims to answer the following questions:
1. What are components of the total reward package for nurse managers?
2. How are these monetary rewards compared to non-monetary rewards?
3. What are the impacts of monetary rewards on motivation, absenteeism, and turnover of nurse managers?
4. What are the impacts of monetary rewards on the performance of nurse managers?
5. What types of monetary rewards, incentives and benefits are most valued by nurse managers?
Research Objectives
This main objective of this research is to identify the effects of monetary rewards, incentives and benefits on nurse managers. This research also aims to:
1. Identify the components of total reward package for nurse managers.
2. Create an appropriate comparison between monetary rewards and non-monetary rewards and their effects on nurse managers.
3. Determine the impacts of monetary rewards on motivation, absenteeism, and turnover of nurse managers.
4. Identify the impacts of monetary rewards on the performance of nurse managers.
5. Determine the types of monetary rewards, incentives and benefit that are most valued by nurse managers.
Literature Review
It is important to start this research by defining both leadership and management. In a sense, the key difference between the concepts of management and leadership is the phrase ‘organizational goals’. A manager works for an organization and carries the responsibility of accomplishing the organization’s goals through specific professional services. Leadership is a much broader concept because all health care professionals are leaders. A person who is a recognized authority, and has followers who count on this person’s expertise to carry out their objectives, is a leader. There are four basic management functions. According to Sims (2002) management functions can be increased to include other functions but these four are the basics.
1. Planning – the planning function involves defining and setting goals, figuring out ways for achieving these goals, and developing a comprehensive hierarchy of plans to integrate and coordinate activities to reach the goals. Setting goals keeps the work to be done in its proper perspective and helps organizational members keep their attention on what is important. Plans establish boundaries for people making decisions and carrying out assigned activities. Planning helps managers anticipate future events, study problems, and analyze causes of those problems. In an increasingly dynamic world, planning helps managers decide what to do before an action is taken. At the same time, a quality plan will have contingencies for other situations that develop. Planning is considered the central function of management, and it pervades everything a manager does.
2. Organizing – this is the process that makes sure that the necessary human and physical resources are available to carry out a plan and achieve organizational goals. Organizing includes all managerial activities that translate required planned activities into a structure of tasks and authority. In a practical sense, the organizing function involves (1) designing the responsibility and authority of each individual job and (2) determining which of these jobs will be grouped in specific departments. For example, managers of an engineering organization will be assigned to the engineering department. The organizing function’s outcome is the organization structure.
The organization structure consists of many different individuals and groups performing different activities. These different activities must be integrated into a coordinated whole. It is management’s responsibility to devise integrating methods and processes. If the differences among jobs and departments aren’t too great, then the simple exercise of authority is sufficient to integrate the differences.
3. Leading – the leading function involves the manager in close day-to-day contact with individuals and groups. Thus, the leading function is uniquely personal and interpersonal. Leading is influencing others to achieve organizational objectives. Leading involves dozens of interpersonal processes: motivating, communicating, coaching, and showing employees how they can reach their goals. When managers motivate employees, direct the activities of others, select the most effective communication channel, or resolve conflicts among members, they are engaging in leading. Leadership is such an important part of management that managing is sometimes defined as accomplishing results through people.
4. Controlling – the final management function is controlling. The controlling function includes activities that managers undertake to ensure that actual outcomes are consistent with planned outcomes. Controlling is ensuring that performance conforms to plans. That is, after the goals are set, the plans formulated, the organizing arrangements determined, and the people hired, trained, and motivated, something may still go amiss. To make sure that things are going as they should, managers must monitor a particular unit of the organization’s performance. Managers must compare actual performance to the previously set goals. If there is a significant difference between actual and desired performance, the manager must take corrective action.
The new nurse manager must remain flexible in order to survive in the health care industry, regardless of the specific setting, and the most valuable tool in his/her arsenal is the combination of clinical and business expertise. In addition, sharp clinical skills and a business acumen for financial, time, and other resource management make the experienced nurse manager a prime choice for promotion to higher positions (Marrelli & Hilliard, 2004).
A reward system is an important tool in attracting, retaining and motivating staff. Reward packages are generally composed of base pay, performance-based pay, compulsory employer-provided benefits and discretionary employer-provided benefits. A company’s reward package will most likely include compensation, incentives and benefits that are given to the employee as a reward for his/her performance and contribution to the company (Sims, 2002). The financial components of a reward system therefore, are compensation, benefits and incentives. Compensation can be described as the monetary equivalent of an individual’s performance of organizational tasks. Defined in its broadest sense, compensation is any reward or payment given to a person for services performed. Compensation is a primary element of the employment contract. The employer contracts with the employee to perform certain functions that the business requires on order to produce an output, in exchange for money, which the employee uses to purchase goods and services that are needed or wanted. Compensation is a system of exchange. Individuals are rewarded with either money or other valuable assets, or both in exchange for performing certain functions. Compensation can be sorted into direct and indirect categories. Direct compensation is actual money given to a worker and consists of base pay, merit pay, incentive pay, and deferred pay. Indirect compensation does not involve actual money, but is usually associated with monetary values such as items that would otherwise have to be purchased by the worker her/himself. Indirect compensation includes protection programs such as health and other insurance, pay for time not worked, and other services.
An incentive is any financial reward given to an employee for accomplishing specific results of a quantitative or qualitative nature. The World Health Organization (WHO) defines incentives as all the rewards and punishments that providers face as a consequence of the organizations in which they work the institutions under which they operate and the specific interventions they provide. Simply defined, incentives are the factors and/or conditions within health professionals’ work environments that enable and encourage them to stay in their jobs, in their profession and in their countries. Incentives provide for variable rewards dependent upon the results accomplished, amount of work produced, or measurable performance (Caruth and Handlogten 2001). Benefit is a generic term used to describe the elements of a considerable part of the total remuneration provided by the organization to its people. This component is a unique part of the total compensation package since most of the time it is given in non-financial form. Benefits may include a wide variety of provisions variously termed ‘fringe benefits’, perquisites’, ‘allowances’, ‘subsidies’, ‘assistance’, ‘leave’, discounts’, or simply ‘something extra’. The common terms that can be used interchangeably with benefit are ‘perquisite’, and ‘allowance’. Perquisite (or perk) refers to something of value which is in addition to payment for work, for example, the company car. An allowance can be a sum of money, usually fixed, given at regular intervals to cover special circumstances, for example, protective clothing allowances for work in potentially hazardous environments (White & Druker, 2000). Another common element that is added to compensation packages are incentives. Health care organizations are searching for the proper mix of incentives that will motivate managers and staff to control costs. Financial incentives are frequently employed. The most basic financial incentives are the ability to retain the job and get an increase in pay. One of the most common tools used in the healthcare industry is the bonus system. Hospital management encourages nurse managers to minimize their spending by offering them bonus if they spend less than the allotted budget given to their department. The use of bonus systems has both positive and negatives. The positives relate primarily to the strong motivation employees have to reduce costs. The negatives relate to the potential detriment to quality of patient care and to the potential negative effect on employee morale.
There are different theories that seek to explain how employees are motivated. These theories also give emphasis on the roles played by monetary rewards, incentives and benefits in motivating employees. These theories include the following:
Contingency Theory
Contingency theory assumes that compensation and incentive programs work when they fit well with the basic strategies and characteristics of the larger organization, including more specifically its human resource practices. The more closely design elements of the incentive plan match the key strategies and overall vision of the organization, the more effective the incentive plan will be in motivating employees and increasing productivity (Lawler, 1990).
Goal Setting Theory
Goals motivate employees when they are specific, challenging, accepted as worthwhile, and achievable. For incentive pay to be successful, it must be linked to these goals (Mohrman & Lawler, 1990; Mento et al, 1987; Tubbs, 1986). Goal-setting theory was first proposed as a psychological theory of employee motivation by Locke in 1968. According to the theory, goals motivate employee behavior when they are specific, challenging, and accepted as worthwhile and achievable. Rewards and incentives are easily imbedded within goal-setting theory, simply by adding a financial incentive for attaining set goals. According to Heneman (1992) motivation will be greatest when goals and rewards, which largely include financial rewards, are coupled through a performance award rather than separated as to solitary issues.
Expectancy Theory
Expectancy theory posits that people respond favorably to incentive programs if three conditions are met – they believe they can accomplish the goal embedded in the incentive plan; they believe there is a clear connection between individual effort and receiving a reward; they value the reward enough to put forth the effort to achieve it (Heneman, 1992; Van Eerde & Thierry, 1996). Expectancy theory is the most prominent theory used to explain employee motivation and the design of effective compensation programs. Expectancy theory draws from psychology to provide insight into compensation plan elements that are effective in motivating individuals. There is considerable empirical research supporting compensation programs based on expectancy theory. Because the line of sight between an individual’s effort and an award is potentially the most direct, incentive programs closer to the individuals, such as competency-based pay or team performance awards, have the strongest empirical support for their effectiveness in stimulating motivation (Odden & Kelley, 2002).
Retention of nurses and nurse managers is a major problem almost everywhere in the world. Nurses from third-world countries leave their work and migrate to industrialized countries primarily in search of higher wages and in search for better incentives and benefits. The connection between job satisfaction and employee retention are often emphasized. Job satisfaction is defied as an attitude that individuals have about their jobs. It is an extent to which one feels positively or negatively about the intrinsic and/or extrinsic aspects of one’s job (Hunt et al, 1985). Job satisfaction has been an interesting construct for researchers in understanding employee behaviors and attitudes. Satisfaction with job is directly related to organizational commitment (Brown & Peterson, 1993). In addition, job satisfaction is either directly or indirectly related to an employee’s turnover intentions. Therefore, shortages can be a symptom of low job satisfaction, poor management and lack of organizational support. Extrinsic values encompass the tangible aspects of the job including wages, benefits and bonuses, whereas intrinsic values include status, recognition, personal and professional development opportunities and other similar factors (Cowin, 2002). Reasons for nurse dissatisfaction have been well documented in the nursing literature. Such reasons include lack of involvement in decision-making, poor relationship with management, low salaries and poor benefits, lack of job security, poor recognition and lack of flexibility in scheduling.
Research Paradigm
Phenomenology is a way of life that is apprehensive with the question of how individuals make sense of the world around them, and how exactly the philosopher should bring out the preconceptions in his or her capture of that world (Bryman and Bell, 2003). This involves in-depth interviews, participant observations etc. According to Moustakes, (1999) this type of paradigm helps the researcher to incorporate his or her own intuitive judgment of what is essential in understanding the environment, and also have a first –hand observation which gives him or her the opportunity to gather data through direct experience and thus be able to understand and interpret the settings and participants being studied and evaluated.
Phenomenology is sometimes offered as an option to positivism. It refers to an umbrella phrase wrapping styles of research that do not rely on measurement, statistics, or other things commonly associated with the scientific methods. In straight contrast to positivism it is seen as an approach that emphasizes subjectivity, description, interpretation and agency. Phenomenological research normally deals with people’s perceptions, attitudes and viewpoint, approach and emotions (Denscombe 2003).it is an approach that focuses on how life is knowledgeable. It is not mostly alarmed with explaining the causes of things but tries, instead, to offer a report of how things are experienced direct by those involved (Denscombe 2003).
Research Method
Both qualitative and quantitative data collection methods will be employed in gathering data. The research followed a multi-stage approach in research, wherein secondary data and information was gathered and presented in the literature review. As part of the multi-stage approach, the researcher also conducted a focus group involving nurse managers. From the information gathered in the focus group, the researcher designed questions for the survey. A survey involving respondents through systematic random sampling technique will also be conducted. The questionnaires will be hand-delivered to the respondents with instructions on how to complete them; together with a return envelope. All respondents will be guaranteed anonymity and confidentiality in the reporting of the results. They will be asked questions relating to their home backgrounds, education, qualifications and training, employment history, current positions, the level of their current salary, and the types of monetary reward, incentives and benefits that they are receiving.
Study Population
The sample will be drawn from nurse managers working in Riyadh, Saudi Arabia. Using the Staff Directories in different hospitals in Riyadh, the researcher will draw a sample of 75 Nurse Managers using a systematic random sampling technique. Data Analysis
Validation of the Instrument
In order to validate the research instrument, the researcher will initially submit a sample of the set of interview and survey questions and after approval; the survey will include seven participants from the target population. Upon completion of the survey questionnaire, the researcher will ask the respondents for any suggestion or any necessary corrections to ensure further improvement on the instrument and at the same time validate its use. The researcher will then again analyze the survey questionnaire in order to ensure that it is reliable. The researcher is prepared to re-design the survey question, should the respondents report difficulty in accomplishing the survey questionnaire.
Reliability Testing
To measure the reliability of the instruments used, Cronbach’s alpha will be employed. According to Sekaran (2005), if the Cronbach’s alpha is less than .6, this means that the instrument used has low reliability (and thus opens for some errors). If the alpha value is .7 or above, the instrument is acceptable.
References
Heneman, R.L. (1992). Merit pay: Linking pay increase to performance ratings. Reading MA: Addison-Wesley.
Lawler, E.E., III. (1990). Strategic pay: Aligning organizational strategies and pay systems. San Francisco: Jossey-Bass.
Marrelli, T.M. and Hilliard, L.S. (2004). The nurse manager’s survival guide: Practical answers to everyday problems. Elsevier Health Sciences.
Mento, A.J., Steel, R.P., & Karren, R.J. (1987). A meta-analytic study of the effects of goal setting on task performance: 1966-1984. Organizational Behavior and Human Decision Processes, 39(1), 52-83.
Mohrman, S.A. & Lawler, E.E., III. (1996). Motivation for school reform. In S.H. Fuhrman and J. O’Day (Eds.), Rewards and reform: Creating educational incentives that work (pp.115-143). San Francisco: Jossey-Bass.
Odden, A. & Kelley, C. (2002). Paying teachers for what they know and do: New and smarter compensation strategies to improve schools. Corwin Press.
Tubbs, M.E. (1986). Goal Setting: A meta-analytic examination of the empirical evidence. Journal of Applied Psychology, 71(3), 474-483.
Van Eerde, W., & Thierry, H. (1996). Vroom’s expectancy models and work-related criteria: A meta-analysis. Journal of Applied Psychology, 81(5), 575-586.
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