U2.22 — Concept of Motivation in Business
Overview
Dotpoint 22: the concept of motivation in business, including methods of reward, benefits and penalties.
Motivation in business refers to the internal and external forces that influence employees to work hard, stay focused and help the business achieve its objectives.
The last dotpoint looked at some of the main motivation theories, including Maslow, Herzberg, Vroom and Adams. These theories help explain why employees may feel motivated or unmotivated at work.
This dotpoint moves from the more abstract theory of motivation to the practical methods employers can use to improve motivation and influence employee behaviour.
The three methods looked at are:
- rewards — positive outcomes given for good performance or behaviour
- benefits — extra advantages employees receive as part of employment
- penalties — consequences used to discourage poor performance or inappropriate behaviour
🏆 Rewards
Rewards are positive outcomes given to employees for good performance, strong effort, achievement or desirable behaviour.
Summary
Rewards are used to encourage employees to repeat certain behaviours. If an employee works hard, reaches a target or shows strong customer service, the business may reward that behaviour so the employee feels valued and is more likely to keep performing well.
Rewards can be financial or non-financial. Financial rewards involve money or monetary value, such as bonuses, commissions, gift cards or share schemes. Non-financial rewards are not directly money-based, but still recognise or encourage effort, such as praise, certificates, awards, extra responsibility or public recognition.
Rewards work best when employees believe the reward is fair, achievable and linked clearly to performance. If rewards are unclear, unfair or only given to favourite employees, they can reduce motivation.
Examples of financial rewards
- Sales bonuses for meeting or exceeding targets.
- Commission based on the value of sales made.
- Performance bonuses for reaching productivity, safety or profit targets.
- Profit-sharing where employees receive part of business profits.
- Share schemes that allow employees to benefit from business success.
- Gift cards or vouchers for excellent customer service.
- Cash prizes for winning internal sales or service competitions.
- Paid overtime opportunities for employees who want extra income.
- Retention bonuses for staying with the business during busy periods or change.
- Referral bonuses for helping recruit suitable employees.
Examples of non-financial rewards
- Employee of the month award for strong performance.
- Public praise in a staff meeting or team newsletter.
- Certificates or awards for excellent customer service.
- Extra responsibility for employees who show reliability and skill.
- Leadership opportunities for trusted employees.
- Preferred shifts or first choice of tasks for consistent performance.
- More autonomy over how work is completed.
- Opportunities to train others or mentor new employees.
- Recognition on social media or internal workplace platforms.
- Invitations to special events or staff celebration days.
How financial rewards motivate employees
- They create a clear link between effort and money.
- They can encourage employees to reach sales or performance targets.
- They can make strong performance feel worth the extra effort.
- They may increase loyalty if employees share in business success.
- They can suit employees who are strongly motivated by income or financial security.
How non-financial rewards motivate employees
- They make employees feel noticed, respected and valued.
- They can build confidence and pride in work.
- They can improve workplace culture because employees feel appreciated.
- They may motivate employees who value recognition, responsibility or career growth more than money.
- They can encourage positive behaviour without adding large costs to the business.
Examples — financial rewards
- Real estate agencies often use commission because sales agents are motivated to close property sales and earn a direct financial reward.
- Car dealerships may use bonuses or commission to encourage salespeople to reach monthly vehicle sales targets.
- Flight Centre has historically used sales-driven reward systems where consultants are encouraged to perform strongly through financial incentives.
- Canva and other high-growth businesses may use share-based incentives or long-term rewards to help employees feel connected to company success.
- Harvey Norman and other sales-focused retailers may use financial incentives to encourage employees to reach sales targets.
Examples — non-financial rewards
- McDonald’s Australia may use crew recognition and internal promotion pathways to reward reliable employees.
- AFL clubs may use leadership roles, awards and public recognition to reward players who show effort, discipline and team-first behaviour.
- Schools may recognise staff through leadership roles, public thanks, professional trust and extra responsibility.
- JB Hi-Fi and other retailers may use team recognition to encourage strong customer service and positive workplace behaviour.
- Hospitals may recognise nurses and health staff through service awards, extra responsibility or professional recognition.
🎁 Benefits
Benefits are extra advantages employees receive as part of their employment, beyond their normal wage or salary.
Summary
Benefits are usually part of the overall employment package. Unlike rewards, they are not generally given because one employee has performed better than another. Instead, they are offered to employees as part of working for the business.
Benefits are used to make a workplace more attractive and supportive. They may not always be linked to individual performance, but they can improve motivation by making employees feel secure, respected and valued by the business.
Benefits can be financial, work-life or career based. Some benefits save employees money, some help employees balance work and personal life, and others help employees develop skills and future career opportunities.
Benefits can help a business attract and retain employees. This is important in industries where skilled workers are hard to find. A business that offers useful benefits may have lower staff turnover because employees see the workplace as more supportive and worthwhile.
Financial benefits
- staff discounts
- subsidised meals
- paid training
- extra superannuation
- health insurance support
- travel discounts
- uniforms or equipment provided
Work-life benefits
- flexible working hours
- work from home options
- extra leave
- family-friendly rosters
- wellbeing programs
- mental health support
- fitness or gym support
Career benefits
- skill improvement training
- mentoring
- leadership programs
- career pathways
- professional development
- study support
- paid conferences
- graduate programs
How benefits motivate employees
- Benefits can make employees feel the business cares about their wellbeing.
- Financial benefits can make the total employment package feel more valuable.
- Work-life benefits can reduce stress, which may improve focus and loyalty.
- Career benefits can increase confidence and motivation because employees feel they are growing.
- Strong benefits can help keep employees in the business for longer.
Examples
- Woolworths Group may use team member discounts and support programs to improve employee satisfaction and loyalty.
- Commonwealth Bank and other large office-based businesses may use flexible work arrangements to help employees balance work and personal responsibilities.
- BHP may use training, safety programs and career pathways to attract and retain skilled workers in mining and resources.
- Hospitals may offer training, wellbeing support and career development to keep nurses and health workers skilled and motivated.
- Atlassian and other technology businesses may use flexible work, professional development and team-based benefits to appeal to skilled employees.
- Mining businesses in WA may use accommodation, travel arrangements, safety programs and career pathways as part of the employment package.
⚠️ Penalties
Penalties are negative consequences used by a business to discourage poor performance, unsafe behaviour, rule-breaking or inappropriate workplace conduct.
Summary
Penalties are different from rewards and benefits because they focus on discouraging behaviour rather than encouraging it. A penalty is used when an employee does not meet expectations, breaks rules or behaves in a way that harms the business, customers or other employees.
Penalties can include verbal warnings, written warnings, loss of privileges, reduced responsibility, performance management, suspension or dismissal. In some workplaces, penalties may also involve losing bonuses or missing out on promotion opportunities.
Penalties can be useful when safety, fairness and standards are important. However, if penalties are used too harshly or unfairly, they can damage trust and reduce motivation. Employees may become fearful, resentful or less willing to take initiative. For penalties to work properly, they should be clear, fair, consistent and linked to workplace rules.
Examples of penalties
- Verbal warning for repeated lateness.
- Written warning for unsafe behaviour.
- Loss of bonus if performance targets are not met.
- Performance management for ongoing poor work quality.
- Suspension for serious misconduct.
- Dismissal for repeated or severe breaches.
How penalties may motivate employees
- They can make expectations clear.
- They can discourage unsafe or inappropriate behaviour.
- They can protect other employees and customers.
- They can encourage employees to follow policies and procedures.
- They can support fairness when poor behaviour has consequences.
Examples
- Construction businesses may issue warnings or remove workers from a site if safety rules are ignored.
- BHP and other mining businesses may use strict safety penalties if workers ignore protective equipment or site procedures.
- Hospitals may use disciplinary processes if staff breach patient safety, privacy or medication procedures.
- Qantas and other airlines may use formal performance management if employees repeatedly ignore safety or service procedures.
- Hospitality businesses such as cafés and restaurants may use warnings for repeated lateness, poor customer service or hygiene breaches.
- Retail businesses may use written warnings if employees repeatedly fail to follow cash handling, customer service or stock procedures.
- Schools may use formal warnings or performance management if staff repeatedly fail to meet professional expectations.
Risks of relying on penalties
- Employees may become fearful rather than motivated.
- Penalties can damage trust if they seem unfair.
- Employees may only do the minimum to avoid punishment.
- Too many penalties can increase stress and staff turnover.
- Penalties do not usually create long-term motivation by themselves.
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Biz Fact: Qantas uses staff travel discounts as a benefit, helping employees feel more connected to the business they work for.