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EFFECT OF EMPLOYEE MOTIVATION

The Effect of Employee Motivation Incentives on Organizational Productivity

Emmanuel Chukwudi Utazi

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Chapter 1

Introduction

1.1 Background of the Study

In contemporary business environments, organisations face immense competitive

pressures that necessitate innovative strategies to enhance productivity and maintain a

competitive edge. Employee motivation is one of the key factors influencing organizational

productivity. Employee motivation refers to the internal and external factors that stimulate

enthusiasm and persistence in performing tasks. According to Deci and Ryan (2000), motivation

is a crucial element that drives employees' engagement and performance, which in turn impacts

organisational productivity.

Scholars have developed various theories to understand the dynamics of employee

motivation. Maslow's Hierarchy of Needs (1943) proposes that a series of hierarchical needs,

from basic physiological needs to self-actualization, motivate employees. Herzberg's Two-Factor

Theory (1959) divides factors influencing employee motivation into hygiene factors and

motivators. Hygiene factors, such as salary and work conditions, prevent dissatisfaction, while

motivators, such as recognition and personal growth, drive satisfaction and performance.

Financial rewards are among the most commonly used motivational incentives in

organizations. These rewards include salaries, bonuses, and other monetary benefits. Studies by

Gupta and Shaw (2014) indicate that financial incentives significantly enhance employee

productivity by directly rewarding performance. Ibrahim and Abiddin (2023) reinforce this
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finding by reviewing previous literature and confirming the substantial impact of incentives on

employee productivity and organizational performance.

Non-financial incentives, such as recognition programmes, career development

opportunities, and a conducive work environment, also play a vital role in motivating employees.

Brun and Dugas (2008) highlight that recognition programmes, including employee of the month

awards and public praise, foster a sense of accomplishment and enhance job satisfaction.

Similarly, Krivenko (2023) emphasizes the importance of material stimulation in boosting work

motivation and performance through bonuses.

Career development opportunities, such as training programmes, mentorship, and

promotions, are essential for long-term employee motivation. Noe et al. (2014) highlight that

opportunities for professional growth increase employees' commitment to the organisation and

their willingness to perform at higher levels. Alanizan (2023) corroborates this by demonstrating

a strong positive relationship between employee satisfaction, motivation, and productivity.

Furthermore, a conducive work environment, characterised by supportive management,

flexible work arrangements, and a positive organisational culture, significantly contributes to

employee well-being and productivity (Saks, 2006). Ignatyuk and Tunina (2023) emphasise that

employee motivation, whether through material or non-material incentives, plays a crucial role in

enhancing workforce productivity and overall management efficiency within an organisation.

Despite the widespread recognition of the importance of employee motivation, many

organisations struggle to implement effective motivation incentives that yield significant

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improvements in productivity. The problem lies in the lack of empirical data on the specific

impact of different motivational incentives on productivity, leading to ineffective motivation

strategies and suboptimal organisational performance. This study aims to address this gap by

investigating the effect of employee motivation incentives on organisational productivity, aiming

to provide actionable insights for management practices.

Several recent studies support the significance of employee motivational incentives.

Hasanova et al. (2022) highlight that motivational incentives play a crucial role in enhancing

organisational productivity by creating motivating factors aimed at improving employee

performance and activity in fulfilling their duties. Zulkarnaen and Riyanto (2022) found that

motivated and enthusiastic employees tend to fulfil their responsibilities with their best abilities,

resulting in increased production levels. Gomathy (2022) further supports this by showing that

motivated employees lead to increased work productivity and allow the organisation to achieve

higher levels of output.

Moreover, Pradhani (2021) discusses how awards given by the company can trigger

individual self-reward and motivate employees to work more effectively, potentially leading to

increased organisational productivity through higher work performance and goal achievement.

Muneeb and Ahmad (2020) found that both financial and non-financial rewards positively and

significantly influence organisational productivity. Salsabillah (2019) emphasises the significant

positive impact of employee motivation incentives and training on employee performance,

enhancing their enthusiasm and drive to achieve job satisfaction and ultimately boosting

organisational productivity.
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Raj (2017) underscores the importance of motivation in the workplace, emphasizing that

managers and leaders must understand individual employee preferences and needs to effectively

implement various motivational strategies. Garg (2016) notes that employee incentive

programmes, whether monetary or not, are effective ways to motivate and retain employees,

ultimately leading to increased productivity, lower turnover, and improved performance within

the organisation.

In summary, the extensive body of literature on employee motivation and organizational

productivity highlights the critical role that motivational incentives play in enhancing employee

performance and overall organizational success. This study seeks to provide empirical evidence

to support the implementation of effective motivational strategies, address the existing

knowledge gap, and offer practical insights for management practices.

1.2 Statement of the Problem

The recognition of employee motivation as a crucial factor influencing productivity is

widespread. However, many organisations struggle to implement effective motivational

incentives that yield significant improvements in productivity. This problem is multifaceted and

stems from several underlying issues.

Firstly, there is a lack of empirical data on the specific impact of different motivational

incentives on productivity. Although we commonly use financial incentives like bonuses and

salary increases, we often question their long-term effectiveness in sustaining employee

motivation and productivity. For instance, Gupta and Shaw (2014) highlight that, while financial
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rewards can significantly enhance employee productivity in the short term, their impact may

diminish over time without the support of non-financial incentives.

Secondly, organisations often fail to effectively integrate non-financial incentives like

recognition programmes, career development opportunities, and a conducive work environment

into their strategies. Despite evidence suggesting that these incentives play a vital role in

enhancing job satisfaction and performance, many organisations fail to leverage them

effectively. For example, Brun and Dugas (2008) found that recognition programmes can foster a

sense of accomplishment and job satisfaction, yet many organisations overlook these low-cost,

high-impact strategies.

Furthermore, implementing career development opportunities presents another challenge.

While Noe et al. (2014) and Alanizan (2023) emphasise that opportunities for professional

growth increase employees' commitment and performance, organisations often lack structured

programmes to support continuous learning and career advancement. This gap can lead to

employee disengagement and reduced productivity over time.

Another critical issue is establishing a conducive work environment. A supportive

management style, flexible work arrangements, and a positive organisational culture are essential

for employee well-being and productivity (Saks, 2006). However, many organisations struggle to

cultivate such environments, leading to high employee turnover and suboptimal performance.

Ignatyuk and Tunina (2023) emphasise that both material and non-material incentives are crucial

for enhancing workforce productivity, yet achieving this balance remains a challenge for many

organisations.
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Given these challenges, this study aims to fill the empirical data gap by investigating the

effect of various employee motivation incentives on organizational productivity. By examining

both financial and non-financial incentives and their combined impact, the study seeks to provide

actionable insights that can guide organisations in implementing effective motivational

strategies. The findings will contribute to a deeper understanding of how to sustain employee

motivation and enhance productivity, ultimately supporting organisational success in a

competitive business environment.

1.3 Aim and Objectives of the Study

The aim of this study is to examine the effect of employee motivation incentives on

organizational productivity. The specific objectives are:

1. To identify the types of motivation incentives currently used in organizations.

2. To assess the impact of financial rewards on employee productivity.

3. To evaluate the influence of recognition programs on employee performance.

4. To analyze the effect of career development opportunities on employee motivation and

productivity.

5. To investigate the role of a conducive work environment in enhancing employee

productivity.

1.4 Research Questions

This study aims to answer the following research questions:

1. What types of motivation incentives are commonly used in organizations?

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2. How do financial rewards affect employee productivity?

3. What is the impact of recognition programs on employee performance?

4. How do career development opportunities influence employee motivation and

productivity?

5. In what ways does a conducive work environment contribute to employee productivity?

1.5 Null Hypotheses

The study will test the following null hypotheses at 0.05 level of significance:

1. There is no significant relationship between financial rewards and employee productivity.

2. Recognition programs do not have a significant effect on employee performance.

3. Career development opportunities have no significant impact on employee motivation

and productivity.

4. There is no significant relationship between work environment conditions and employee

productivity.

1.6 Significance of the Study

The significance of this study is multifaceted, encompassing both academic and practical

contributions to the field of organizational behavior and human resource management.

Academic Significance

1. Contribution to Knowledge: This study contributes to the existing body of knowledge

on employee motivation and organizational productivity by providing empirical evidence

on the effectiveness of different motivational incentives. While numerous studies have

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explored the impact of financial and non-financial incentives separately, this research

takes a holistic approach, examining their combined effects on productivity. This

comprehensive perspective fills a gap in the literature and provides a deeper

understanding of the dynamics between employee motivation and organizational

performance.

2. Theoretical Implications: By grounding the research in established motivational

theories such as Maslow's Hierarchy of Needs, Herzberg's Two-Factor Theory, and

Vroom's Expectancy Theory, the study not only tests these theories in a contemporary

organizational context but also extends them by integrating modern motivational

strategies. The findings will either support or challenge these theoretical frameworks,

potentially leading to refinements or new theoretical insights.

3. Methodological Advances: The mixed-methods approach adopted in this study,

combining quantitative and qualitative data, enhances the robustness and validity of the

findings. This methodological rigor can serve as a model for future research in the field,

demonstrating the value of using diverse data sources and analytical techniques to study

complex organizational phenomena.

Practical Significance

1. Managerial Implications: The study provides actionable insights for managers and HR

practitioners on designing and implementing effective motivation strategies. By

identifying the specific types of incentives that most significantly impact productivity,

managers can tailor their motivational programs to meet the needs and preferences of
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their employees. This targeted approach can lead to more efficient use of resources and

higher returns on investment in employee motivation.

2. Policy Formulation: Organizations can use the findings to develop or revise their HR

policies related to employee motivation and rewards. For instance, the study might reveal

the importance of non-financial incentives such as recognition and career development

opportunities, prompting organizations to incorporate these elements into their incentive

structures. Such policy adjustments can enhance employee satisfaction, reduce turnover,

and improve overall organizational performance.

3. Enhancing Employee Well-being: By highlighting the critical role of a conducive work

environment, the study underscores the importance of factors such as supportive

management, flexible work arrangements, and a positive organizational culture.

Implementing these recommendations can lead to a healthier, more engaged, and

productive workforce, contributing to both individual and organizational well-being.

4. Strategic Planning: The insights gained from this research can inform strategic planning

processes, helping organizations align their motivational strategies with broader business

goals. For example, understanding the long-term impact of career development

opportunities on productivity can support succession planning and talent management

initiatives, ensuring a steady pipeline of motivated and capable employees.

5. Benchmarking and Best Practices: The study's findings can serve as a benchmark for

organizations seeking to improve their motivational strategies. By comparing their

current practices with the best practices identified in the research, organizations can
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identify areas for improvement and adopt more effective approaches to employee

motivation.
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Societal Impact

1. Economic Benefits: Improved organizational productivity driven by effective employee

motivation can have broader economic benefits. Higher productivity can lead to increased

profitability, business growth, and job creation, contributing to economic development at

a regional or national level.

2. Workplace Culture: The emphasis on non-financial incentives and a positive work

environment can help foster a culture of appreciation and recognition in organizations.

This cultural shift can lead to more humane and supportive workplaces, where employees

feel valued and motivated to contribute their best efforts.

In conclusion, this study is significant for its comprehensive examination of the

relationship between employee motivation incentives and organizational productivity. It offers

valuable contributions to academic knowledge, practical management, policy formulation,

employee well-being, and broader societal benefits. The findings are expected to guide

organizations in designing effective motivational strategies that enhance productivity and foster a

positive and supportive work environment.

1.7 Scope of the Study

The scope of this research project encompasses a comprehensive examination of the

impact of motivational incentives on employee productivity within manufacturing and service

sector organizations. The study will be conducted in a specific geographic region, to be clearly

defined in the full research proposal, over a five-year period, allowing for a longitudinal analysis

of trends and long-term impacts. It will focus on relevant industries within the manufacturing
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sector (such as automotive, electronics, textiles, or food processing) and the service sector

(including finance, healthcare, hospitality, retail, or information technology services). The

research will investigate various types of incentives, including financial rewards, recognition

programs, career development opportunities, and work environment factors.

The study will include organizations of varying sizes, from small and medium enterprises

to large corporations, and consider employees across different organizational levels, from entry-

level positions to senior management. Productivity will be measured using sector-appropriate

metrics, which may include output per hour, sales figures, customer satisfaction ratings, or other

relevant indicators. Data collection will involve both quantitative and qualitative methods,

gathering productivity metrics, financial performance data, employee surveys, and interviews

from participating organizations. The scope excludes public sector organizations and non-profit

entities, focusing solely on for-profit businesses in the manufacturing and service sectors.

Through this focused yet comprehensive approach, the research aims to provide valuable insights

into how motivational incentives affect productivity in key economic sectors over an extended

period, offering benefits for both academic understanding and practical application in the

business world.

1.8 Limitations of the Study

Potential limitations of this study include the reliance on self-reported data, which may be

subject to biases. Additionally, the study's findings may not be generalizable to all industries or

geographic regions. Time constraints and limited access to proprietary organizational data may

also pose challenges.

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CHAPTER TWO

LITERATURE REVIEW

2.1 Conceptual Framework

2.1.1 Employee Motivation

Motivating employees is a crucial aspect of human resources management and

organisational behavior. It refers to the psychological processes that impact an employee's

behaviour in terms of achieving workplace objectives and completing tasks. In other words,

motivation is a combination of internal and external factors that motivate individuals to remain

engaged and dedicate themselves to a work, function, or subject, or to make an effort in order to

achieve a goal (Ryan & Deci, 2000).

The understanding of employee motivation has undergone significant changes over the

last century. Early views, such as Taylor's (1911) scientific management, regarded motivation

solely from the standpoint of economic incentives. Nevertheless, as our comprehension of human

psychology in the workplace has become more profound, more subtle perspectives have arisen.

McGregor's (1960) Theory X and Theory Y proposed that managers' beliefs about human nature

impacted their methods of motivating people. Modern research acknowledges motivation as a

complex and diverse concept. Pinder (2014) describes work motivation as a collection of

powerful influences, originating from both within and outside an individual, that prompt work-

related actions and shape their kind, direction, intensity, and duration (p. 11). This definition

emphasizes the intricate interaction between internal psychological processes and external

environmental factors that influences employee motivation. We frequently classify motivation

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into two types: intrinsic and extrinsic. Intrinsic motivation is the act of participating in an activity

because it brings personal satisfaction, rather than doing it for any external reward or outcome

(Ryan & Deci, 2000).

An employee in a professional setting may experience gratification from the work itself, a

sense of achievement, or find pleasure in the difficulty of a task. Extrinsic motivation refers to

the act of doing something with the intention of achieving a distinct result or outcome, as

explained by Ryan and Deci in 2000. These motivations may encompass seeking monetary

compensation, acknowledgement, or evading penalties. One cannot overstate the significance of

employee motivation in organisational settings. Several research studies have established a

correlation between elevated levels of employee motivation and various positive outcomes such

as greater job performance (Judge et al., 2001), increased commitment to the organisation

(Meyer et al., 2004), improved creativity and invention (Amabile, 1996), and reduced intentions

to leave the company (Richer et al., 2002).

Furthermore, driven individuals are more likely to engage in organisational citizenship

activities, going above and beyond their official job responsibilities to support their colleagues

and the organisation (Organ et al., 2006). Nevertheless, organisations face difficulties in

upholding elevated levels of employee motivation. Job design, leadership style, corporate

culture, and reward systems are all significant factors that influence employee motivation

(Latham & Pinder, 2005). Moreover, variations in personality, values, and career stage can

impact the way employees react to various motivational approaches (Kanfer & Ackerman, 2004).
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Recent studies have also emphasised the ever-changing character of motivation. Ployhart

(2008) posits that we should view motivation as a dynamic concept that evolves over time,

shaped by both enduring human traits and evolving environmental circumstances. This viewpoint

emphasises the necessity for organisations to embrace flexible and adaptable strategies for

motivating employees. With the rise of globalisation and the growing variety of the workforce,

the importance of cross-cultural variances in motivation has become more prominent. Erez

(2010) observes that cultural values have a substantial impact on employee motivation and their

reactions to various motivating approaches. Individualistic cultures tend to prioritise personal

achievement and liberty, whereas collectivistic cultures prioritise community cohesion and

loyalty.

Technology's emergence and the changing nature of work have introduced new factors to

consider in employee motivation. Organisations are currently facing the challenge of sustaining

employee engagement and motivation in virtual environments due to the increasing prevalence

of remote work and digital platforms (Cascio & Montealegre, 2016). In addition, the emergence

of the gig economy and non-traditional employment arrangements has prompted enquiries into

how to effectively incentivize individuals who may have fewer formal connections to a particular

business (Petriglieri et al., 2018). Employee motivation is a critical subject for research and

application in the fields of organizational psychology and management. The intricate nature and

extensive influence on individual and organizational results highlight the importance of ongoing

research and inventive methods to cultivate a motivated workforce.

2.1.2 Organizational Productivity

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Organisational productivity is a critical concept in management and organisational

studies, representing the efficiency with which an organisation converts inputs into outputs

(Tangen, 2005). It is a multidimensional construct that encompasses various aspects of

organisational performance, including efficiency, effectiveness, quality, and innovation (Sink &

Tuttle, 1989).

Productivity is commonly defined as the proportion of output to input (Prokopenko,

1987). However, in organisational contexts, this straightforward ratio becomes more intricate due

to the multiple character of both inputs (such as labour, money, materials) and outputs (such as

goods, services, customer pleasure). Therefore, organisational productivity is commonly

perceived as a comprehensive notion that encompasses both quantitative and qualitative aspects

(Pritchard, 1992).

The importance of organisational productivity cannot be overstated. It is widely

recognised as a key driver of economic growth, competitiveness, and long-term organisational

success (Porter, 1990). High levels of productivity enable organisations to produce more with

fewer resources, leading to increased profitability, higher wages for employees, and improved

living standards for society at large (Krugman, 1994).

Productivity measurement and management have evolved significantly over time.

Traditional approaches focused primarily on labour productivity, measuring output per worker or

per hour worked (Syverson, 2011). However, these measures have been criticised for their

narrow focus and inability to capture the full complexity of modern organisational processes

(Neely, 1999).
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In response, more comprehensive frameworks for productivity measurement have been

developed. For instance, the balanced scorecard approach, introduced by Kaplan and Norton

(1992), proposes a multidimensional view of organisational performance that includes financial,

customer, internal process, and learning and growth perspectives. Similarly, the performance

prism framework (Neely et al., 2002) emphasises the importance of stakeholder satisfaction and

contribution in assessing organisational productivity.

Recent studies have identified some crucial elements that impact the efficiency of an

organisation. The following items are included:

1. Technology and Innovation: Technology and innovation play a vital role in driving

productivity increase (Brynjolfsson & Hitt, 2000). Research has demonstrated that the

implementation of information and communication technology can greatly improve the

productivity of organisations (Bloom et al., 2012).

2. Human capital: Human capital refers to the skills, knowledge, and capacities of the

worker. These factors have a significant impact on productivity levels, as stated by

Becker (1994). Research conducted by Dearden et al. (2006) has established a positive

correlation between investments in staff training and development and enhanced

organisational productivity.

3. Organizational Structure and Management Practices: The way an organization is

structured and managed can have a significant impact on its productivity. Lean

management practices, for example, have been associated with higher productivity levels

(Bloom & Van Reenen, 2007).

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4. Work environment: Factors such as workplace design, organizational culture, and

employee well-being can influence productivity. A positive work environment has been

shown to enhance both individual and organisational productivity (Haynes, 2008).

5. External Factors: Productivity is also influenced by external factors such as market

competition, the regulatory environment, and macroeconomic conditions (Syverson,

2011).

The correlation between productivity and other organisational outcomes is intricate and

frequently reciprocal. Employee motivation is well recognised as a factor that influences

productivity. However, it is important to note that improved productivity can also result in

increased levels of job satisfaction and motivation (Judge et al., 2001). Organisational learning

and knowledge management have a mutual relationship with higher production (Argote &

Miron-Spektor, 2011).

Within the framework of globalisation and significant technical advancements, the notion

of organisational productivity is constantly developing. The emergence of the knowledge

economy has redirected attention towards intangible assets and intellectual capital as crucial

factors influencing productivity (Marr & Moustaghfir, 2005). In addition, the growing

significance of sustainability has given rise to the development of ideas like "sustainable

productivity," which takes into account the enduring environmental and social effects of

organisational operations (Jørgensen et al., 2009).

The COVID-19 epidemic has emphasised the necessity for flexible and robust methods of

managing production. Organisations have been compelled to swiftly adapt to distant work
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arrangements, digital revolutions, and evolving customer behaviours, all of which have

substantial ramifications for productivity (Bartik et al., 2020).

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2.1.3 Motivation Incentives

Motivation incentives are tools or strategies employed by organizations to encourage and

stimulate desired behaviors and performance among employees. These incentives are designed to

align individual goals with organizational objectives, thereby enhancing overall productivity and

effectiveness (Gerhart & Fang, 2015). The concept of motivation incentives is deeply rooted in

various motivational theories and has evolved significantly over time to encompass a wide range

of approaches.

Incentives can be broadly categorized into two main types: extrinsic and intrinsic (Ryan

& Deci, 2000). Extrinsic incentives are external rewards or punishments that motivate behavior,

while intrinsic incentives relate to the inherent satisfaction derived from the task itself. This

distinction is crucial in understanding the complex nature of human motivation in the workplace.

2.1.3.1 Financial Rewards

Financial rewards are among the most traditional and widely used extrinsic incentives.

These include:

1. Base Salary: The fixed amount an employee receives for their work, which provides a

stable foundation for motivation (Milkovich et al., 2011).

2. Performance-Based Bonuses: Additional payments tied to individual, team, or

organizational performance metrics (Nyberg et al., 2018).

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3. Profit-Sharing: Programs that distribute a portion of company profits to employees,

fostering a sense of ownership and alignment with organizational goals (Kruse et al.,

2010).

4. Stock Options: Offering employees the opportunity to purchase company stock at a

predetermined price, potentially leading to financial gain and increased commitment

(Core & Guay, 2001).

While financial rewards can be powerful motivators, research has shown that their

effectiveness can vary depending on factors such as individual preferences, job characteristics,

and cultural context (Rynes et al., 2004). Moreover, excessive focus on financial incentives may

lead to unintended consequences such as short-term thinking or unethical behavior (Ordóñez et

al., 2009).

2.1.3.2 Recognition Programs

Recognition programs are non-financial incentives designed to acknowledge and

appreciate employee contributions. These can include:

1. Employee of the Month/Year Awards: Formal recognition of outstanding performance

over a specific period (Luthans, 2000).

2. Peer Recognition Systems: Platforms that allow colleagues to recognize each other's

contributions, fostering a culture of appreciation (Brun & Dugas, 2008).

3. Public Acknowledgment: Verbal or written praise in front of colleagues or in company

communications (Gostick & Elton, 2007).

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4. Symbolic Awards: Trophies, certificates, or other tangible symbols of achievement

(Jeffrey & Shaffer, 2007).

Recognition programs can be particularly effective in boosting intrinsic motivation,

enhancing job satisfaction, and improving employee engagement (Bradler et al., 2016).

However, their success depends on factors such as perceived fairness, consistency, and alignment

with organizational values (Feys et al., 2013).

2.1.3.3 Career Development Opportunities

Career development opportunities serve as both extrinsic and intrinsic motivators,

offering tangible benefits while also satisfying employees' need for growth and self-actualization.

These include:

1. Training and Skill Development Programs: Formal and informal learning opportunities

that enhance employees' capabilities and value to the organization (Aguinis & Kraiger,

2009).

2. Mentorship Initiatives: Pairing less experienced employees with seasoned professionals

for guidance and support (Eby et al., 2008).

3. Clear Career Progression Paths: Transparent frameworks that outline potential career

trajectories within the organization (Baruch, 2004).

4. Job Rotation and Lateral Moves: Opportunities to gain diverse experiences across

different roles or departments (Campion et al., 1994).

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Research has consistently shown that career development opportunities are strong

predictors of job satisfaction, organizational commitment, and reduced turnover intentions

(Kraimer et al., 2011). However, the effectiveness of these initiatives depends on factors such as

organizational support, individual career aspirations, and the alignment between development

opportunities and business needs (Colquitt et al., 2000).

2.1.3.4 Work Environment

The work environment encompasses various factors that can serve as motivational

incentives:

1. Flexible Working Hours: Allowing employees to adjust their work schedules to better

balance personal and professional responsibilities (Baltes et al., 1999).

2. Remote Work Options: Providing the opportunity to work from locations outside the

traditional office setting (Gajendran & Harrison, 2007).

3. Improved Physical Workspace: Designing office spaces that promote comfort,

collaboration, and productivity (Vischer, 2007).

4. Team-Building Activities: Events and initiatives that foster positive relationships among

colleagues (Klein et al., 2009).

5. Work-Life Balance Initiatives: Programs and policies that support employees in

managing their personal and professional lives effectively (Beauregard & Henry, 2009).

A positive work environment can significantly enhance employee motivation, job

satisfaction, and overall well-being (Bakker & Demerouti, 2007). However, the impact of these
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factors can vary based on individual preferences, job characteristics, and organizational culture

(Johns, 2006).

Motivation incentives encompass a wide range of strategies that organizations can

employ to enhance employee performance and engagement. The effectiveness of these incentives

depends on various factors, including individual differences, organizational context, and the

specific nature of the work. As such, organizations often need to adopt a holistic and tailored

approach to motivation, combining different types of incentives to create a comprehensive and

effective motivational strategy (Cerasoli et al., 2014).

2.2 Theoretical Framework

The theoretical framework for understanding employee motivation and its impact on

organizational productivity draws upon several well-established theories in organizational

psychology and management. These theories provide a foundation for understanding the

complex relationships between motivation, incentives, and productivity.

2.2.1 Maslow's Hierarchy of Needs

Abraham Maslow's Hierarchy of Needs (1943) is a foundational theory in the study of

human motivation. Maslow proposed that human needs are arranged in a hierarchical order, with

basic physiological needs at the bottom and self-actualization at the top. The hierarchy consists

of five levels:

1. Physiological needs (e.g., food, water, shelter)

2. Safety needs (e.g., security, stability)

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3. Love and belongingness needs (e.g., relationships, social connections)

4. Esteem needs (e.g., recognition, status)

5. Self-actualization needs (e.g., personal growth, fulfillment)

In the context of workplace motivation, Maslow's theory suggests that organizations

should address employees' lower-level needs before focusing on higher-level needs (Wahba &

Bridwell, 1976). For instance, fair compensation and job security (addressing physiological and

safety needs) should be in place before implementing recognition programs or offering career

development opportunities (addressing esteem and self-actualization needs).

While Maslow's theory has been influential, it has also faced criticism for its rigid

hierarchical structure and lack of empirical support (Neher, 1991). Nevertheless, it continues to

provide a useful framework for understanding the diverse needs that can motivate employees in

the workplace.

2.2.2 Herzberg's Two-Factor Theory

Frederick Herzberg's Two-Factor Theory, also known as the Motivation-Hygiene Theory

(1959), proposes that job satisfaction and dissatisfaction are influenced by two distinct sets of

factors:

1. Hygiene Factors: These are extrinsic factors that, when absent, can lead to job

dissatisfaction. They include salary, job security, working conditions, company policies,

and interpersonal relations. However, their presence does not necessarily lead to job

satisfaction.
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2. Motivator Factors: These are intrinsic factors that, when present, contribute to job

satisfaction and motivation. They include achievement, recognition, the work itself,

responsibility, advancement, and growth.

Herzberg's theory suggests that addressing hygiene factors can prevent job

dissatisfaction, but to truly motivate employees and enhance productivity, organizations need to

focus on motivator factors (Herzberg et al., 1959). This theory has implications for the design of

motivation incentives, suggesting that a combination of both extrinsic and intrinsic rewards may

be most effective.

While the Two-Factor Theory has been influential in management practice, it has also

faced criticism for its methodological limitations and oversimplification of the relationship

between satisfaction and motivation (House & Wigdor, 1967). Despite these criticisms, the

theory continues to inform discussions about job design and motivation strategies.

2.2.3 Vroom's Expectancy Theory

Victor Vroom's Expectancy Theory (1964) provides a cognitive approach to

understanding motivation. The theory proposes that an individual's motivation is a function of

three factors:

1. Expectancy: The belief that increased effort will lead to increased performance.

2. Instrumentality: The belief that if one performs well, a valued outcome will be received.

3. Valence: The importance that the individual places on the expected outcome.

According to Vroom, motivation is the product of these three factors:

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EFFECT OF EMPLOYEE MOTIVATION

Motivation = Expectancy × Instrumentality × Valence

This theory suggests that employees will be motivated when they believe that: a) Their

effort will result in acceptable performance (expectancy) b) That performance will be rewarded

(instrumentality) c) The value of the rewards is highly positive (valence)

Vroom's theory has important implications for the design of motivation incentives. It

suggests that organizations should ensure that:

1. Employees have the necessary skills and resources to perform their jobs effectively

(addressing expectancy)

2. There is a clear link between performance and rewards (addressing instrumentality)

3. The rewards offered are valued by employees (addressing valence)

The Expectancy Theory has received considerable empirical support and has been

influential in management practice (Van Eerde & Thierry, 1996). However, it has been criticized

for its complexity and the difficulty in practically applying it to all workplace situations

(Mitchell, 1974).

2.2.4 Self-Determination Theory

Self-Determination Theory (SDT), developed by Deci and Ryan (1985), focuses on the

degree to which human behavior is self-motivated and self-determined. SDT proposes that

individuals have three innate psychological needs:

1. Autonomy: The need to feel in control of one's own behavior and goals
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EFFECT OF EMPLOYEE MOTIVATION

2. Competence: The need to gain mastery of tasks and learn different skills

3. Relatedness: The need to experience a sense of belonging and attachment to others

According to SDT, when these needs are satisfied, individuals experience enhanced self-

motivation and mental health. In the workplace context, this theory suggests that organizations

can enhance employee motivation by:

 Providing opportunities for autonomous decision-making

 Offering challenges that allow employees to develop and demonstrate competence

 Fostering a sense of community and belonging within the organization

SDT also distinguishes between intrinsic motivation (doing something because it is

inherently interesting or enjoyable) and extrinsic motivation (doing something because it leads to

a separable outcome). The theory proposes that extrinsic motivators can be internalized to

varying degrees, leading to different types of motivation ranging from external regulation to

integrated regulation (Ryan & Deci, 2000).

This theory has significant implications for the design of motivation incentives,

suggesting that organizations should focus on creating environments that support autonomy,

competence, and relatedness, rather than relying solely on extrinsic rewards.

2.2.5 Goal-Setting Theory

Developed by Edwin Locke and Gary Latham (1990), Goal-Setting Theory proposes that

specific and challenging goals, along with appropriate feedback, contribute to higher and better

task performance. The theory states that goals affect performance through four mechanisms:
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EFFECT OF EMPLOYEE MOTIVATION

1. Direction: Goals direct attention and effort toward goal-relevant activities

2. Effort: Goals mobilize effort in proportion to the perceived difficulty of the goal

3. Persistence: Goals encourage individuals to persist in their efforts over time

4. Strategy Development: Goals foster the development of strategies and action plans

According to this theory, the most effective performance seems to result when goals are

specific and challenging, when they are used to evaluate performance and linked to feedback on

results, and when they create commitment and acceptance.

Goal-Setting Theory has important implications for motivation incentives, suggesting that

organizations should:

 Set clear, specific, and challenging goals for employees

 Provide regular feedback on progress towards goals

 Ensure that goals are accepted and internalized by employees

 Link goal achievement to rewards and recognition

The theory has received substantial empirical support and has been widely applied in

management practice (Locke & Latham, 2002). However, it has been criticized for potentially

encouraging unethical behavior when goals are too specific or challenging (Ordóñez et al.,

2009).

These theories provide a rich theoretical framework for understanding employee

motivation and the design of effective motivation incentives. While each theory offers unique

insights, they collectively emphasize the complexity of human motivation and the need for a
 32

EFFECT OF EMPLOYEE MOTIVATION

multifaceted approach to motivation in the workplace. Organizations can draw upon these

theories to develop comprehensive motivation strategies that address both intrinsic and extrinsic

factors, set clear goals, meet psychological needs, and align rewards with employee values and

expectations.

2.3 Empirical Review

This section provides an overview of empirical studies that have investigated the

relationship between various motivation incentives and organizational productivity. The review

is structured around the main types of incentives discussed earlier: financial rewards, recognition

programs, career development opportunities, and work environment factors.

2.3.1 Financial Rewards and Employee Productivity

Numerous studies have examined the impact of financial rewards on employee

productivity. A meta-analysis by Jenkins et al. (1998) found a positive relationship between

financial incentives and performance quantity, but not quality. They concluded that financial

incentives were most effective for simple, routine tasks where performance was under the direct

control of the individual.

Lazear (2000) conducted a seminal study on the impact of piece-rate pay on worker

productivity at an auto glass company. He found that switching from hourly wages to piece-rate

pay increased average worker output by 44%, with about half of this gain coming from increased

productivity of existing workers and half from attracting more productive workers.
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EFFECT OF EMPLOYEE MOTIVATION

However, the effectiveness of financial rewards is not universal. A study by Ariely et al.

(2009) found that while moderate levels of financial incentives improved performance, high

levels of financial incentives led to decreased performance, particularly for tasks requiring

cognitive skill. This suggests a potential "choking under pressure" effect when stakes are too

high.

Gneezy and Rustichini (2000) famously demonstrated that introducing a small financial

incentive can sometimes decrease performance compared to no incentive at all, a phenomenon

they termed "pay enough or don't pay at all." This highlights the complex interaction between

intrinsic and extrinsic motivation.

More recently, Nyberg et al. (2016) conducted a meta-analysis of pay-for-performance

studies and found that the relationship between pay-for-performance and future performance is

generally positive but subject to multiple contingency factors, including pay plan type, pay plan

effectiveness, and employee performance level.

2.3.2 Impact of Recognition Programs on Performance

Recognition programs have been shown to have a significant positive impact on

employee performance and productivity. A field experiment by Bradler et al. (2016) found that

public recognition in the form of a thank-you card from the employer increased subsequent

performance substantially, particularly for employees who had not previously been high

performers.
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EFFECT OF EMPLOYEE MOTIVATION

Stajkovic and Luthans (2003) conducted a meta-analysis of organizational behavior

modification interventions and found that social recognition programs had a significant positive

effect on performance, with an average 17% improvement in performance.

However, the effectiveness of recognition programs can depend on how they are

implemented. Feys et al. (2013) found that employees' reactions to coworkers receiving

recognition depended on the perceived fairness of the recognition. When recognition was

perceived as unfair, it led to negative emotions and decreased helping behavior among

coworkers.

2.3.3 Career Development Opportunities and Motivation

Research has consistently shown a positive relationship between career development

opportunities and employee motivation and productivity. A longitudinal study by Kraimer et al.

(2011) found that perceived career opportunities within an organization were positively related to

job performance and negatively related to turnover intentions.

Lee and Bruvold (2003) found that employees' perceptions of investment in their

development were positively related to job satisfaction and organizational commitment, which in

turn were related to improved performance.

A meta-analysis by Colquitt et al. (2000) examined the relationship between training

motivation and training outcomes. They found that training motivation was strongly related to

learning outcomes and transfer of training to the job, highlighting the importance of employee

motivation in the success of career development initiatives.

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EFFECT OF EMPLOYEE MOTIVATION

2.3.4 Work Environment and Productivity

The impact of work environment on productivity has been the subject of numerous

studies. A meta-analysis by Gajendran and Harrison (2007) found that telecommuting had small

but positive effects on productivity, job satisfaction, and turnover intentions. However, high-

intensity telecommuting (more than 2.5 days a week) was associated with deterioration in

relationships with coworkers.

Flexible work arrangements have also been shown to have positive effects on

productivity. A meta-analysis by Baltes et al. (1999) found that flexible work schedules had

positive effects on productivity, job satisfaction, and absenteeism.

The physical work environment has also been shown to impact productivity. Vischer

(2007) reviewed studies on the effects of the physical environment on job performance and

found that factors such as lighting, temperature, noise, and office layout can significantly affect

employee comfort and productivity.

2.3.5 Integrated Approaches to Employee Motivation

Recent research has increasingly focused on integrated approaches to employee

motivation that combine multiple types of incentives. For example, Cerasoli et al. (2014)

conducted a meta-analysis examining the joint effects of intrinsic motivation and extrinsic

incentives on performance. They found that intrinsic motivation was a medium to strong

predictor of performance, regardless of whether incentives were present. However, incentives

and intrinsic motivation together accounted for 45% more variance in quality of performance

than incentives alone.

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EFFECT OF EMPLOYEE MOTIVATION

Similarly, Miao et al. (2013) conducted a meta-analysis on the effects of leadership on

employee motivation and found that transformational leadership, which often involves elements

of recognition, career development, and a positive work environment, had significant positive

effects on both intrinsic and extrinsic motivation.

In conclusion, the empirical evidence generally supports the positive impact of various

motivation incentives on employee productivity. However, the effectiveness of these incentives

can vary depending on factors such as the nature of the task, individual differences among

employees, and the specific context of implementation. This underscores the need for

organizations to adopt a nuanced, context-specific approach to employee motivation.

2.4 Research Gap

Despite the extensive body of research on employee motivation and its impact on

organizational productivity, several important gaps remain in the current literature. These gaps

present opportunities for further research and more comprehensive understanding of the complex

relationships between motivation incentives and productivity.

2.4.1 Limitations in Current Literature

One significant limitation in the existing literature is the predominance of short-term

studies. Many research projects examine the immediate or short-term effects of motivation

incentives on productivity, but fewer investigate the long-term sustainability of these effects. For

instance, while Lazear's (2000) study on piece-rate pay showed impressive short-term gains in

productivity, it did not explore whether these gains were maintained over extended periods or if

they led to potential negative consequences such as burnout or quality issues.

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EFFECT OF EMPLOYEE MOTIVATION

Another limitation is the tendency to study motivation incentives in isolation. While

many studies focus on specific types of incentives (e.g., financial rewards, recognition

programs), fewer examine the interactive effects of multiple incentives implemented

simultaneously. This approach may not accurately reflect the complex motivational

environments found in many organizations.

Furthermore, much of the existing research has been conducted in Western, developed

countries, potentially limiting the generalizability of findings to other cultural contexts. As noted

by Erez (2010), cultural values can significantly influence what motivates employees and how

they respond to different motivational strategies.

2.4.2 Need for Comprehensive Analysis

There is a pressing need for more comprehensive analyses that consider the interplay

between various motivation incentives and their combined impact on organizational productivity.

While meta-analyses like that of Cerasoli et al. (2014) have begun to address this gap by

examining the joint effects of intrinsic motivation and extrinsic incentives, more research is

needed to understand how different combinations of incentives interact to influence productivity.

Additionally, there is a need for more studies that consider the role of individual

differences in the effectiveness of motivation incentives. Factors such as personality traits, career

stage, and personal values may moderate the relationship between incentives and productivity,

but these factors are often overlooked in broader organizational studies.

2.4.3 Long-term Impact of Motivational Incentives

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EFFECT OF EMPLOYEE MOTIVATION

The long-term impact of motivational incentives on organizational productivity remains

an under-researched area. While some longitudinal studies exist, such as Kraimer et al.'s (2011)

research on career opportunities and job performance, there is a need for more extended studies

that track the effects of motivation incentives over several years. Such research could provide

valuable insights into the sustainability of various motivational strategies and their long-term

impact on both individual and organizational performance.

Moreover, the potential negative long-term consequences of certain motivation incentives

deserve further attention. For example, while performance-based financial incentives may boost

short-term productivity, their long-term effects on employee well-being, creativity, and ethical

behavior are less well understood and require further investigation.

2.5. Summary of Literature Reviewed

The literature review has provided a comprehensive overview of the theoretical

foundations and empirical evidence related to employee motivation incentives and their impact

on organizational productivity. Key theories such as Maslow's Hierarchy of Needs, Herzberg's

Two-Factor Theory, Vroom's Expectancy Theory, Self-Determination Theory, and Goal-Setting

Theory offer valuable frameworks for understanding the complex nature of employee

motivation.

Empirical studies have generally supported the positive impact of various motivation

incentives on productivity. Financial rewards have been shown to enhance performance,

particularly for simple, routine tasks. Recognition programs have demonstrated significant

positive effects on employee performance, especially when perceived as fair. Career

 39

EFFECT OF EMPLOYEE MOTIVATION

development opportunities have been linked to improved job performance and reduced turnover

intentions. A positive work environment, including factors such as flexible work arrangements

and well-designed physical spaces, has also been associated with increased productivity.

However, the review has also highlighted several important gaps in the current literature.

These include the need for more long-term studies, comprehensive analyses of multiple

incentives implemented simultaneously, and research that considers cultural and individual

differences in motivation. Additionally, the potential negative long-term consequences of certain

motivation strategies require further investigation.

In conclusion, while substantial progress has been made in understanding the relationship

between employee motivation incentives and organizational productivity, there remains

significant scope for further research. This research will be crucial in helping organizations

design and implement motivation strategies that are not only effective but also sustainable and

aligned with broader organizational goals and employee well-being.

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EFFECT OF EMPLOYEE MOTIVATION

Chapter 3

Research Methodology

3.1. Research Design

This study employs an explanatory sequential mixed-methods design to investigate the

effect of employee motivation incentives on organizational productivity. This design involves

collecting and analyzing quantitative data first, followed by qualitative data collection and

analysis to help explain or elaborate on the quantitative results.

The research will be conducted in two main phases:

Phase 1 (Quantitative): A cross-sectional survey will be administered to employees and

managers across multiple organizations. This survey will gather data on types of motivation

incentives used, productivity metrics, and employee satisfaction levels.

Phase 2 (Qualitative): Based on the quantitative results, in-depth interviews and focus

groups will be conducted with selected employees and managers to explore the reasons behind

the observed patterns and to gain deeper insights into the relationship between motivation

incentives and productivity.

This mixed-methods approach is chosen for its ability to provide a comprehensive

understanding of the complex relationship between motivation incentives and organizational

productivity. The quantitative phase will allow for statistical analysis of relationships between
 41

EFFECT OF EMPLOYEE MOTIVATION

variables, while the qualitative phase will offer rich, contextual data to explain these

relationships.

3.2. Area of Study

The study will be conducted in Lagos State, Nigeria, focusing on medium to large-sized

organizations in the manufacturing and service sectors. This area is chosen for its diverse

economic landscape, featuring a mix of traditional industries and emerging sectors, which allows

for a comprehensive examination of various motivation strategies across different organizational

contexts.

3.3. Population of Study

The population for this study consists of employees and managers working in medium to

large-sized organizations (50+ employees) in the manufacturing and service sectors within Lagos

State. This population is estimated to be approximately 150,000 individuals.

This population estimate includes:

 Approximately 90,000 employees in the manufacturing sector

 Approximately 60,000 employees in the service sector

The study will include employees at various organizational levels, from entry-level

positions to senior management, to ensure a comprehensive representation of perspectives on

motivation incentives and their impact on productivity. This diverse population allows for a

thorough examination of how different motivation strategies affect productivity across various

job roles and industries within the region.

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EFFECT OF EMPLOYEE MOTIVATION

3.4. Sample and Sampling Technique

For the quantitative phase, a stratified random sampling technique will be used to ensure

representation across different organizational levels and sectors. The sample size will be

determined using the following formula for finite populations:

n = [N * Z^2 * p * (1-p)] / [e^2 * (N-1) + Z^2 * p * (1-p)]

Where: n = sample size N = population size (150,000) Z = Z-score (1.96 for 95%

confidence level) p = estimated proportion of the population (0.5 for maximum variability) e =

margin of error (0.05 for 5%)

Applying this formula:

n = [150,000 * 1.96^2 * 0.5 * (1-0.5)] / [0.05^2 * (150,000-1) + 1.96^2 * 0.5 * (1-0.5)] n

= 383.16

Rounding up, the minimum sample size required is 384 participants.

To account for potential non-responses and to ensure adequate representation across

different strata, we will increase this sample size by 20%. Therefore, the final sample size for the

quantitative phase will be 461 participants.

This sample will be stratified as follows:

 277 participants (60%) from the manufacturing sector

 184 participants (40%) from the service sector

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EFFECT OF EMPLOYEE MOTIVATION

Within each sector, further stratification will ensure representation across different

organizational levels (entry-level, mid-level, and senior management).

For the qualitative phase, purposive sampling will be used to select participants for

interviews and focus groups. The selection will be based on the quantitative results, aiming to

include individuals who can provide diverse and insightful perspectives on the research

questions. Approximately 30 individuals will be selected for in-depth interviews, and 4-6 focus

groups (6-8 participants each) will be conducted.

This sampling strategy aims to provide a statistically representative sample for the

quantitative analysis while allowing for in-depth exploration of key themes in the qualitative

phase.

3.5. Instruments for Research

The following instruments will be used for data collection:

Quantitative Phase:

a) Employee Motivation and Productivity Questionnaire (EMPQ): A structured

questionnaire designed to measure employees' perceptions of various motivation incentives and

self-reported productivity.

b) Organizational Performance Metrics (OPM): A data collection tool to gather

objective productivity metrics from participating organizations.

Qualitative Phase:
 44

EFFECT OF EMPLOYEE MOTIVATION

a) Semi-structured Interview Guide: A flexible interview protocol designed to explore

employees' and managers' experiences with motivation incentives and their perceived impact on

productivity.

b) Focus Group Discussion Guide: A structured guide for facilitating group discussions

on the relationship between motivation incentives and organizational productivity.

3.6. Validation of Instrument

To ensure the validity of the research instruments:

1. Content Validity: The questionnaires and interview guides will be reviewed by a panel

of experts in organizational psychology and human resource management to ensure they

adequately cover the domain of employee motivation and productivity.

2. Face Validity: A pilot study will be conducted with a small group of employees (not

included in the main study) to ensure the clarity and relevance of the questions.

3. Construct Validity: Factor analysis will be performed on the quantitative data to confirm

the underlying structure of the motivation and productivity constructs.

3.7. Reliability of Instrument

The reliability of the quantitative instruments will be assessed using:

1. Cronbach's Alpha: To measure the internal consistency of the EMPQ scales.

2. Test-Retest Reliability: A subset of participants will complete the EMPQ twice, two

weeks apart, to assess the stability of the measures over time.

 45

EFFECT OF EMPLOYEE MOTIVATION

For the qualitative phase, reliability will be enhanced through:

1. Use of a standardized interview and focus group protocol.

2. Training of multiple interviewers to ensure consistency in data collection.

3. Inter-rater reliability checks on the coding of qualitative data.

3.8. Method of Data Analysis

Quantitative Data Analysis:

 Descriptive statistics (means, standard deviations, frequencies) to summarize the data.

 Inferential statistics (correlation analysis, multiple regression, ANOVA) to examine

relationships between variables and test hypotheses.

 Structural Equation Modeling (SEM) to assess the overall fit of the proposed model

linking motivation incentives to productivity.

Qualitative Data Analysis:

 Thematic analysis of interview and focus group transcripts to identify key themes and

patterns.

 Content analysis to quantify the frequency of specific themes or responses.

Integration of Quantitative and Qualitative Data:

 Joint displays will be used to present quantitative results alongside qualitative findings.

 A narrative approach will be employed to explain how the qualitative results help to

interpret and contextualize the quantitative findings.

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EFFECT OF EMPLOYEE MOTIVATION

3.9. Ethical Considerations

The following ethical considerations will be adhered to throughout the research process:

1. Informed Consent: All participants will be provided with detailed information about the

study and asked to provide written consent before participation.

2. Confidentiality and Anonymity: Participant identities and organizational affiliations will

be kept confidential. Data will be anonymized and stored securely.

3. Voluntary Participation: Participants will be informed of their right to withdraw from the

study at any time without penalty.

4. Institutional Review Board (IRB) Approval: The research protocol will be submitted for

review and approval by the relevant IRB before data collection begins.

5. Data Protection: All data will be stored securely in accordance with data protection

regulations.

6. Feedback to Participants: A summary of the research findings will be made available to

all participants and participating organizations.

7. Avoiding Harm: The research design and data collection methods will be carefully

considered to minimize any potential psychological or professional risks to participants.

By adhering to these ethical considerations, the study aims to protect the rights and well-

being of all participants while ensuring the integrity of the research process.
 47

EFFECT OF EMPLOYEE MOTIVATION

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