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Non-monetary reward and team performance in start-up projects

Written by Philip S.

 

1. Introduction

Modern organisations are constantly searching for new methods to improve the performance of their employees in order to achieve better financial results (Saraswat and Arora, 2016). The use of different incentives is one of the ways to increase the commitment of individuals and teams. The contemporary theories such as the Motivation-Hygiene theory by Herzberg suggest that non-monetary reward may be as effective for this purpose as monetary methods (Herzberg, 2017). This is highly relevant for start-ups that are usually limited in terms of available resources and have to reduce their internal spending during the first stages of product development (Burton, 2017). The aim of this essay is to explore how non-monetary reward can influence team performance in start-up projects.

 

2. Significance of Non-Monetary Reward

Non-monetary rewards may include a positive working environment, training and development opportunities, empowerment and autonomy, recognition of individual achievements, flexible working arrangements and team rewards (Saraswat and Arora, 2016). These instruments are successfully applied by many global companies including Coca-Cola and Nestle. That said, start-ups may not be able to provide such corporate-level advantages as professional organisations membership and corporate training programmes. The relevance of non-monetary reward for increasing motivation and job performance was recognised in the work by Fredrick Herzberg who developed the Motivation-Hygiene theory (Herzberg, 2017). This concept suggests that monetary compensation and other tangible motivators have a limited impact as ‘hygiene’ factors or the incentives that are expected from all organisations and are standard across similar job positions. At the same time, non-monetary rewards including the sense of achievement, the positive working environment or the balance between employee talents and work goals can provide better motivational results exceeding those of ‘hygiene’ factors in many cases (Nakhate, 2016). A summary of hygiene factors as well as motivators can be found in the Appendix.

According to Pettersen et al. (2015), start-up members are highly motivated by social and identity-based factors during the growth stage, while calculative and monetary incentives become more relevant during the subsequent stages. This effect is largely attributed to the innovative drive associated with new knowledge generation and the development of genuine products. Unfortunately, the aforementioned study was focused on business incubation in the educational context and may be limited in terms of its generalisability. The analysis of entrepreneurial start-ups by Staniewski and Awruk (2015) revealed that pull-based motivations associated with personal satisfaction and the sense of achievement were highly significant for the overall motivation and performance of the studied organisations. However, the inspirational capability of non-monetary factors was limited by the need to provide financial resources for the realisation of innovative ideas. Hence, monetary reward can be viewed as a hygiene factor, while non-monetary reward can be perceived as a motivator within the scope of the Motivation-Hygiene theory.

At the same time, the study by Gabriel and Nwaeke (2015) discovered no positive correlation between job autonomy, job enrichment and employee satisfaction. This may indicate that non-monetary rewards vary in their efficiency and should be selected on a case-by-case basis depending on specific team composition and needs. Some members may be specifically motivated by self-development programmes that allow them to increase their professional competences, which is also beneficial for team performance (Emerole, 2015). Such opportunities may not be available in all start-up organisations or may take the form of transformational leadership-based education. On the one hand, incentives such as empowerment, job recognition and recognition by the organisation may be highly valuable for employees and increase their job satisfaction (Haider et al., 2015). On the other hand, the correlation between their utilisation and the resulting job performance may be indirect and can vary depending on particular industries, company sizes and employee preferences. That said, greater employee engagement improves teamwork quality, and a positive working environment has a significant impact on firm performance (Waqas, 2014). Therefore, it can be suggested that non-monetary rewards can be highly relevant for maintaining long-term commitment and increasing the overall effectiveness of company operations.

 

3. Team Performance in Start-Up Projects

The performance of individuals and teams in start-ups is defined by a large number of factors including the selected leadership style (Zaech and Baldegger, 2017). As the choice of incentives is closely associated with follower preferences, it can be assumed that non-monetary rewards may be more effective for transformational leaders, while transactional leaders rely on tangible ones. At the same time, the innovative nature of start-ups may also substantiate the choice of intangible motivators such as recognition and empowerment that are characteristic to the transformational style. According to Barnett and Weidenfeller (2016), the performance of teams was dependent on coordination, cognitive, affective and motivational processes. Some of these dimensions involved relationship-based components as well as the overall sense of collective confidence and the need to acquire new skills through teamwork experiences. These factors can be linked to non-monetary motivators including the need to improve one’s competence, to realise the full potential in the sphere of operations and to enjoy high-quality collaboration while developing one’s professional skills in a supportive environment.

Teamwork is an important empowerment practice that is highly significant for both start-ups and established organisations (Bendickson et al., 2017). Organisational climate can be viewed as a necessary prerequisite for building self-organised and self-managed work units capable of developing complex and innovative projects. Therefore, environment can also serve as a powerful motivator that stimulates employee retention through supporting the professional development of team specialists within the scope of their cooperation with the company and their devotion to the common goal. In start-ups, members generally demonstrate greater effectiveness and better outputs in comparison with individual projects (Klotz et al., 2014). This effect is explained by the synergies realised through the collaboration of talented individuals working on the same problem and contributing their expertise and skills to its resolution. This also raises the problem of achieving a steady performance through offering proper incentives to motivate team members.

The analysis of software start-up projects by Unterkalmsteiner et al. (2016) revealed that individual motivations were more relevant for team performance than corporate agendas. At the same time, financial incentives were often limited due to the early stage of company development and the lack of established customer databases, which emphasises the significance of non-monetary rewards for retaining key specialists and ensuring that they are highly motivated and provide positive results. The findings of Indriyani (2017) indicated that both monetary and non-monetary factors had been relevant for ensuring good team performance in start-ups. However, the second type of incentives had to be tailored to the needs of individual employees because work schedule flexibility and other intangible benefits could be relevant for some workers and completely irrelevant for others. Hence, a team performance increase from non-monetary compensation depends on the quality of management and resources allocation.

Non-monetary rewards are also highly compatible with start-up financing arrangements such as crowdfunding where tangible and intangible benefits reflect the contribution to the company made by prospective customers (Burton, 2017). In a similar manner, some projects can offer non-monetary incentives such as the inclusion of team member names into the authors list or the capability to take part in interviews and publications representing the company in mass media. This can be especially significant for creative team members that often prefer non-financial rewards to financial ones (Hewison and Holden, 2016). However, this approach is associated with transformational leadership and requires high cultural compatibility with the goals and values of the organisation. This can make it highly efficient in start-ups that are often founded by small highly motivated teams united by common goals and principles.

It can be assumed that start-ups sometimes have to rely on non-monetary incentives due to the limited availability of financial resources and the small number of employees (Weber, 2016). That said, team members often have the opportunity to work with industry professionals or discuss their personal projects with them. This experience may be attractive to young specialists and viewed as valuable as regular salaries, which positively influence team performance. Another non-monetary incentive is the involvement of well-recognised sponsors and consulting companies (Sethi, 2016). Firstly, the cooperation with these organisations stimulates team members to contribute to the start-up project in order to be recognised by their representatives. Secondly, such relationships can be highly beneficial for the participating specialists in the future within the scope of their own professional activities. This proves to be an additional motivator for achieving good performance and teamwork in organisations.

 

4. Conclusion

It can be concluded that non-monetary rewards are an important prerequisite of team performance in start-up projects and organisations of all sizes (Hewison and Holden, 2016; Unterkalmsteiner et al., 2016). The effectiveness of these instruments depends on the needs of individual employees and their personal preferences (Indriyani, 2017). Hence, it can be recommended that the managers of start-up projects should select specific motivators on the basis of their team composition and available resources in order to maximise the performance of their units. Additionally, transformational leadership can be viewed as the optimal choice for start-ups as this leadership style is highly compatible with non-monetary rewards and the focus on individual development and empowerment (Zaech and Baldegger, 2017).

 

References

Barnett, R. and Weidenfeller, N. (2016) “Shared Leadership and Team Performance”, Advances in Developing Human Resources, 18 (3), pp. 334-351.

Bendickson, J., Muldoon, J., Ligouri, E. and Midgett, C. (2017) “High Performance Work Systems: A Necessity for Startups”, Journal of Small Business Strategy, 27 (2), pp. 1-12.

Burton, S. (2017) Engaged Scholarship and Civic Responsibility in Higher Education, Hershey: IGI Global.

Emerole, O. (2015) “Effect of Non-Monetary Rewards on Productivity of Employees among Selected Government Parastatals in Abia State, Nigeria”, IOSR Journal of Business and Management, 17 (4), pp. 6-11.

Gabriel, J. and Nwaeke, L. (2015) “Non-financial incentives and job satisfaction among hotel workers in Port Harcourt”, Journal of Scientific Research and Reports, 6 (3), pp. 228-236.

Haider, M., Aamir, A., Hamid, A. and Hashim, M. (2015) “A literature analysis on the importance of non-financial rewards for employees’ job satisfaction”, Abasyn Journal of Social Sciences, 8 (2), pp. 341-354.

Herzberg, F. (2017) Motivation to Work, London: Routledge.

Hewison, R. and Holden, J. (2016) The cultural leadership handbook: how to run a creative organization, London: CRC Press.

Indriyani, A. (2017) “Effect of Compensation and Benefit to Employee Engagement through Organisation Brand in Indonesia’s Startup Company”, Jurnal Manajemen Teori dan Terapan| Journal of Theory and Applied Management, 10 (1), pp. 83-92.

Jex, S. and Britt, T. (2014) Organizational Psychology: A Scientist-Practitioner Approach, Chichester: John Wiley & Sons.

Klotz, A., Hmieleski, K., Bradley, B. and Busenitz, L. (2014) “New venture teams: A review of the literature and roadmap for future research”, Journal of Management, 40 (1), pp. 226-255.

Nakhate, V. (2016) “Critical Assessment of Fredrick Herzberg's Theory of Motivation with Reference to Changing Perception of Indian Pharma Field Force in Pune Region”, The International Journal of Business & Management, 4 (1), pp. 182-190.

Pettersen, I., Aarstad, J., Hovig, O. and Tobiassen, A. (2015) “Business incubation and the network resources of start-ups”, Journal of Innovation and Entrepreneurship, 5 (1), pp. 7-24.

Saraswat, Y. and Arora, K. (2016) “Non-monetary rewards in manufacturing industry”, International Journal of Research in IT and Management, 6 (5), pp. 157-172.

Sethi, A. (2016) From science to startup: the inside track of technology entrepreneurship, Berlin: Springer Science & Business Media.

Staniewski, M. and Awruk, K. (2015) “Motivating factors and barriers in the commencement of one’s own business for potential entrepreneurs”, Ekonomska istraživanja, 28 (1), pp. 583-592.

Unterkalmsteiner, M., Abrahamsson, P., Wang, X., Nguyen-Duc, A., Shah, S., Bajwa, S., Baltes, G., Conboy, K., Cullina, E., Dennehy, D. and Edison, H. (2016) “Software Startups–A Research Agenda”, e-Informatica Software Engineering Journal, 10 (1), pp. 89-123.

Waqas, Z. (2014) “The Effect of Monetary and Non-Monetary Rewards on Employee Engagement and Firm Performance”, European Journal of Business and Management, 6 (31), pp. 73-82.

Weber, E. (2016) Advisory Boards in Startups: Investigating the Roles of Advisory Boards in German Technology-Based Startups, Berlin: Springer Science & Business Media.

Zaech, S. and Baldegger, U. (2017) “Leadership in start-ups”, International Small Business Journal, 35 (2), pp. 157-177.

 

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