How effective are financial rewards for learning?

Financial motivation may benefit in the short term, but it is only intrinsic motivation that works in the long term.

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Every good organisation will have a learning and development programme in place to help its employees grow and contribute in greater quality. However, getting results from an L&D programme is easier said than done. If there are a thousand employees in an organisation, usually only 30 per cent or less will show any interest at all in reskilling. The majority of the workforce may think of reskilling as extra work.

Every good manager knows that keeping employees motivated is the key to achieving productivity and quality. Different managers employ different techniques from a vast array of tools available to them. Most of them are incentives of a financial nature.

Can financial gratification be a good motivation for employees to reskill?

A monetary perk upon successful upskilling is usually provided in some companies along the line of a two to three per cent hike in pay. However, using financial incentives can be detrimental for a company, in the long term.

Bonuses for completing a learning exercise may lead to increased employee participation, but in the end, they may not result in much learning. Workers may rush to join and complete as many courses as they can, in order to receive more money. The organisation, on the other hand, will end up having a highly certified workforce for sure, but whether that workforce would have really learnt anything would be doubtful.

Moreover, there are potential fallouts such as poor performance leading to poor delivery on quality of products, which in turn, can incur financial costs to the company.

Anurag Verma

Standalone financial incentives will not motivate employees these days. It has to be a combination of people recognised for their work, getting opportunity to work in leading projects and along with it and coupled with some sort of financial incentive is what people look forward to

Ganesh Chandan V, CHRO, Tata Projects, reveals that financial incentives for learning have been altogether done away with at Tata Projects. “Last year, we revised our policy and now we have a formal policy, where career progression is linked to certifications and performance,” he says.

Chandan explains that the traditional practice was to provide incentives based only on performance or on the basis of performance and potential in an individual. However, this was found to be detrimental for the organisation because workers were not reskilling. After the policy revision last year, the current mandate is that employees need to acquire appropriate certification first and then deliver on performance too, in order to progress in their career.

“The qualifications or specifications required for every level in the work hierarchy need to be clearly defined and a robust L&D system must be in place, for this to work”, adds Chandan.

Another point is that financial motivation can be beneficial only in the short term. If employees are offered a certain reward every time for upskilling or reskilling, they may be motivated to only receive that extra money, because in the initial run every hike matters. However, once employees reach a certain senior position, they may begin thinking that they are a valuable resource to the organisation and do not need to upskill anymore. The motivation to learn new things significantly drops for people with age and seniority.

Anurag Verma,VP-HR, Uniphore, says, “Standalone financial incentives will not motivate employees these days. It has to be a combination of people recognised for their work, getting opportunity to work in leading projects and along with it and coupled with some sort of financial incentive is what people look forward to. Motivation has to be more holistic in that sense and one has to constantly innovate in that.”

Moreover, incentives offered will have to be quite large and significant at this point. Continuously providing such perks may lead to the company incurring heavy costs in the long run, so much so that incentives may overrun the profits gained.

Ganesh Chandan

The qualifications or specifications required for every level in the work hierarchy need to be clearly defined and a robust L&D system must be in place, for this to work

Rather than financial motivation, a roadmap to career progression will be a better incentive. Another reason for this is that money does not remain a motivator always. It can act as an external motivator while starting out, but once a person reaches a certain point in his or her life, what matters more is intrinsic motivation. That can only come from achievement, and linking that motivation to career progression is the way to produce sustainable results.

Organisations need to offer opportunities for career progression, based on their willingness to learn and their ability to acquire more knowledge. Having certified professionals in every arena can be a good way of flaunting or presenting to the external world one’s organisational competencies, in a more meaningful and scientific manner.

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