Rewarding of the employee is a cost-benefit incentive that requires informed decision making by the organization. Deciding which investment to apply for a company is a critical process in management. What many do not know or acknowledge is that employee motivation is a major cost benefit investment in all enterprises (Miura, 2018). If employees are not motivated and treated nicely by the host organization, performance will not be appealing. Therefore, the organization should be willing to spend on any mechanism that helps align individual goals to those of the firm. These means can be cash, non-monetary rewards or benefit packages.
Cost-benefit analysis for monetary incentives
If in Bull Whip Company we decide to financially motivate our employees, we will suddenly incur a sunk cost. The cost has no guarantee of being recovered although there are future changes that could help restore it. If our organization's employees will work hard becouse monetary motivation is given to them by the organization, this cost will automatically be regained through high productivity. In motivating employees financially, Bull Whip Company will focus on production, marketing and sales department. We intend to invest a maximum of 500,000 dollars as the cost of financially motivating our employees. If the initiative works, the general profitability will be more than double. Alternatively, we could assume the need to motivate our employees and end up suffering an opportunity cost of 500,000 dollars in return.
Delegate your assignment to our experts and they will do the rest.
Getting our employees used to monetary motivation is a costly investment. The program requires consistency to work. Due to economic instability, Bull Whip cannot provide this guarantee to its workforce. Therefore, during an economic recession when monetary motivation is not an option, we could end up suffering huge opportunity cost (Osabiya, 2015). A program such as giving employees in sales 20% commission per every sale they make can go a long way in motivating them to work hard. However, some workers can be reluctant when the job gets tough. Doing this in harsh economic times is a risk as the chance of not recovering the cost spent on the commission may be felt. Our employees may end up enjoying the 20% commission and the company suffering the respective sunk cost.
Cost-benefit analysis in non-monetary incentives
Rewarding our employees through awards and promotions will be associated with both costs of the program and potential benefits to be gained. For Bull Whip Company to invest in non-monetary incentives for various employees, the program could be costly depending on its value. If employees don’t take measures to improve their performance, the sunk cost will be felt by the organization (Osabiya, 2015). In Bull Whip, employees will be used for sampling products made. Instead of selling all products to the customer, employees will get a chance of using them first as a way to motivate them. These products come at a production cost, hence employees should work extra hard to ensure Bull Whip Company does not suffer sunk cost or opportunity cost. The opportunity cost of this program would be a poor performance by employees hence not recovering the cost of products given to them in comparison to if they got sold.
If the cost of these items amounted to 5000 dollars, the opportunity cost of the similar amount will be incurred. The sunk cost, however, could be lower depending on the level of productivity output made by employees if the program is put in place. Promotions, however, could portray the same effects to Bull Whip production wise but not cause sunk cost. When an employee is promoted for motivation purpose, the organization will expect payback through loyalty and quality performance. However, individuals may achieve their senior position and relax since their goals have been reached. If the employee thinks like this, the opportunity cost of having made an alternative decision to promote a different individual will be experienced (Butt et al., 2015). Employee’s characters and personalities differ a lot, hence before Bull Whip Company promotes employees, proper vetting should be done in advance to determine their investment worth. To reap the best benefits from employees through motivation, the organization should ensure that the right person is promoted and to respectful rank.
Cost-benefit analysis in benefits packages and pay increase
In the organization, employee motivation programs could be done through issuing of the gym classes benefit plan for all workers. The initiative will be meant to make workers feel appreciated and worthy to the company. Such initiatives will be highly appreciated by employees who subscribe and to show their gratitude, they become loyal and more hardworking (Osabiya, 2015). However, not all employees are affected by certain benefits packages hence many might feel left out. Therefore, the organization should ensure the benefit plan covers all workers not a selected few since everyone is crucial to productivity. The cost of this program will be estimated at 2 million dollars per year. If it works to motivate employees, benefits of over 10 million dollars can be expected. If the program is put in place and does not work to motivate employees, we will suffer an opportunity cost of 2 million dollars.
Health benefits, parking space reservations and yearly pay increase are most popular in organizations benefit packages. Our organization could promise employees end of a year pay increase of 5%. The program could be very costly if it does not motivate employees as expected. The initiative may not directly influence productivity but could help retain workers. Due to the scarcity of workers and cost associated in employing new ones, Bull Whip Company will not suffer as its employees will be retained. However, a sunk cost of 5% for every employee motivated will experience if there will be turnover in the beginning of the year. The opportunity cost of not doing this could be a loss of employees.
A worker who will earn Bull Whip 3 million dollars yearly should be rewarded with at least 1000 dollars pay increase. In such a case, the benefit outweighs associated cost by 2.9 million dollars. Such investment is worth making especially when good workers are few in the organization. Offering special packing reservation for certain personnel will costs the organization almost nothing or very little. Hence, if it will motivate employees to work harder, there is no harm in doing it. Targeting employee’s medical cover to trigger motivation will be a smart move. People do not get sick all the time hence, it will be a cost-effective move to invest in such programs and also improve productivity.
Conclusion
Every decision made by an organization to motivate employees has its cost-benefit effect. In most cases, such initiatives always bear fruits in time. The cost associated with investing in employees is short-lived as their performance helps leap more benefits than the input. Therefore, every organization should balance between the type of motivation techniques to be used and the benefits sought before making any decision.
References
Butt, M., Hu, P., Shafi, K., & Malik, B. H. (2015). Study of organizational environment, incentives and promotion and its effect on employees motivation. International Journal of Academic Research in Accounting, Finance and Management Sciences, 5(3), 91-99.
Miura, G. (2018). Cost-benefit analysis. Nature chemical biology, 14(10), 903.
Osabiya, B. J. (2015). The effect of employees motivation on organizational performance. Journal of public administration and policy research, 7(4), 62-75.
