The Problem with ESOP’s
February 12, 2025
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All of us need to be motivated to get work done.
We might be motivated by the lure of financial rewards like bonuses, pay hikes, and other monetary benefits.
We also might be motivated by recognition, reward, fame, and glory.
Thirdly, there are some of us who are motivated by the fulfillment that comes from doing a good job.
Finally, we might be motivated by altruistic desires of helping society and building a better world.
This is the model of motivation that has been described by the legendary organizational behavior theorist, Abraham Maslow. The different levels of motivation in each case correspond to the different life stages that an individual goes through and hence, the level of motivation and the drivers of motivation vary from individual to individual.
The Hygiene theory makes the case for the presence and absence of motivators. In this theory, we would be demoralized if the motivators are not in place and when they are in place, the base level of motivation is guaranteed. Hence, the implications of the theories of motivation are that rewards (financial and non-financial) play an extremely important role in motivating individuals.
Given the background described above, organizations must evolve reward systems that motivate each individual according to his or her level of self-development and need for either monetary benefit or fulfillment imperative. In this context, it is important to note that many multinational companies have a financial component that motivates employees and a non-financial component like honoring the employees, publicizing their achievements, and making senior management talk to these employees for their contributions.
The point here is that both financial and non-financial rewards are important for individuals to be motivated and organizations must design reward systems that take into account these aspects.
In many companies, it is the practice to earmark certain employees as those in the “Fast Track” or “High Potentials” and then devise specific reward systems for these employees. This is the practice in companies like Infosys where employees are identified early on and appropriate reward systems designed to ensure that they retain their motivation levels throughout their careers with the company.
The important aspect here is that one need to stay focused and motivated throughout one’s career and it is easy to lose focus and be demoralized at each stage of one’s career. As those in the corporate sector would attest, once one loses focus and is distracted, the downward slope is swift and steep. After all, in many sectors, the last performance is the one, which counts, and hence, there is a need for individuals to stay focused throughout.
Organizations must match the reward systems with the motivational needs of employees and hence, the package that they offer to potential and existing employees must be a mix of financial and non-financial rewards.
As economists would point out, the role of incentives in motivating employees is indeed high and hence the right kind of incentives must be rolled out. It is not simply enough if companies keep raising the salaries or giving higher bonuses. It is also not enough if companies flatter their employees and publicize their achievements. The key aspect is the match between the rewards that are offered to the employee and his or her inner needs.
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