Perceived Effects of Financial Incentives Systems on Work Performance of Employees in a Local Small-Scale Enterprise

Abstract

The Philippine economy is mostly composed of agricultural industries and light industries. By 1995 the number of local business establishments was recorded at around 250,000, majority of which (99%) are Small and Medium enterprises and the remaining 1% composed of large industries. The function of Small and Medium Business Enterprises in the Philippines is not just isolated to the production of wealth or capital. They are also essential in the dispersal of new industries to the countryside and in providing employment for Filipinos. In both the manufacturing and service sectors, small and medium enterprises hold up 67% of the job market, generating approximately two million jobs, 33% percent of employment is supplied by the larger enterprises. Because of this obvious prevalence of light industries in the Philippines, it would be of interest to us to study their methods and get an idea of how majority of the working population is being managed. This paper studies one aspect of motivational methods in the management of human resources - financial incentive systems. It postulates that these systems improve employee work performance. This study is divided into 5 chapters. The first chapter contains the background of the organization under study and the basis and framework for the study according to different theories, primarily that of Karl Popper's. It states that the hypothesis can be disproved or proven through observation and questioning of the Flexy Components Inc.'s staff. This segment also mentions the issues that this study hopes to tackle, as well as the subjects that it does not cover. The second chapter discusses financial incentive systems, its relations to the broader aspects of the organizational system and its role as a motivator. This chapter was designed to give readers a cohesive and comprehensive view of incentive systems. It relates human resources management and organizational communication within a small business setting. From there it further illustrates how incentive systems fit into this whole scheme of relations and how they function. Factors and formulas of performance related pay as a motivator is also explained in this part of the study. In relation to these motivator factors, chapter 3, primarily includes research methods and design, which were used for the following segments of this paper. It utilizes the given variables and formulas in chapter 2 regarding work performance and contingently states explanations for the use of indicated values for each dichotomous query indicated in the questionnaires. The researcher used a survey type of research of the whole organizational population for this study as well as 1 and O variables to score each answer. Chapters 4 and 5, finally address the results of the census. They not only give variable figures, but also interpret these findings to ultimately answer the problems and sub-problems stated in the previous chapters. According to the results of this study expectancy, valence and ability are ranged from average to high. The resulting motivational scores are then pulled down by average scores in all aspects especially inequity, resources and fairness. In conclusion, whether performance scores are low or high, financial incentive systems still function as a motivator among human resources management schemes.