Literature Review Template

Word count: 1463

Title: A research on the incentive measures of employees in enterprises —
a case study of Wal Mart

Research Question:
What is the impact of Wal Mart’s employee incentives on the company?
What are the problems and countermeasures of Wal Mart’s employee incentive measures?

Objectives: To explore the effect of Wal Mart’s incentive mechanism on employees’ enthusiasm and the realization of the company’s objectives. Whether the use of incentive mechanism will affect the success of an enterprise.

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1.0 Introduction

In order to study how the incentive system affects the success of enterprises, this essay takes Wal Mart as a case to explore the incentive mechanism of employees. This part is to provide and establish the theoretical background for this research topic by exploring the relevant literature in the past. First of all, the general situation of incentive theory will be reviewed. Second, the way and impact of incentives will be discussed. The last section describes some problems of incentive measures.

2.0 Overview of incentive theory

Since the 1950s, incentive theory has developed gradually. The most representative of the early study of incentive theory is that Maslow’s hierarchy of needs theory proposes that human needs should have a hierarchy, which should be developed from the lowest needs to the highest needs (Maslow, 1943). However, some scholars think that when the “needs” are not satisfied, the role of incentive factors is not significant. Montuclard et al. (1960) put forward “motivation-hygiene theory”, which emphasized that not all needs can be met to stimulate people’s enthusiasm. In other words, people’s enthusiasm can be maximized only when the needs called motivators are met. Adams (1963) put forward the theory of fairness, which focuses on the fairness of compensation distribution and its positive impact on employees. Further, both McLellan’s achievement needs theory (McClelland, 1961) and attribution theory (Heider, 1958) further point out the role and influence of external incentives. It can be seen that scholars in various fields are constantly exploring the study of motivation.

Roos and Van Eeden (2008) focus on the relationship between employee characteristics and motivation, and stated that it is a good performance of incentive measures to give different tasks and jobs to different types of employees. However, Church (1993) argues that the nature of work is also closely related to motivation. For example, Church (1993) explaines that when an enterprise gives its employees monotonous work, it may affect their low spirits or moods, or even work efficiency; on the contrary, those employees who are given rich work are in a good mood, which promotes work efficiency. Obviously, these scholars have emphasized the interaction between employee characteristics, work characteristics and motivation, which also reflects that motivation has direct or indirect impact on employees and work. In addition, Greenberg (1987) further proposed the content and principle of organizational equity and explained how to use the equity theory. Therefore, through the above literature research on incentive theory, it seems that the research on incentive theory has been systematic.

3.0 Main ways to implement incentive mechanism

Many studies (Clark and Wilson, 1961); (Terborg and Miller, 1978) show that incentive theory has been fully applied to practice, and goal incentive, emotional incentive, material incentive and so on are the means used by many enterprises to motivate employees.

Latham and Locke (1979) state that the goal of the enterprise is achieved through the joint efforts of the organization group and individual employees. Moreover, Locke and Latham (2002) further imply that because the goal itself has the nature of motivation and guidance, enterprise managers need to grasp the characteristics of the goal and set different sub goals to motivate employees. For example, some companies set reasonable, specific and moderate difficulty stage goals and long-term long-term goals to make employees feel that the work goals are reasonable (YY, 2019). Therefore, this can let employees mobilize their enthusiasm to achieve a number of small goals.

Moreover, Bonner and Sprinkle (2002) propose that material incentive is also an important means to motivate employees, including wages, bonuses and so on. However, many studies show that many small and medium-sized enterprises do not implement material incentives well. For example, Jensen and Murphy (1999) argue that some enterprises only adopt the way of salary plus bonus, and seldom adopt the material incentive methods such as annual salary and profit sharing. In terms of material incentives, research shows that whether the salary distribution is reasonable and fair directly affects whether employees have sufficient enthusiasm (Kvaløy, Nieken and Schöttner, 2015). For example, Huawei provides employees with better salary than the industry, and also implements equity incentive; Ren Zheng of Huawei holds only 1.4% of the company’s equity, and the rest belongs to 84000 employees (De Cremer and Tao, 2015). It has been proved that the long-term incentive of ESOP to employees is very effective. Obviously, a reasonable salary system is one of the basic conditions for employees, so the lack of material incentives can not make employees maintain high enthusiasm for work.

In addition, in addition to material and objective incentives, spiritual incentives are also a feasible measure for enterprises. Pessoa (2009) believes that emotion is one of the factors that directly affect people’s behavior, because everyone has emotional appeal. Zhou and George (2003) explain that emotional motivation will help the company and employees to establish a harmonious relationship, so as to mobilize the enthusiasm of employees. Enterprise leaders can encourage employees by caring for their needs or using trust language, which can enhance their confidence in themselves and their sense of belonging to the enterprise (Fry, 2003). It seems that the emotional motivation of leaders is not only to care for and support employees, but also to create a harmonious working atmosphere.

In conclusion, three main incentive methods are discussed. Moreover, the above content also reflects that if the enterprise can make full use of these ways and play the advantages of these ways, it will play an incentive role for employees to a certain extent. On the contrary, if enterprises do not pay attention to and ignore the incentive to employees, it will also have a negative impact on the development of enterprises.

4.0 Potential problems of incentive mechanism

Even though many enterprises have applied incentive theory to practical operation, the situation of many small and medium-sized enterprises using incentive mechanism is still not very optimistic. Some studies show that managers of some enterprises have some problems in the process of adopting incentive, such as single incentive method, only focusing on material incentive, lack of fairness and so on. However, although some studies have described some possible problems in the incentive mechanism, there is a lack of systematic and sufficient literature on the problems in the incentive mechanism of Wal Mart.

4.1 Lack of pertinence

Govindarajulu and Daily (2004) state that in the process of implementing the incentive mechanism, enterprises need to build on the specific needs of employees in order to promote the enthusiasm of employees. Psychologists have shown that human needs are diverse and hierarchical (Phillips, Slepian and Hughes, 2018). Everyone has different needs, so enterprises should take this into account when meeting the needs of employees. Shaw, Gupta and Delery (2002) stress that when enterprises adopt the popular way as incentive measures, it may not only fail to meet the needs of employees, but also may greatly reduce the incentive effect. It can be concluded that only to achieve the diversified needs of various employees can help enterprises achieve the goal and effect of incentive measures.

4.2 Lack of fairness

Lack of fairness is also a common problem in enterprises. Guay, Core and Larcker (2001) consider that incentive measures should not only be implemented so simply, but also the absolute and relative degree of incentive should be paid attention to. Research shows that many employees compare their input and return to work with others. In particular, employees often feel unfair when they see that other people’s pay is roughly the same as their own, but the rewards and returns are higher than their own (Schmidt, 2012). Therefore, this shows that the incentive measures need to be based on fairness, so that employees can feel the sense of fairness. Otherwise, even if the company implements specific incentive measures, the incentive effect and the enthusiasm of employees will be greatly reduced.

5.0 Conclusion

In a word, it seems that the literature about the connotation of incentive theory, the form and function of incentive measures are quite sufficient. There is less literature on the potential problems of incentives. According to these documents, once the incentive mechanism is formed, it will have an effect on the organizational system and further affect the survival and development of the organization. Besides, incentive mechanism has two natures: encouraging and weakening, that is, whether the incentive mechanism is appropriate will have a positive or negative impact on the organization. In addition, enterprises should not only use one method to motivate employees, but also observe the different needs of employees to carry out a variety of targeted incentive measures. However, there is not enough literature and evidence on the specific incentive measures, problems and targeted countermeasures of Wal Mart case, so the author will collect evidence and data from Wal Mart Company on the spot through interviews.

Kvaløy, O., Nieken, P. and Schöttner, A. (2015). Hidden benefits of reward: A field experiment on motivation and monetary incentives. European Economic Review, 76, pp.188-199.

Latham, G. and Locke, E. (1979). Goal setting—A motivational technique that works. Organizational Dynamics, 8(2), pp.68-80.

Locke, E. and Latham, G. (2002). Building a practically useful theory of goal setting and task motivation: A 35-year odyssey. American Psychologist, 57(9), pp.705-717.

Maslow, A. (1943). A theory of human motivation. Psychological Review, 50(4), pp.370-396.

Montuclard, M., Herzberg, F., Mausner, B. and Snyderman, B. (1960). The Motivation to Work. Revue Française de Sociologie, 1(2), p.244.

McClelland, D.  (1961). Achieving society (No. 15). Simon and Schuster.

Pessoa, L. (2009). How do emotion and motivation direct executive control?. Trends in Cognitive Sciences, 13(4), pp.160-166.

Phillips, L., Slepian, M. and Hughes, B. (2018). Perceiving groups: The people perception of diversity and hierarchy. Journal of Personality and Social Psychology, 114(5), pp.766-785.

Roos, W. and Van Eeden, R. (2008). The relationship between employee motivation, job satisfaction and corporate culture. SA Journal of Industrial Psychology, 34(1).

Schmidt, H. (2012). Wellness Incentives, Equity, and the 5 Groups Problem. American Journal of Public Health, 102(1), pp.49-54.

Shaw, J., Gupta, N. and Delery, J. (2002). Pay dispersion and workforce performance: moderating effects of incentives and interdependence. Strategic Management Journal, 23(6), pp.491-512.

Terborg, J. and Miller, H. (1978). Motivation, behavior, and performance: A closer examination of goal setting and monetary incentives. Journal of Applied Psychology, 63(1), pp.29-39.

Zhou, J. and George, J. (2003). Awakening employee creativity: The role of leader emotional intelligence. The Leadership Quarterly, 14(4-5), pp.545-568.