What is the Importance of Money for Business Organization?

Importance of Money for Organizations: The need for money is quite clear to everyone as it has the capacity to fulfill the different needs of people. So the importance of money in organizations is quite important as it is used as a motivational tool for triggering the Performance of the Employees.

Moreover, besides basic needs, there are many diversified needs that can be satisfied through money. The importance of money is to prove and increase the personal identity of people along with the self-perceptions. No doubt, today money has great importance in human life and in business, it is just like a blood running in our bodies.

Importance of Money for Organization

Improving Reward Effectiveness

There are certain factors that are involved in the improvement of the effectiveness of the reward. These factors are as follow.

• Linkage of reward to the performance
• The relevancy of the reward should be ensured.
• Interdependent jobs should be connected with the team rewards.
• Offering rewards should be valuable to the employees.
• The unintended consequences should be considered in advance.

Money as a Motivator

The major importance of money is considered as a motivator. Maslow & Alderfer provide a theory that explains that the money offered in the form of pay becomes the motivation for those employees who has needs of the lower level. When the payment has the potential to satisfy a variety of needs of employees than then this pay can be used as a good motivator for enhancing the performance of the employees.

Why People Leave Organizations

There are a number of reasons that result in a high turnover of employees in organizations. Employees leave organizations due to the following reasons.

• The benefits offered by the organizations are not satisfactory enough for the employees.
• The extraordinary performers are not properly recognized in the organizations.

The above factors cause a decrease in the loyalty of the employees which would result in the leave of the potential employees from the organizations.

There are certain methods that can be properly utilized by the organizations to decrease the turnover of employees. These effective ways are as follows.

1. Use Recognition

There are certain employees that have a strong desire to be recognized by their effective work by their team members & supervisors. They want to be appreciated by their colleges & management of the organization for the effective performance that they have shown.

SO the organizations should make such set up that can help the potential employees to be recognized prominently for their effective work so that their needs for recognition is satisfied and they become more willing for potential performance in the future.

2. Use Positive Reinforcement

The operant conditioning principles are used to provide change behavior & positive reinforcement through the implementation of positive reinforcement programs. It is proved from the research that the improvement in the desirable behavior is much more powerful than a decrease in undesirable behaviors. There are many consequences of employing positive reinforcement in the organizations to keep potential employees loyal like

• Tangible consequences like merit raise, bonuses.
• Social consequences like praise from the boss or peer approval.
• Intrinsic consequences like Happiness feel by an employee in completing a challenging task.

3. Empower Employees

Empowerment is referred to as the provision of the information, tools & authority to the employees so that they can perform the tasks of their jobs effectively with more autonomy & self-confidence. The feeling of self-efficacy of the employees is boosted through empowerment which would result in a much more potential performance.

Rewards & Behaviors of Other Employees

When the employees in the organizations are not happy with the prevailing reward system or when the employees consider that the existing reward system is not fair enough to provide the justified return to the effective performance of the employees, then this would result into some serious problems for the organization like:

• The productivity of the organization lowers
• The rate of absenteeism increases.
• The rate of employee turnover increases.

It is a natural thing that whenever an employee performs according to the established standards or even above the standards, then he definitely expects to receive some kind of reward and recognition for his effective performance so that his performance would improve further.

When the organization does not fulfill his expectations, he would not be further motivated to give the same performance level and in fact, his performance level decreases from the previous one and this would harm the effectiveness of the organization.

When effective performance is recognized & rewarded in the organization, then this effective performance would be repeated again and again. But when there are negative consequences (No recognition & reward) for any useful performance, then that performance would never be repeated in the future.