Monetary and non-monetary compensation in for-profit, nonprofit, and public organizations: comparison and competition

Abstract

Nearly all managers seek to improve performance by recruiting and retaining the most productive, motivated employees. Motivation is significant for determining whether an employee will work for a given organization and the extent to which they will seek to enhance an organization's productivity. Yet, public and nonprofit organizations confront weaker connections between tangible work rewards and performance. Given this challenge we discuss the role of monetary and non-monetary compensation for enhancing work motivation. Specifically, we focus on the theory of wage determination and the likely reasons for differences in monetary compensation of employees between and within each sector. We also review the literature regarding non-monetary aspects of compensation including intrinsic incentives and public service motivation (PSM). Finally, the chapter concludes with a discussion about the implications of these studies of employee motivation for future research on organizational performance and employee motivation.