Introduction
It is a general presumption that the motivation of an employee plays a pivotal role in amplifying his/her productivity and performance. To attain maximum achievement in the organizations, it is inevitable that the employees must perform optimally. It is a unanimous consensus that workers will accomplish their tasks better when they are highly motivated. Particularly, in developing countries like Pakistan, the personnel are more inclined to perform when they get recognition from the management (Tehseen and Hadi, 2015). The recognition of their achievements may be translated into intrinsic rewards; and through these rewards, the employees may motivate and perform up to their maximum capacity. Earlier literature is evident that there is an affirmative connection between employee motivation and job performance. For instance, Kuvaas et al. (2017) discussed the role of employees, intrinsic and extrinsic motivation, and their performance in the finance trade sector and as store managers, Norway. Their study concluded that intrinsic and extrinsic rewards are considered a principal motivator for the employees. Before this, Grant (2008) explained that motivation results in instant performance and productivity by the employees, and as a result of motivation, employees are self-driven.
Every organization needs financial, physical, and human resources to achieve its targeted goals. It is possible only when motivated employees use their full potential to do the work. Kuvaas and Dysvik (2009) argued that employees who are highly engaged and more willing to do their work take responsibilities as motivated employees. Motivation is not clearly understood nor practiced. Knowledge about human nature is very important for understanding motivation but human nature is not as simple to understand because every human is different from others. Organizations are using different human resource tactics and practices to motivate their employees (Manzoor et al., 2019a). Reward management system and participation of employees in decision-making are frequently used practices by organizations to accomplish their objectives (Güngör, 2011).
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The reward management system includes intrinsic rewards and extrinsic rewards like salary, bonuses, recognition, praise, flexible working hours, and social rights (Skaggs et al., 1991). With the help of a reward management system, enterprises can appeal, retain, and motivate employees to attain high performance of the employee (Liu et al., 2008). Gabriel et al. (2016) examined the relationship between effective management of rewards on the performance of employees in the public service sector of Anambra state, Nigeria. They concluded that intrinsic rewards like employee development, recognition, and pay/salary have a significant and positive effect on the performance of employees in the public service of Anambra. They further deduced that the motivation of employees is one of the significant factors for all firms because it enhances the performance of the employee and the performance of the firm.
Based on the above literature, it is evident that intrinsic rewards are one of the main factors that influence the motivation of an employee that has subsequent effects on amplifying the performance of the employee.
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Small and medium enterprises (SMEs) are considered as the fundamental tool for economic growth, and they are playing an essential and vital role in the economic and social configuration of the nation (Ahmedova, 2015; Manzoor et al., 2021b). The worldwide perception of small and micro-businesses or firms has reached noteworthy importance in the economic progress of a nation (Kuzilwa, 2005). It is generally claimed that there is no universally accepted definition for SMEs. In fact, it is difficult to adopt a universal definition for SMEs due to differences in firm size, sectors, culture, and the development status of economies in which SMEs operate (Kushnir, 2010). Gibson and Van Der Vaart (2008) proposed a new quantitative formula for defining SMEs that takes into account the revenue of a company and the country-specific economic context in which the SME operates. The definition of SME as defined by the Government of Pakistan is “SMEs are enterprises whose employment size is up to 250, with paid up capital to Rs. 25 million and an annual sales value up to Rs. 250 million” (Perera and Chand, 2015). The report of the United Nations Industrial Development Organization (2002) defines SMEs in terms of the number of employees and classifies these SMEs in developing and developed economies. According to the UNIDO (2002), in developing countries, there are between 5 and 9 employees for small enterprises and between 20 and 99 for medium-sized enterprises (Abor and Quartey, 2010). Pakistan is a developing country that faced a lot of problems including the high unemployment rate, slow growth in the development process, and severe poverty (Manzoor et al., 2019b). As far as the SME sector is concerned, it provides the framework for a developing and inclusive society through employment opportunities. It strengthens the ability among the members of societies to apply their human competencies and develops a strong association with socio-economic development (Van Kleef and Roome, 2007). Unfortunately, in Pakistan, there are some constraints in this sector, such as weak infrastructure, lack of financial resources, low financial allocation and low participation, lack of incentive for staff, and lack of political commitment. In such cases, the retention of workers in the enterprise is very challenging. To address these issues, this study is being conducted. Many empirical studies (Allen and Kilmann, 2001; Ajila and Abiola, 2004; Hafiza et al., 2011) have been conducted on reward system and employee performance. The study by Ajila and Abiola (2004) showed that reward package can influence on employee performance. Based on their findings, they concluded that reward system helps to increase employee performance by enhancing employee skills, knowledge, and abilities in order to achieve organizational objectives. According to the study by Allen and Kilmann (2001), reward practices play a vital role in improving employee performance and to achieve organizational goals. As mentioned earlier, many researchers have identified that employee rewards directly attach to employee performance. In contrast, if an organization fails to reward employees, it will directly affect the performance of the employees. Empirical studies divulge that an efficient reward system can be a good motivator to the employees, but an inefficient reward system can be a de-motivation to the employees in terms of low productivity, internal conflicts, absenteeism, high turnover, lack of commitment and loyalty, lateness and felling grievances. Therefore, an organization needs to develop a strategic reward system for employees in order to retain competent employees, which results in obtaining a sustainable competitive advantage.
Regarding the previous studies, the relationship between intrinsic rewards and employee performance has been considered. However, many researchers have argued that money is not the only motivator for employees to enhance their performance. Jovanovic and Matejevic (2014) argued that once the pay exceeds the subsistence level, intrinsic factors are the stronger motivators, and staff motivation requires intrinsic rewards such as satisfaction at doing a good job and a sense of doing something worthwhile. In contrast, there is an increasing interest and attention on the use of both extrinsic and intrinsic rewards as a performance-related stimulation. Especially in large organizations, they have diverse reward package, and there is a wide literature on their implausible influence in obtaining and retaining highly motivated employees through that. Despite the vast research on the impact of reward in large organizations, a small number of researchers have investigated the case of the SME sector in developing countries like Pakistan. This study contributes by filling the gap in reward literature in the context of the SME sector and identifies whether the SME sector employees in Pakistan value intrinsic rewards the most or not; it tries to explore the attitudes of employees toward the reward policy of their organization. This study is also important as it is relevant for understanding the reward preferences of the SME employees. To conclude, the results of the study may be helpful for exploring the utilization and motivational potential of the reward management in the SME sector of Pakistan. This study attempts (a) to identify the role of intrinsic rewards on job performance and (b) to focus on discovering that employee motivation mediates the relationship between intrinsic rewards and job performance. Therefore, this study is based on an innovative idea that aims to observe the supposed correlation, i.e., to observe the mediating role of employee motivation between the relationship of intrinsic rewards and job performance. The authors ensure that, if organizations recognize the worth of intrinsic reward actions as honestly as possible, they would get best performance from workers. The main objectives of the study are interlinked with each other because conventional motivation theories like the Motivation-Hygiene Theory by Herzberg (Herzberg et al., 1959) unanimously agree that intrinsic rewards have a positive impact on the motivation of the employees, and due to the motivation of the employees, the performance of employees may amplify.
The remainder section of the article consists of the following. The next section explains the point of view of prior researchers who have contributed to analyzing respective variables. Brief existing literature is reviewed followed by research methodology and data collection. Then, empirical results are discussed with the conclusion and future research.
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