The Effectiveness of Bonus Payment as a Financial Incentive for Top

Management

ADEL BYKOVA1, ALLA LOBZA1, JULIA GAVRYSH2, IRYNA SOROKA3,

YEVHENIIA KARPENKO4

1Department of Economics and Social and Labor Relations, Faculty of Economics,

Business and International Relations, University of Customs and Finance

2/4 Vladimir Vernadsky (Dzerzhinsky) Street, 49000, Dnipro

UKRAINE

2Department of Industrial Marketing, Faculty of Management and Marketing,

National Technical University of Ukraine “Igor Sikorsky Kyiv Polytechnic Institute”,

37 Peremohy Avenue, 03056, Kyiv,

UKRAINE

3Jindal Institute of Behavioural Sciences (JIBS),

JGU, Sonipat Narela Road, Near Jagdishpur Village, Haryana, 131001, Sonipat,

INDIA

4Department of Finance, Banking and Taxation, Educational and Scientific Institute of Finance,

Economics, Management and Law, National University “Yuri Kondratyuk Poltava Polytechnic”

24 Pershotravnevyj Ave., 36011, Poltava,

UKRAINE

Abstract: - Employees are important for the company’s success. Top management not only performs functional

duties, but also makes strategic and operational decisions. The aim of the study is to determine the impact of

bonus payments as a means of material motivation on the top managers’ performance. The authors of this study

surveyed 147 top managers of 70 Ukrainian IT product companies using a pre-developed questionnaire. The

method of pairwise comparisons was used to establish the priority forms of motivating and demotivating

factors. The impact of payment of material incentives in the form of bonuses to top managers on the

achievement of such performance indicators as company profit, total revenue, ROI, performance indicators of

individual departments and personal performance indicators of top managers was established and confirmed.

There is a 96% correlation between the amount of additional bonus payments and the motivation of top

managers. The reliability of the regression model of the impact of additional bonuses on the level of motivation

of top managers is 92%. The results indicate the ability of company owners to influence the motivation of top

managers through the introduction of bonus payments or increasing their size. A high level of efficiency of

bonuses as financial incentives to motivate top managers to achieve the established KPIs has also been

established and proven. The vast majority of top managers are willing to increase the number or value of

already established KPIs to receive additional bonuses. The results of the study confirm the importance and

effectiveness of financial incentives for top managers.

Key-Words: - Bonuses, material incentives, motivation, rewards, basic salary, additional salary.

Received: October 7, 2021. Revised: July 22, 2022. Accepted: August 13, 2022. Published: September 6, 2022.

1 Introduction

In the current competitive environment, when

innovative advantages are increasingly offset by the

speed of technology transfer, the company’s

employees are becoming increasingly important for

its success. Top management is a separate category

of employees, which not only performs functional

duties, but also makes strategic and operational

decisions on which the company’s performance

depends. Business owners become dependent on the

decisions made by hired top managers. On the one

hand, ineffective decisions can be avoided at the

stage of selecting a candidate for the position of top

manager, while on the other hand, even high

competence and experience do not guarantee the

effectiveness of decisions.

Like any employee, top managers must be

motivated enough to work effectively. One of the

tools of such motivation is financial incentives

through the payment of bonuses or rewards for the

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results of their work. An open question is what

exactly the top manager receives a bonus for, and

whether it is possible to manage financial incentives

in a certain way to achieve the company’s specific

goals. Besides, top managers usually receive bonus

payments not monthly, but quarterly or often based

on the results of the year. Thus, the motivation of

top managers should be long-term, and therefore

significantly different from the motivation of

ordinary employees, whose incentives are usually

monthly.

The motivation and purpose of this work are to

determine the influence of material payments in the

form of wages and bonuses on the motivation and

productivity of top managers. Unlike previous

studies, in our study, we pay attention to the

category of top management employees who

perform non-routine work, on which the success of

the company's activities and financial indicators

depend to a large extent.

2 Literature Review

The In existing studies, the issue of staff motivation

is considered in different contexts. Part of the

research deals with the classification of tools to

increase motivation to work. The rest of the research

examines the impact of financial and non-financial

incentives on motivation. Many studies reveal the

question of comparing tangible and intangible

incentives to work. In our opinion, the effect of staff

motivation, which is not considered at all in the

analysed research, is ignored. Researching the

remuneration of management, researchers in [1]

note that the vast majority of companies focus on

fair pay. At the same time, there is no notion of

fairness in the personnel management policies of

these companies. Only 25% of surveyed companies

share their success with their employees in the form

of additional bonuses or incentives for performance

indicators. At the same time, the authors do not

study the differences in the remuneration of

ordinary managers and top managers, who usually

have slightly different performance indicators and

goals. According to the concept of fair pay, the

category of top managers should receive greater

compensation due to the higher level of

responsibility. However, this aspect was not

considered in the work of the authors.

In the study of modern methods of incentivising

employees [2] it is noted that the system of material

incentives needs to be modernized and developed.

Such a system of motivation must be consistent and

tied to the company’s goals. The main task of

material incentives is to encourage employees to

achieve better results [3]. A system of material

incentives should be introduced on the basis of an

analysis of the employees’ needs. It is necessary to

find out what forms of material incentives are

desirable and to establish how they can be

implemented in view of the company’s goals [4, 5].

However, the author does not define the features of

material motivation of top management, whose

decisions determine the company’s performance,

and therefore the material incentives of whom

should be built on a model different from other

employees.

Examining the pay of top managers, the authors

of [6] come to the conclusion that it is necessary to

change the system of material incentives for this

category of managers. The authors of the study note

that the scope and results of the direct functional

responsibilities of top management are not directly

related to the company’s results. At the same time,

the material incentives of top managers depend on

the company’s performance. This is also evidenced

by the results of other studies [7, 8]. There is a

situation where top managers may not have a direct

impact on the company, but top management will

receive bonuses and incentives because other

employees provide high performance. The results of

this study urge the topic of our study, which focuses

on identifying the consequences of material

incentives for top management of companies.

In another study of the impact of material

incentives on employee motivation [9], the authors

conclude that material incentives not only affect the

level of employee satisfaction with their wages and

work, but also have a positive effect on their

motivation. At the same time, the study does not

consider different categories of employees and,

accordingly, the impact of financial incentives on

their motivation. We can assume that with an

increase in wages, the effect of material incentives

will decrease in accordance with the law of

diminishing marginal utility. In this case, the

category of top management needs research, which

usually has a high level of remuneration, and

therefore it is interesting to study the consequences

of financial motivation of this category of

employees.

In the study of the importance of the system of

rewards [10] it is noted that the need to establish a

system of incentives in companies. These systems

should include both tangible and intangible

incentives, and they should be implemented

according to a clearly defined and developed

strategy. At the same time, the author does not detail

the categories of employees in relation to which it is

necessary to apply certain incentives. Since top

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management has such significant privileges, the

effectiveness of intangible incentives for this group

of employees can have an extremely low effect.

Accordingly, it is necessary to investigate the

possible potential consequences of material

incentives for top management in order to determine

the most effective incentivising methods.

In a study of the relationship between the

motivation system and the company’s performance

[11], the authors argue that when the incentive to

achieve the targets is distributed fairly, it helps to

increase employee satisfaction. However, if the

company has a system of comparing employees

with each other, it leads to a deterioration of the

microclimate in the team, which negatively affects

the results of their work. Besides, employee

satisfaction with material incentives encourages

them to participate more actively in achieving

performance targets. In general, such conclusions do

not reveal the features of material incentives for top

management and the consequences of such

incentives for their further work.

Examining the system of motivation in global

corporations, the team of authors in [12] noted that

modern systems of motivation of top management

include both objective and subjective components.

The objective components of the motivation system

include the results of the company, the

implementation of plans, increasing the value of the

company or its capitalization, and so on. Subjective

components include taking into account the top

manager’s personal qualities, his emotional

intelligence, ability to work effectively with

subordinates, and so on. In this aspect, the system of

motivation takes transformations and material

bonuses can broadcast not only the importance of

company development, but also the top manager’s

personal development. Besides, the motivation of

other staff depends on the management’s

motivation, as [13] noted.

Studying the role of the motivation system to

improve staff performance, [14] notes that the

majority of motivation policies are biased in the way

they motivate. It is necessary to develop such

systems of motivation that would proportionally

combine tangible and intangible incentives. It is also

necessary to clearly establish the relationship

between different incentive methods and

performance targets. This will allow for a clearer

and more predictable implementation of the

incentive policy, and employees will clearly

understand the conditions for receiving bonuses.

The team of authors [15] conclude that material

incentives for employees are effective in the short

term. In particular, the material incentive has a

positive effect in the period in which it was paid,

and in the period following the date of receipt of

such incentive. So, a one-time financial incentive

has a positive effect on the incentive for employees

to do their job better. However, the study did not

single out the categories of top management

employees for whom a one-time motivation system

is set individually depending on the contract terms.

Studying the impact of the reward system on

employee engagement, [16] indicate that there is a

low correlation between total pay and engagement.

This conclusion indicates that what is important for

employees is not the total remuneration, but its

individual elements. Therefore, it is necessary to

conduct a preliminary study of the validity of

tangible and intangible incentives for employees and

to form a system of motivation, taking into account

the importance of certain rewards for individual

employees.

Analysis of the literature has shown that in the

vast majority of studies, top management is not

considered as a separate specific category of

employees. At the same time, the issue of the impact

of material incentives, in particular one-time

payments, on the performance of top managers

remains unresolved. So, our study is timely and

topical in this context.

The aim of the study is to determine the impact

of bonus payments as a means of material

motivation on the top managers’ performance. The

aim involved the following research objectives:

- study the level and structure of remuneration of

top managers of Ukrainian IT companies;

- determine the level of job satisfaction and

factors that motivate and demotivate top managers

of Ukrainian IT companies;

- determine the list of resultant indicators of the

companies’ activity which can be influenced by top

managers owing to the motivation or demotivation

to receive bonus payments in addition to a salary.

3 Methodology

3.1 Research Design

The main stages of the study are schematically

shown in Fig. 1.

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Fig. 1: Visualised research design

Source: Authors

The first stage of the study involves a review of

current research and identification of unresolved

issues. After that, we formulated th aim of the study

and identified the objectives that need to be fulfilled

to achieve it. Having developed the research design,

we sent a questionnaire to top managers of

Ukrainian IT companies with a request to fill it out.

The second stage of the study involved the

analysis of the respondents’ answers and the

determination of resulting indicators of material

incentives for top management of IT companies.

The third stage of the study provides for the

formulation of research limitations and drawing

conclusions. Besides, the prospects for further

research will be identified at this stage.

3.2 Sample

The study is based on the analysis of the results of a

survey of top managers of Ukrainian IT companies

on the level and structure of remuneration, the

factors that motivate and demotivate them in their

work. Multi-stage stratified sampling based on

company specialization was used to select IT

companies, and 147 respondents from 70 IT product

companies engaged in software development for

different categories of consumers were selected for

the sample. Of the approximately 4,000 IT

companies in Ukraine with a 90% confidence

interval and a 10% confidence interval, the required

sample size is 67 companies.

However, for greater reliability, the number of

companies was increased to 70 because top

managers were the object of study. Instead, the

position and scope of activities of top managers

whose motivation is being studied are important. On

this basis, the sample presents the following

categories of top management of Ukrainian IT

companies: CEO (Chief Executive Officer) — 33

respondents, CTO (Chief Technical Officer) — 21

respondents, GPM (Chief Product Manager) — 5

respondents, COO (Chief Operating Officer) — 20

respondents, CFO (Chief Financial Manager) —

respondents, HRD (HR Director) — respondents,

CMO (Chief Marketing Officer) — 24 respondents.

3.3 Methods

The main methods used in the study are:

- survey;

- regression analysis;

- statistical analysis.

The methodological background of the study is a

survey of 147 respondents through a questionnaire

developed by the author. There were 10 questions in

the questionnaire. The answers provided for the

need to choose one answer from the proposed

options (for example, for the form of remuneration),

and the need for ranking. The question of the size of

the basic salary and the size of bonuses provided a

choice from the offered scale: up to $2,000; $2,001-

3,250; $3,251-5,000; $ 5,001-6,000, more than $

6,001. The question of the size of the salary plus the

bonus provided a choice from the proposed scale: up

to $ 2,000; $2,001-5,000; $5,001-6,250; $ 6,251-

10,000, more than $ 10,001.

The answer options to the question about the

factors of the greatest motivation and demotivation

provided for the need to evaluate each of the

proposed answer options in percent. It was

necessary to distribute 100% between the answer

options that best correspond to the respondent’s

opinion. The format of answering the question about

the KPIs which are the ground for paying the bonus

Preperatory

stage

Development of

the research

design

Development and

distribution of the

questionnaire

Experimental

stage

Analysis of the

respondent's

answers

Determining the

resulting indicators

of stimulation

Post-

experimental

stage

Formulation of

research

limitations

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and the readiness to reach the set KPIs and expand

them was built in the same way. To process the

survey results, the method of pairwise comparisons

was used to establish the priority forms of

motivating and demotivating factors.

When processing the responses, which provided

the ability to choose several options, the weighted

average values were used to calculate the proportion

of each of the answer options. A graphical method

was used to present the obtained results in a user-

friendly form. The correlation method was used to

determine the dependence of motivation on bonus

payments. Regression analysis was used to

determine the impact of salaries and bonuses on the

level of top managers’ motivation. For the purposes

of the study, we consider the level of motivation of

top managers of IT companies as a function of

bonus payments. In turn, the level of motivation is

assessed on a scale from 1 to 5, where 1 is the

lowest level of motivation, and 5 is the highest. The

survey results were processed and presented in

graphical form in Microsoft Excel using statistical

data processing methods.

4 Results

One of the main and most effective means of

ensuring the optimal use of company resources is

staff motivation. The main task of the process of

staff motivation is to obtain the highest possible

return on the use of available human resources. This

factor is designed to increase the company’s overall

profitability and efficiency. The importance of

motivating the companies’ top management is worth

noting, because the motivation of all company staff

and performance indicators depend on the

effectiveness of their decisions. We analysed the

respondents’ answers in order to determine which

performance indicators of companies may be

affected by the material incentives of top managers.

The results of the survey showed that a total of

63% of respondents receive additional material

incentives to the basic salary (Fig. 2).

Fig. 2: Forms of remuneration of top managers of IT companies, %

Source: Authors

Such additional financial incentives in 39% of

respondents are paid in the form of a bonus. As a

rule, such bonuses are paid once a year for the

fulfilment of certain planned or target indicators,

which are pre-determined by the employment

agreement. In 13% of respondents, additional

financial incentives are provided in the form of

granting rights to a company’s share. Such a

material incentive is not systemic and is based on

the results of many years of the top manager’s

work. In 11% of respondents, additional financial

incentives are paid in the form of monthly or

quarterly bonuses.

Analysis of data on the size of the basic salary

and the size of the basic salary and bonuses per

month is shown in Fig. 3.

The data of Fig. 3 show that 10% of respondents

receive only the basic salary without additional

bonuses and it is $ 2,000. There were 50% of

respondents who received a basic salary of $ 5,000,

and it was $ 6,250 together with bonuses. Some

25% of respondents receive a basic salary of $

3,250, and it is $ 5,000 together with the bonuses.

There were 15% of respondents who received a

basic salary of $ 6,000, and it was $ 10,000

together with the bonuses. Analysis of the survey

results showed that young top managers who have

37% 39%

13% 11%

10%

20%

30%

40%

50%

Fixed salary Fixed salary + bonus

Fixed salary + company share Fixed salary + rewards

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no more than 2 years of experience in the position

receive a salary without bonuses. The highest

salaries and bonuses are received by top managers

who have extensive experience in general and have

held the position of top manager in the company

for quite a long time (more than 7-8 years).

Fig. 3: The amount of remuneration of top managers of IT companies, $

Source: Authors

As we can see, the bonus is quite a significant part

of the total material reward of top managers. The

highest salaries and bonuses are given to three

categories of top managers of IT companies:

founders, who are also CEOs ($ 6,250); Chief

Executive Officers and Chief Technical Officers ($

6,000) (Fig. 4).

Fig. 4: Salary + bonus of top managers of IT companies, $

Source: Authors

The average salary is paid to Chief Product

Managers, Chief Operations Officers and Chief

Financial Officers. HR and Marketing Directors

have the lowest remuneration. To assess the impact

of material incentives for top managers on the

performance of IT companies, it is important to

establish the degree of satisfaction with their work.

After all, even if the size of the basic salary and

bonuses is large, it still does not guarantee that top

managers will try to achieve those indicators that

are important for business owners. Satisfaction and

motivation to work play an equally important role

for that purpose.

The results of the survey show that a total of

84% of respondents are satisfied with their work in

the company (Fig. 5). At the same time, 53% of

respondents are unequivocally sure about that.

10%

25%

50%

15% 10%

25%

50%

15%

10%

20%

30%

40%

50%

60%

2000 3250 5000 6000 2000 5000 6250 10000

Fixed salary Fixed salary+bonus

6250 6000 6000

4500 5000

3875

2450 3000

1000

2000

3000

4000

5000

6000

7000

Founder + CEO CEO CTO GPM COO CFO HRD CMO

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Fig. 5: The degree of satisfaction of top managers with work in the company

Source: Authors

There were 5% of respondents who were absolutely

dissatisfied with their work; 11% of respondents

were rather dissatisfied with the work in the

company in which they worked at the time of the

survey. The obtained data on the degree of job

satisfaction indicate that the vast majority of

respondents are satisfied with their work in the

company and also have financial bonuses or

rewards in addition to the basic salary. Taken

together, this gives us reason to say that the

surveyed top managers of Ukrainian IT companies

are satisfied with their work and appreciate their

position. As working for the company is valuable

to them, they agree to work on the terms of their

contracts, and therefore the employer can influence

the work of top managers through the tool of

material incentives in the form of bonuses and

rewards. Through the bonus payment tool, the

employer can influence the efficiency of top

managers. This assumption is confirmed by the

analysis of the factors of the greatest motivation of

top managers of Ukrainian IT companies (Fig. 6).

Fig. 6: Factors of the greatest motivation of top managers of IT companies

Source: Authors

The data of Fig. 6 show that the most significant

motivating factors include two instruments of

material incentives (salary level and bonus level).

The high importance of material motivation factors

confirms the idea that it can be a tool to influence

the work of top managers and ensure that they

achieve the company’s goals.

At the same time, the factors of the greatest

motivation (Fig. 7) include the unsatisfactory level

of bonuses, which was chosen by 29% (or almost a

third) of respondents. This means that a third of top

managers surveyed are dissatisfied with the amount

of material benefits.

17%

36%

31%

11%

3% 2%

10%

15%

20%

25%

30%

35%

40%

Absolutely

satisfied

Satisfied Rather

satisfied

Rather

dissatisfied

Not satisfied Absolutely

dissatisfied

62%

36%

45% 49%

61% 65%

10%

20%

30%

40%

50%

60%

70%

Salary level Level of bonusesFlexible schedule Company values Freedom in

decision making Professional

growth

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Fig. 7: Factors of the greatest demotivation of top managers of IT companies

Source: Authors

For business owners, this can be a signal of

reserves to increase the productivity and efficiency

of top managers. By increasing the amount of

bonus payments, this factor can be transferred from

demotivators to motivators, which will increase the

level of top manager’s satisfaction with the work.

As a result, work in the company will be of value to

him/her, and therefore he/she will be motivated to

achieve his/her goals.

To determine the possible resulting indicators of

bonus payments to top managers, let’s analyse

which KPIs provide top managers with bonuses

(Fig. 8).

Fig. 8: KPIs which provide top managers with a bonus for their achievement

Source: Authors

The study showed that the payment of bonuses to

top managers depends on their achievement of key

indicators, which are fixed in their contracts.

Accordingly, by using bonus payments as a

motivating factor or by increasing the amount of

bonuses offered to convert them from a

demotivating to a motivating factor, it is possible to

influence the motivation of top managers to

achieve the KPIs set. However, it is still unknown

whether top managers will agree to such

conditions. To answer this question, the

questionnaire provided a question about the

readiness to achieve the already set KPIs to receive

the bonuses provided and the willingness to

increase the number or value of KPIs to obtain the

relevant bonuses (Fig. 9, 10).

44% 42%

29% 28% 24%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Lack of work-life

balance Unsatisfactory

level of salaries No or low bonuses Lack of flexible

work schedule Lack of friendly

corporate culture

43%

30% 25% 23%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Company profit The company's

total revenue Achieving the

planned indicators

of the department

Achieving

individual targets Company's ROI

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Fig. 9: Willingness of top managers of IT companies to achieve KPIs for bonuses

Source: Authors

Fig. 10: The readiness of top managers of IT companies to expand the list of KPIs for bonuses

Source: Authors

The analysis of the respondents’ answers shows

that the vast majority are ready to achieve the KPIs

set in order to receive the bonuses provided for this.

We assume that this may be the part of top

managers who said they were dissatisfied with the

level of bonuses in their company. So, if the size of

the proposed bonuses increases, this category of top

managers may shift to those who are rather ready to

achieve the KPIs or surely ready.

The share of those top managers who are

definitely ready to increase the requirements for

KPIs in order to receive bonuses is much smaller

than the share of those who are ready to achieve the

already set KPIs. At the same time, the share of

those who are more willing to expand the list of

KPIs is less than the share of those who are more

willing to reach the set KPIs. We can state that top

managers are much more motivated to achieve

existing KPIs than to receive new ones for

additional bonuses. This may indicate either a

reluctance to take on additional responsibilities or a

lack of motivation for the additional responsibilities

offered by the company. The generalized results of

the survey of top managers of Ukrainian IT

companies on the effectiveness of bonus payments

as a financial incentive are shown in Fig. 11.

Based on the obtained data, we can present the

impact of bonus payments on the motivation of top

managers of IT companies (Fig. 12).

47%

38%

15%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Ready to achieve Rather ready to

achieve Rather not ready to

achieve Not ready to achieve

18%

54%

20%

10%

20%

30%

40%

50%

60%

Ready to expand Rather ready to expand Rather not ready to

expand Not ready to expand

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Fig. 11: The readiness of top managers of IT companies to expand the list of KPIs for bonuses

Source: Authors

Fig. 12: Dependence of the level of motivation on the basic salary

Source: Authors

According to the results of calculations, the

correlation between the size of wages and the level

of motivation is 0.93. For a more detailed analysis

of the impact of wages on the level of motivation,

we consider its regression impact (Table 1). High

values of model reliability indicators (Multiple R =

0.9304804; R-squared = 0.8657937; Adjusted R-

squared = 0.7986906) indicate a positive, strong

correlation between salary and the level of

motivation of top managers.

Table 1. Regression correlation between the salary size and the level of motivation of top managers

Regression statistics

Multiple R

0.9304804

R-squared

0.8657937

Adjusted R-squared

0.7986906

Standard error

0.2590426

Number of observations

Analysis of variance

•51% of respondents receive bonuses and rewards1

•84% of respondents are satisfied with their work in the company2

•Salaries and bonuses are the motivation for 62% and 36% of respondents,

respectively

•The low level of bonuses demotivates 29% of respondents4

•The bonuses or rewards can help to influence the following indicators: the

company's profit, total revenue and ROI, performance indicators of departments

and individual targets of top managers

•85% of surveyed top managers are ready to expand the list of KPIs to receive

bonuses

2000

3250

5000

6000

3 3

4 4

0,5

1,5

2,5

3,5

4,5

1000

2000

3000

4000

5000

6000

7000

Level of motivation

Salary, $

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Significance F

Regression

0.8657937

12.902439

0.0695196

Residue

0.1342062

0.0671031

Total

The reliability of the model of the influence of the

salary size on the degree of top managers’

satisfaction is 86%, which is quite a high value.

The chart of the size of existing bonuses for top

managers and the level of their motivation due to

such bonuses is shown in Fig. 13.

Fig. 13: Dependence of the level of motivation on the size of bonuses

Source: Authors

The correlation between the size of top managers’

bonuses and their level of motivation is 0.93. Such

data indicate a high level of correlation between

both the basic salary and bonuses to the basic salary

with the level of motivation of top managers of IT

companies.

The data of the regression model (Table 2)

indicate a high degree of reliability of the obtained

results. High values of model reliability indicators

(Multiple R = 0.9345306; R-squared = 0.8733475;

Adjusted R-squared = 0.8100213) indicate a

positive strong correlation between the amount of

salary and the level of motivation of top managers.

To assess the effect of increasing bonus payments

on the degree of motivation of top managers, the

questionnaire included a question of how top

managers assess their own level of motivation,

provided that the size of their bonus will be

increased by 20% of the basic salary. A graphical

representation of the size of additional bonuses and

the degree of motivation is shown in Fig. 14.

Table 2. Regression correlation between the size of bonuses and the level of motivation of top managers

Regression statistics

Multiple R

0.9345306

R-squared

0.8733475

Adjusted R-squared

0.8100213

Standard error

0.7443819

Number of observations

Analysis of variance

Significance F

Regression

7.6417910

13.791245

0.06546934

Residue

1.1082089

0.5541044

Total

8.75

1750

1250

4000

500

1000

1500

2000

2500

3000

3500

4000

4500

Level of motivation

Existing bonus, $

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Fig. 14: Dependence of the level of motivation on the size of potential bonuses

Source: Authors

The correlation between the level of additional

bonuses offered and the level of motivation is 0.96.

Thus, the increased bonuses show an even greater

correlation with the level of motivation of top

managers. These data are confirmed by regression

analysis (Table 3). High values of model reliability

indicators (Multiple R = 0.9345306; R-squared =

0.8733475; Adjusted R-squared = 0.8100213)

indicate a positive strong correlation between the

amount of salary and the level of motivation of top

managers.

Table 3. Regression correlation between the size of additional bonuses and the level of motivation of top

managers

Regression statistics

Multiple R

0.9636296

R-squared

0.9285820

Adjusted R-squared

0.8928730

Standard error

0.3133682

Number of observations

Analysis of variance

Significance F

Regression

2.5536006

26.004166

0.03637037

Residue

0.1963993

0.0981996

Total

2.75

4.1 Limitations and Implications for the

Research

This study has methodological and implementation

limitations. The methodological limitation is that

the sample of respondents consists of the

representatives of IT companies only. IT companies

offer significantly higher wages and bonus

payments compared to companies in other

industries. Accordingly, the study on the example

of less profitable industries may give results that

will differ from the results obtained in our study.

The implementation limitation of the study is that

the results can be applied only in those industries or

companies where top management has financial

incentives in their work, as well as in companies or

industries that have the ability to introduce or

increase wages and bonuses based on their financial

position.

5 Discussions

The results of the study show that bonus payments

are an effective tool for motivating top managers.

By setting or increasing the size of bonuses or

rewards, you can influence the motivation of top

managers to achieve key performance indicators. In

some cases, the number of KPIs can even be

increased compared to those already set, being

compensated for that with additional bonuses. This

indicates a significant reserve for companies to

return to work and motivate top managers to

achieve the set goals.

The results of the study are unique as they

empirically prove the correlation between bonuses

and rewards as financial incentives and the ability

of companies to achieve their targets through the

work of top managers. Comparing the results with

400

650

1000

1200

5 5

200

400

600

800

1000

1200

1400

Motivation level

New bonus, $

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other studies, it should be noted that previous

studies have been largely limited to the impact of

financial incentives on employee motivation. The

author of [17] found that financial incentives have a

significant impact on increasing employee

motivation. Besides, it was found that 46% of

employees’ motivation depends on the financial

reward they receive.

According to the results of the study, the author

concludes that financial incentives in the form of

bonuses or rewards are the most effective way to

increase employee motivation in manufacturing

enterprises. The researcher in [18] comes to similar

conclusions in the study of the impact of financial

benefits on labour productivity. The author notes

that a strong positive correlation was found

between financial remuneration and labour

productivity as the main indicator of employee

motivation. In this context, wages can only be seen

as an incentive if they are above the market

average. Otherwise, wages are not a tool of

motivation, and it is necessary to use additional

bonuses or payments to achieve the effect of

productivity growth.

In another study of the impact of financial

incentives on employee creativity [19] the authors

conclude that financial reward has a strong positive

impact on employee creativity. The results of

regression analysis show that 76% of employees’

creativity is due to financial rewards paid to them.

The authors note that for the further development

of creativity in employees it is necessary to develop

and implement new differential systems of

financial incentives. In a study of the impact of

deferred bonus payments on investment decisions

of managers, the team of authors [20] concludes

that investment top managers are more likely to

make decisions that reduce their short-term

payments, but provide long-term benefits to the

company.

This is due to the fact that long-term successful

performance of the company ensures that managers

receive bonuses. It also proves a positive

correlation between financial payments and

managers’ investment performance.

A study of the behavioural effects of financial

bonuses on managers [21] notes that under the

traditional system of rewards in the form of

bonuses, managers can intentionally change the

style of their work with a focus on receiving

financial incentives. But such a change in

behaviour does not always have a positive effect on

the company’s performance. So, the introduction of

a system “bonus for the result” when the manager

receives a bonus after the company reaches the

target is more promising [22]. However, such a

system may have the disadvantage of reducing the

motivation of managers, because the results of the

company do not always directly depend on them. In

a similar study of the relationship between

payments to top managers and the efficiency of

banks [23], the authors found that the relationship

between payments to top management and

performance indicators of the bank has a nonlinear

correlation. Increasing the level of top management

payments does not always lead to increased

efficiency of the bank. In particular, variations in

the amount of payments do not affect the

technological development of banks. A similar

study on the example of Nigeria [24] showed that

there is a relationship between the salaries of

directors and such indicators of the bank’s

performance as return on assets (ROA), return on

equity (ROE). There is a similar correlation

between the premium paid to managers and ROA,

ROE. The correlation between staff motivation and

company performance is also confirmed in the

study [25].

A study of the impact of financial payments to

top managers on the performance of banks in

Kenya [26] concludes that financial payments in

the form of wages, annual bonuses and rewards

have a positive effect on the performance of

commercial banks. At the same time, bonuses in

the form of a block of shares of the bank do not

have a positive effect on the work of top managers

and lead to a deterioration in the performance of

financial institutions. The same results are observed

in the study of the team of authors on the example

of manufacturing companies in the UAE [27].

The team of authors [28-30] studied the level of

payments to top managers in the short and long

term. The amount of these payments was examined

for the correlation with the performance of

companies. Research has shown that there is a

strong link between payments to top managers and

company performance. Our study found that the list

of these indicators can be increased if top managers

are willing to do so. Our results show that the vast

majority of surveyed top managers are ready to

increase the number of KPIs to receive additional

bonuses. Our study confirms that financial

incentives significantly prevail over other ways of

motivating staff, including representatives of top

management companies.

6 Conclusion

Strengthening the competitive environment

requires not only gaining competitive advantages in

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the external environment, but also increasing the

efficiency of the use of resources of the internal

environment. One such resource is employees in

general and top managers in particular. It is

important to find effective methods of stimulating

top managers of companies to ensure the

achievement of the company’s goals through their

personal motivation. For this purpose, the influence

of the payment of financial incentives in the form

of bonuses and rewards to top managers on the

achievement of such performance indicators as

company profit, total revenue, ROI, performance

indicators of individual departments and personal

performance indicators of top managers was

established and confirmed. The obtained results

indicate the ability of company owners to influence

the motivation of top managers through bonus

payments or increasing their size. The results of the

study indicate a high level of effectiveness of bonus

payments as financial incentives. The correlation

between the level of motivation and the size of

bonuses is 96%. This testifies to the strong

statistical influence of material payments on the

productivity of top managers of IT companies,

proving that material incentives significantly

prevail in effectiveness over other forms of

motivation.

The obtained results can be used for the

development of remuneration policy and

motivation system in IT companies. In particular,

the obtained results can be considered when

forming the section of the labor contract of top

managers in terms of material remuneration for

their work.

Unlike previous studies, in our research, we pay

attention to the category of top management

employees who perform non-routine work, on

which the success of the company's activities and

financial indicators depend to a large extent.

The methodological limitation is that the sample

of respondents consists of the representatives of IT

companies only. IT companies offer significantly

higher wages and bonus payments compared to

companies in other industries. Accordingly, the

study on the example of less profitable industries

may give results that will differ from the results

obtained in our study. The implementation

limitation of the study is that the results can be

applied only in those industries or companies where

top management has a monetary motivation in their

work, as well as in companies or industries that

have the ability to introduce or increase wages and

bonuses based on their financial position.

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Appendix A Table 3. Questionnaire for survey of top managers in IT Companies

Item

No.

Question

Answer options

Indicate your position

o Owner

o CEO

o CTO

o GPM

o COO

o CFO

o HRD

o CMO

What form of remuneration is used in your company?

o Fixed salary

o Fixed salary + bonus

o Fixed salary + share in the company

o Fixed salary + rewards

Specify the approximate amount of your basic salary, $

o 2,000

o 3,250

o 5,000

o 6,000

Specify the approximate amount of your basic salary +

bonus, $

o 2,000

o 5,000

o 6,250

o 10,000

Indicate your degree of job satisfaction in the company

o Absolutely satisfied

o Satisfied

o Rather satisfied

o Not satisfied

o Absolutely dissatisfied

Indicate the factors of the greatest motivation to work in

your company (you can pick several answer options)

o The level of wages

o The level of bonuses

o Flexible schedule

o Company values

o Freedom in decision-making

o Professional growth

Indicate the factors of the greatest demotivation of work in

your company (you can pick several answer options)

o Lack of work-life balance

o Unsatisfactory level of wages

o No or low bonuses

o Lack of flexible work schedule

o Lack of a friendly corporate culture

For the fulfilment of which KRIs are you paid a bonus?

o Company profit

o Total company revenue

o Achieving the planned performance

of the department

o Achieving individual targets

o Company’s ROI

Are you ready to fulfil KPIs to receive bonuses?

o Ready

o Rather ready

o Rather not ready

o Not ready

Are you ready to expand the list of KPIs to receive

bonuses?

o Ready

o Rather ready

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o Rather not ready

o Not ready

Estimate your level of motivation from the size of your

basic salary, where 1 is low, 5 is high

o 1

o 2

o 3

o 4

o 5

Evaluate your level of motivation from the size of your

bonuses, where 1 is low, 5 is high

o 1

o 2

o 3

o 4

o 5

Estimate your level of motivation from the size of

additional bonuses in the amount of 20% of the basic

salary, where 1 is low, 5 is high

o 1

o 2

o 3

o 4

o 5

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