Transcript Motivation and Reward Management
Motivation and Reward Management
Kun András István University of Debrecen, Hungary Faculty of Economics and Business Administration
The main question is: how to achieve high work performance?
Work performance is affected by: Job characteristics and (physical) work environment + Abilities and skills + The willingness to perform
Misbeliefs on motivation
Motivation is the willingness to contribute to the oganisational goals Motivation is a kind of ability Motivation is connected directly to money With motivation every job performance problem can be solved Motivation depends on the employee
What is Motivation?
(Robbins 2009)
The processes that account for an individual’s intensity, direction and persistence of effort toward attaining a goal.
Intensity (=effort) – how hard a person tries Direction – what a person is trying to do (Is it one that benefits the organization?) Persistence – how long the effort is maintained
Motive and Motivation
MOTIVATION is a set of processes that moves a person toward a goal.
MOTIVE is a need or a want that causes us to act (energises us).
motive
Need: Some internal state that makes
certain outcomes appear attractive.
Classic process of motivation
Energisation to Késztetés „wants and goals” Motivated action (effort)
Unsatisfied needs Reduction of tension Tension Drive Search behavior (effort) Satisfied needs Effort: a measure of intensity (how hard a person is trying) The greater the tension, the greater the effort (Robbins)
Abilites, motivation and performance
' A driving force within individuals by which they attempt to achieve some goal in order to fulfil some need or expectation'
(Mullins, 1993) Performance = (a X m) Job performance is a function of ability (a) and motivation (m)
What is „motivating”?
Motivating others: to have others doing efforts towards a goal. It usually means the sychronization of their goals or needs with the goals of the organisation. Motivating ourselves: setting the direction independently and then taking actions to ensure that we get there.
Source: http://www.ineedmotivation.com/blog/wp-content/uploads/2008/07/pp30580motivation-posters.jpg
Intrinsic and Extrinsic Motivation
(Herzberg)
Intrinsic Motivation: the source of motivation comes from inside the performer (from his/her beliefs, values, attitudes). Responsibility, autonomy etc. Long-lasting effect (high persistency) Extrinsic Motivation: comes from outside of the performer. Money, promotion, coertion, punishment… Immediate and powerful, but usually not persistent
Intrinsic vs. Extrinsic Motivation
(Lepper, 1988)
Intrinsic Motivation is when an individual takes on an activity… For its own sake For the enjoyment it provides For the knowledge gained For the feelings of accomplishment it brings Extrinsic Motivation is when an individual performs… In order to gain some kind of reward In order to avoid some kind of punishment separate from the activity
Theories of motivation
(Armstrong 2005)
Instrumentality theory: rewards and punishments serve as the means of ensuring people behave in a desired way (operant conditioning – Skinner; taylorism). Content (needs) theories: explain the specific factors that motivate people (the content of motivation consists of needs). Not all needs are equally important at a given time, and goals and needs has a complex relationship). (Maslow, Herzberg?, McClelland?) Process (cognitive) theories: focuses on the psychological processes that affects motivation. (Expectancy, Goal, Equity theories)
Two ways of extrinsic motivation: ‘carrot and stick’
Source: http://www.krishnade.com/blog/2010/drive/
Maslow’s Hierarchy of Needs
Five (later eight) major categories of needs Applied generally Hierarchy: some needs are more fundamental than others. A higher level of needs can be activated only if the below level is satisfied.
No level can be bypassed.
A level once satisfied looses its motivating power.
Maslow’s Hierarchy of Needs (original model)
Jekaterina Zenkova
Maslow’s hierarchy with 8 needs
Cognitive: knowledge, meaning, to explore, self awareness; Aesthetic: beauty, form, symmetry, order.
Self trancendence Self actualization Cognitive Needs Aesthetic Needs Esteem Needs
Self-transcendence: to connect to something beyond the ego, or to help others find self-fulfillment and realize their potential.
Social Needs Safety Needs Physiological Needs
Two-Factor Theory of Herzberg
(extrinsic) Hygiene factors affect job dissatisfaction • Quality of supervision • Pay • Company policies • Physical working conditions • Relations with others • Job security (intrinsic) Motivator factors affect job satisfaction • Promotional opportunities • Opportunities for personal growth • Recognition • Responsibility • Achievement
High Job Dissatisfaction 0 Job Satisfaction High
Herzberg’s Two-Factor Theory
Managers who seek to eliminate factors that can create job dissatisfaction may bring about peace but not necessarily motivation. If a manager wants to motivate people on their jobs, she or he should emphasize factors associated with the work itself or outcomes directly derived from it. Satisfaction and dissatisfaction are not related (not equal, nor opposite) Managers should provide opportunities for employees to maximise the satisfiers (motivators) Keep the Hygiene factors (demotivators) to a minimum Underlies that both financial (hygiene) and non-financial (motivator) rewards should be provided.
McGregor’s Theory X and Theory Y
Theory X
Inherent dislike for work and will attempt to avoid it Must be coerced, controlled or threatened with punishment Will avoid responsibilities and seek formal direction Place security above all factors and will display little ambition
Theory Y
View work as being as natural as rest or play Will exercise self-direction and self-control if committed to objectives Commitment to objectives is directly related to the rewards associated with their achievement Can learn to accept, even seek, responsibility Can make innovative decisions on their own
McClelland's Theory of Needs
Need for achievement (nAch) - drive to excel Need for power (nPow) - the need to make others behave in a way they would not have behaved otherwise Need for affiliation (nAff) - the desire for friendly and close interpersonal relationships
McClelland's Theory of Needs
High achievers prefer jobs with personal responsibility, feedback, and intermediate degree of risk.
High achievers are not necessarily good managers.
Affiliation and power closely related to managerial success Employees can be trained to stimulate their achievement need.
What motivates a university student?
(based on a motivation concept by Hunt J. W.)
80 70 60 50 40 30 20 10 0 ko Comfort m fo st ru kt ur al Structu red work ka pc Personal relations el is m er Respect, ts status Power ha ta lo m ön Self actualiza tion nő women férfi men
Expectancy Theory
Expectancy Theory
Effort-performance relationship: the probability perceived by the individual that exerting a given amount of effort will lead to performance.
Performance-reward relationship: the degree to which the individual believes that performing at a particular level will lead to the attainment of a desired outcome.
Reward-personal goals relationship: the degree to which organisational rewards satisfy an individual’s personal goals or needs and the attractiveness of those potential rewards for the individual.
Simple Numeric Example on Expectancy Theory
Assumptions: A given project-work needs some effort: little effort has an opportunity cost of £100 great effort has an opportunity cost of £200 With little effort, the chance to be successful is 50%, with great effort it is 80%.
If the project succeeds, the company gives us a £500 bonus, if it fails, we get nothing.
Our discount rate is 10% to the time of rewarding.
Is it any worth making a great effort (are we motivated)?
The expected present value of the greater effort: 0.8*(£500/1.1)-0.5 *(£500/1.1)= £136.36
The ‘motivation’ in terms of money: £136.36-£100=£36.36
Goal-Setting Theory
Goal Setting Theory is based on people being motivated if they set their own targets Specific goals lead to increased performance.
Difficult (but achievable) goals, when accepted, result in higher output than easy goals.
Self-generated feedback is a more powerful motivator than externally generated feedback.
Influences on goal-performance relationship: Commitment Task characteristics (National and/or organisational) culture
Management by Objectives (MBO)
Converts overall organizational objectives into specific objectives for work units and individuals Common ingredients: Goal specificity Participation in decision making Explicit time period Performance feedback
Equity Theory
People are better motivated if treated equitably Employees weigh what they put into a job situation (input) against what they get from it (outcome).
Then they compare their input outcome ratio with the input outcome ratio of relevant others.
Possible inputs and outputs
INPUTS Performance Education Organisational Level Tenure/Seniority Demographic features
OUTPUTS Social Reward Benefits Recognition Actual Pay Perks
Equity Theory
Choices when perceived inequity
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Change their inputs Change their outcomes Distort perceptions of self Distort perceptions of others Choose a different referent Leave the field
Forms of justice
Job satisfaction
The (individual) attitudes and feelings people have about their work. Positive and favourable attitudes towards the job indicate job satisfaction.
Morale: a group variable related to the degree to which group members feel attracted to their group and desire to remain a member of it.
Factors affecting job satisfaction
Intrinsic and extrinsic motivating factors, Quality of supervision, Social relationships within the workgroup, Work performance.
Job satisfaction and performance
Common belief: positive correlation Empirical evidence: no or very little correlation High performace can produce job satisfaction, but job satisfaction is unlikely to produce high performance Satisfied workers are not necessarily productive workers and productive workers are not necessarily satisfied ones. BUT: performance improvement can be achieved by giving people the opportunity to perform, and rewarding them according to their goals (needs).
Why then job satisfaction is important?
Motivation increases job performance, Job satisfaction does not.
BUT People want to be satisfied with their work, and if they are not satisfied, they will leave the job, even if they are motivated to high performance.
Modifiers of satisfaction-performance relation
(Alan Wilson, Jacob Frimpong 2004)
The Job Characteristics Model
Proposes that any job can be described in terms of five core job dimensions: Skill variety Task identity Task significance Autonomy Feedback
The Job Characteristics Model
Motivating Potential Score (MPS)
MPS = Skill variety + Task Identity + Task significance 3 x Autonomy x Feedback
How can jobs be Redesigned?
Job Rotation or Cross-training – the periodic shifting of an employee from one task to another Job Enlargement – increasing the number and variety of tasks Job Enrichment – increasing the degree to which the worker controls the planning, execution and evaluation of the work
Guidelines for Enriching a Job
Implications for Managers
Recognize individual differences Use goals and feedback Allow employees to participate in decisions that affect them Link rewards to performance Check the system for equity
Reward management
Rewarding Employees
Major strategic rewards decisions: What to pay employees How to pay individual employees What benefits to offer How to construct employee recognition programs
What to pay
Need to establish a pay structure Balance between: Internal equity – the worth of the job to the organization External equity – the external competitiveness of an organization’s pay relative to a pay elsewhere in its industry A strategic decision with trade-offs
Definition of Reward Management
• • This management discipline is concerned with the formulation and implementation of strategies and policies, the purposes of which are to reward employees fairly, equitably and consistently in accordance with their value to the organisation.
It deals with design, implementation and maintenance of reward systems (processes, practices, procedures) that aim to meet the needs of both the organisation and its stakeholders.
Philosophy of Reward Management
Strategic sense: long-term focus & it must be derived from the business strategy Total Reward approach: considering all approaches of reward (financial or not) as a coherent whole; integration with other HRM strategies Differential reward according to the contribution Fairness, equity, consistency, transparency
Economic theories (partially) explaining pay levels
Supply and Demand: labor market factors Efficiency wage theory: attraction of better employees, motivation, reducing fluctuation leads to high wages Human Capital theory: productivity differences Principal – Agent Theory: inequality in the information leads to „agency costs” The effort bargain: collective bargaining
Total Reward
(Armstrong 2009) All types of reward:
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Non-financial as well as financial,
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Indirect as well as direct,
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Extrinsic as well as intrinsic. Each element is developed, implemented and treated as an integrated and coherent whole.
The 4Ps of Reward
Pay Salary, bonus, shares, etc.
Praise Positive feedback, commendation, staff-of-the-year award, etc.
Promotion Status, career elevation, secondment, etc.
Punishment Disciplinary action, withholding pay, or criticism, etc
Derivation of Total Reward
Business & HR strategy Reward strategy Job evaluation Grade & pay structure Market rate analysis Contingent pay Employee benefits Allowances Performance management Non-financial rewards Total Remuneration Total Reward
Strategic Reward Management
Where do we want our reward practices to be in a few years time? (vision) How do we intend to get there? (means)
Reward Strategy
A declaration of intent that defines what the organisation wants to do in the longer term to develop and implement reward policies, practices and processes that will further the achievement of its business goals and meet the needs of the stakeholders.
It gives a framework to other elements of reward management.
The structure & content of a Reward strategy
Environment analysis: Macro-level: social, economical, demographic Industrial level Micro-level: competitors Analysis of the „inner environment”: strategy, job evaluation, financial conditions… Gap-analysis Guiding principles Broad-bush reward strategy Specific reward initiatives
Job-evaluation
A systematic process
For defining the relative worth/ size of jobs/ roles within an organisation
For establishing internal relativities
For designing an equitable grade structure and grading jobs in the structure
To give an input for reward considerations
Dimensions of job evaluation
Relative or measured to an absolute scale Relative: compares jobs to one another within the company Absolute: compares to an „independent”, external measure Analytical or non-analytical (global) Analytical: measures factors or elements of the jobs Non-analytical: measures the job as a whole
Wage gaps
Wage gaps can occur in companies using international benchmarking in job evaluation. The cause is simple: The market of top managers is usually international: they earn international wages, or they leave the firm The market of workers with little or no qualification is local in (nearly) every case: they earn local wages.
In poor countries this can lead to enermous wage gaps between the „top” and „bottom” employees.
Components of Total Remuneration
Base pay: Base pay is the fixed compensation paid to an employee for performing specific job responsibilities. It is typically paid as a salary, hourly (or in some situations piece rate). There is a tendency towards market orientation and the increasing role of qualifications. Contingent pay: Individual contingent pay relates financial rewards to the individual performance, organisation or team performance, competence, service, contribution or skill of individual employees.
Consolidated pay: built into the base pay Variable pay: provided in the form of cash bonuses (increasing role nowadays).
Employee benefits: Elements of remuneration given in addition to the various forms of cash pay.
Contingent pay
Individual contingent pay is a good motivator (but to what extent?) for those who receive it.
It attracts and retains better workers.
It makes labour related expenditures more flexible.
It can demotivate those who don’t receive it (depends on performance measurement) Can act against quality and teamwork.
Types of individual contingency pays
Performance-related: increases basic pay or bonuses related to assessment of performance Competence related: Pay increases related to the level of competence Contribution-related: pay is related both to inputs and outputs Skill-based: pay is related to acquisition of skills Service-related: pay is related to service-time
Team based pay
Pay is related to team performance It can encourages teamwork, loyalty and co operation It can be demotivating on individual level (encourages social loafing)
Organisaton-wide schemes
Profit-Sharing Plans – organization-wide programs that distribute compensation based on an established formula designed around profitability Gain Sharing – compensation based on sharing of gains from improved productivity Employee Stock Ownership Plans (ESOPs) – plans in which employees acquire stock, often at below-market prices
Employee benefits
Attractive and competitive total remuneration Provide for the personal needs Increase commitment toward the organisation Tax-efficient
Main types of Employee benefits
Pension schemes Personal (and family) security: different types of insurances Financial assistance: loans, house purchase schemes, discount on company services… Personal needs: holidays, child care, recreation facilities, career breaks… Company cars and petrol Intangible benfits: quality of working life… Other benefits: mobile phones, notebooks… Cafeteria systems
The Hungarian Three Pillar Pension System First pillar: Mandatory Tax-financed Public Universal Pension Second Pillar: Mandatory Private Pension Funds Third pillar: Funded Voluntary Pension
Health Insurane Funds
Tax allowance after expenditures on certain goods
Definition of the psychological contract
“The perceptions of both parties to the employment relationship, organization and individual, of the reciprocal promises and obligations implied in that relationship” The state of the psychological contract is concerned with whether the promises and obligations have been met, whether they are fair and their implications for trust.
The Psychological Contract Framework
(David Guest) The Good Employer & The High Quality Workplace The Deal Satisfied And Productive Workers
Total remuneration in recession
It a good chance to rethink and renew the remuneration system Share of contingeny payment should increase Empoyer benefits, that dont need short term expenditure will increase: Company car Saturday-year (freetime) Share-options