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8/16/2019 Managerial Psychology a Reason for Poor Incentives
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MANAGERIAL PSYCHOLOGY A REASON
FOR POOR INCENTIVES
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MANAGERIAL PSYCHOLOGY A REASON FOR
POOR INCENTIVES
Final term presentation
Submitted by
Azeem Dilawar
Jawwad
Submitted to: Sir Nazir Ahmed Sheikh
Course Instructor for
r!anisational "eha#iour
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MANAGERIAL PSYCHOLOGY A REASON FOR
POOR INCENTIVES
$% &esearch on employee compensation is sporadic and sparse%
'% A meta(analysis of )* years of research on +nancial incenti#esand performance yielded only ,- studies. about one per year/Jenkins. 0itra. 1upta. 2 Shaw. $--34%
,% $'** sessions at the '*$, annual meetin!s of the Society forIndustrial and r!anizational 5sycholo!y /SI54. only threeare related to compensation. rewards. or bene+t
)% f $$$ articles published in 5ersonnel 5sycholo!y in '**, 6'**7. only two
focused on compensation issues8 the parallel proportion wasse#en of )97 in
Journal of Applied 5sycholo!y/Cascio 2 A!uinis. '**34
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COMPENSATION PROBLEMATIC AREA
• ne. compensation is ar!uably one of the most critical
inuences /if not the most critical inuence4 on the ;ualityand e
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WHY MANAGERS PSYCHOLOGY IS RELATED TO
POOR INCENTIVES
• Dilute employee performance consideration factors
•
nly focus moti#ation• >?trinsic incenti#e bias
• underestimate the importance of freedom. respect. learnin!new
information and de#elopin! skills
the underminin! of intrinsic moti#ation. and the ne!lect of social
and relational
rewards
• 0ana!er@ s social ne!lect
• eak e?trinsic moti#ation
• >Bcacy
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WHY MANAGERS PSYCHOLOGY IS
RELATED TO POOR INCENTIVES
• underestimate the need for trainin! pro!rams. clear task
instructions. and other forms of support for employees%• mana!ers mi!ht layer on more rewards /or punishments4
• Contin!ency
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PSYCHOLOGICAL STAND POINT
• a psycholo!ical standpoint. compensation a
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COMPENSATION TRENDS
• 0any compensation decisions are not particularly e?pensi#e% It would. of courseincrease payroll costs to raise salaries for the entire workforce%
• n the other hand. the same le#el of total payroll dollars can be distributed acrossemployees in a #ariety of di
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BAD INCENTIVE SYSTEM AND MANAGER
• 0ana!ers !enerally compares subordinate employees
performance a!ainst a benchmark of performance standardan ob=ecti#e or may be relati#e comparison betweenemployees
• particular rewards and punishments that mana!ersadminister contin!ent on how employees@ performance
compares to these standards /incenti#e instruments4
• 0ana!ers desi!ns incenti#e systems with the intent to induceemployees to beha#e more producti#ely for the or!anization.or. perhaps more accurately. for the mana!ers% No incenti#esystem works e;ually well for all employees.
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MANAGERS' PSYCHOLOGY AND
INCENTIVE• "ad incenti#e system can be linked to mana!er psycholo!ical tendencies
• e propose that mana!ers ha#e a propensity to desi!n systems that fail /a4by o#er(emphasizin! +nancial and material compensation. either because noe?trinsic incenti#e is necessary to moti#ate employees because employees wouldbe more responsi#e to social and relational rewards /o#er(emphasis oncompensation 4
&
• by not suBciently moti#atin! the desired beha#ior. either because theincenti#e instrument is too weak or because the employee feels unable to
reach the performance standard /weak e?trinsic moti#ation4
&
• by moti#atin! undesirable beha#ior /per#erse moti#ation4
&
• communicatin! #alues and e?pectations for beha#ior
that are at odds with the or!anizational culture /misali!nment with culture4
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EXAMPLES
• e?ample. a C>@s ambitious !oals nearly destroyed "ausch and
Gomb in the $--*s% As the sales force faced impossible tar!ets.many salespeople started forcin! unwanted products out todistributors and bookin! shipments before orders were placed/0aremont 2 "arnathan. $--94% hus.
&>SGS
• per#erse moti#ation counterproducti#e beha#iors
• weak moti#ation because of impossible tar!ets
As this e?ample illustrates. incenti#es can ha#e di
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WHY DO BAD INCENTIVE SYSTEMS GO
ON?
•Hierarchy and mana!erial psycholo!y
•who becomes mana!er and how will he chan!e people /processof hirin! and promotion .competent mana!er more producti#e4
•hi!h workload limits the time and a#ailable co!niti#e capacity ofmana!er%
•Second. we propose that mana!ers@ power o#er
subordinates fundamentally transforms how they think aboutincenti#es in a number of predictable ways%
• power is the !reatest source of mana!ers@ folly in thedesi!n of incenti#es and mostly results in poor incenti#es
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FOLLY OF POWER
• Di
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FOLLY OF POWER
• he power di
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CONSTRUAL LEVEL THEORY A PSYCHOLOGICAL
DIFFERENCE
• 5ower re;uires to process abstract information
• Construal le#el is de+ned by two features in mentalrepresentationcentrality and super ordination
• Construal le#el theory focuses on psycholo!ical distance
• desirability of the options o#er their feasibility
• hi!h(le#el
• construal emphasizes !oals o#er beha#iors%
• abstract co!nition
• 5sycholo!ical d distance. temporal distance /i%e%. far awayfrom now4 and social distance
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BAD INCENTIVES AND MANAGERS
• >?trinsic and intrinsic incenti#es
• Co!nition and feasibility of !oals• 5erspecti#e of subordinates
• Discount and dilute the performance of employee
• >?trinsic incenti#e bias
• Social and relational reward
• nderminin! of intrinsic one
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WEAK MOTIVATION
• eak e?trinsic moti#ation
• nreachable !oals• Contin!ency
• a!!ressi#e standards
• plannin! fallacy
• 5erceptions
• Intended #alue of incenti#e
• 0oti#ational di
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REMEDIES
• 0ental simulation
• Consultation with employees• Fosterin! a more e!alitarian culture
• 5ilot testin!
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CONCLUSION
hese characteristics of mana!erial psycholo!y discussedcan combine to create incenti#e systems that are faulty inat least one of the followin! ways:
they o#er(emphasize +nancial and materialcompensation. o