COVER SHEET

PEOPLE & ORGANISATION

Assignment: Organisational Behaviour

Module code: BEMM 121

Name of Tutor: Stephen Champion

Date of submission: 24th March’ 2014

Number of words: 1618

Submitted By: Ayush Agrawal

Student Number: 630058475

Candidate Number: 002330

1

BEMM 121 PEOPLE AND ORGANISATION

ORGANISATIONAL BEHAVIOUR

Table of Contents

PRP (Performance related pay) .......................................................................... 1

Impacts of PRP ................................................................................................... 1

Inadequacy of PRP ............................................................................................. 1

Motivation ......................................................................................................... 2

Motivational Theories concerning PRP in an organisation ................................. 2

Motivation without PRP ..................................................................................... 3

Motivating through Job Characteristics ............................................................. 3

Impacts of culture in Motivating through PRP ................................................... 4

Conclusion ......................................................................................................... 4

Recommendation .............................................................................................. 4

Bibliography ........................................................................................................ i

BEMM 121 PEOPLE AND ORGANISATION

ORGANISATIONAL BEHAVIOUR

Report by: Ayush Agrawal (Student No. 630058475) (Candidate no. 002330)

1

A large multi-national organisation is considering implementing performance related pay

(PRP) throughout the company, with the aim of increasing employee motivation.

Using your knowledge of theories and evidence concerning motivation, critically evaluate

whether you believe the organisation is likely to be successful in achieving its aim.

PRP (Performance related pay)

It is a monetary remuneration structure for employees where the pecuniary compensation is

correlated to their performance assessment relative to stated criteria. In business context the

PRP is the variable pay supplemented by the base pay that helps to attain certain goal. It is

offered on how an individual, a group or the company as a whole performs during a

specified time frame, which benefits both employer/company and employees. (Bi, August 20,

2011). Employees get rewards for their successful endeavours and accomplished targets. This

gives them “Satisfaction” as their hard work is appreciated.

PRP can be evaluated qualitatively (behaviour based) or quantitatively (results based).

The behavioural aspects have very low inter-rater reliability which is mainly because of the

ambiguity between the two managers expecting different outcomes. This at time confuses the

performance oriented employees and hence effects result. Further for the results the employees

lose control on other services which might distract customers. If both behaviour and results are

encouraged then better results will be delivered. (Gerhart, et al., 2009).

Impacts of PRP

The PRP increases the productivity of the employees as they are motivated by the money

offered. The new talent also gets encouraged to achieve goals and hence helps the company to

retain the employees as they feel loyal to the organisation.

The companies being performance oriented prefers variable pay (bonuses and

commissions) more than the base pay (annual or hourly salaries). This develops the risks for the

low performers as an uncertainty for even getting the minimum is developed, but at the same

time develops zeal for those who have high needs and spirit to perform. They are motivated to

optimise their capacity for generating maximum possible income. (Gerhart, et al., 2009).

Inadequacy of PRP

Although PRP schemes are whopping motivational tool but pay always is not an efficient

motivator. (Rynes, Sara L.; Gerhart, Barry; Minette, Kathleen A., Winter 2004). According to

“Jurgensen” (1978), other significant motivational features are company profile, working

conditions, supervisor, co-workers, and benefits. Priority order of which differs between men

and women. (Turban, et al., 1993) . The employees compare some crucial characteristics. I.e.

promotion opportunity, work type, work load, work hour regulations, commuting time, fringe

benefits and security against job loss to remain loyal towards the company. (Grund, August

2009).

BEMM 121 PEOPLE AND ORGANISATION

ORGANISATIONAL BEHAVIOUR

Report by: Ayush Agrawal (Student No. 630058475) (Candidate no. 002330)

2

PRP have certain shortcomings that dwindles the employee motivation. The predicament evolves

as it de-motivates those employees who are not rewarded. On every pay related amendment

employee’s gets on “high alert” for changes indicating differences as regarded by employer,

particularly in relation to the peers. (Rynes, Sara L.; Gerhart, Barry; Minette, Kathleen A., Winter

2004). Due to the competitiveness prompted by PRP, a disagreement regarding targets is

developed within the organisation. In lure of the payments, the employees tend to neglect those

tasks that are not rewarding. (Chamberlin, et al., 2002).

Further there is always a dilemma whether PRP should be rewarded individually or for group

performance. It’s a vice versa situation as individual remuneration reduce group performance

while group rewards lowers the individual performance. (Gerhart, et al., 2009).

PRP on individual basis motivates high performance driven individuals as they desire to achieve

high through their performance but at the same time decrease the group cohesion due to the

developed competition within the group. On the other hand PRP based on group performance

encourage cooperation but unclear line of sight can condense the interest of the personnel’s in

the organisation. (Gerhart, et al., 2009).

Motivation

The PRP scheme being a motivational factor invigorates the allegiance towards the organisation.

Motivation is “a set of energetic forces that originates both within and outside of an employee,

initiates work-related effort, and determines its direction, intensity, and persistence” (Colquitt,

et al., 2009). In particular to a work place or an organisation motivation is a “Psychological

processes that direct, energize, and maintain action toward a job, task, role, or project”

(Pritchard.R, et al., 1976;1990). Motivation cultivates the ability to perform.

Motivational Theories concerning PRP in multinational organisation

The implementation of employee motivation can be explained using certain theories.

‘Reinforcement theory’ formulated by Skinner in 1953 is most appropriate for routine work. It

includes rewards for desirable work and punishment for undesired work. E.g. To increase

punctuality in the organisation, the employees arriving on time are given with bonuses or

monetary benefits (Reward) and those arriving late are penalised as salary deduction

(Punishment).

Vroom in 1964 gave a method called ‘Expectancy Theory’ (or expectancy-valence) related

to workplace. He provided a method of cognitive variables that indicates the individual

differences and gave implications for motivating employees. Recommendations include altering

the person’s efforts by providing knowledge and skills for successful performance, (Expectancy);

Rewarding fairly for successful performance (Instrumentality); and valuable monetary

compensation (Valences). (Lunenburg, 2011).

Adam in 1963 established ‘Equity Theory’ to elucidate employee response to injustice in

the workplace. His argument was PRP influence subsequent behaviour which might create

BEMM 121 PEOPLE AND ORGANISATION

ORGANISATIONAL BEHAVIOUR

Report by: Ayush Agrawal (Student No. 630058475) (Candidate no. 002330)

3

difference between the employees. Further In 1960, ‘Goal setting theory’ emerged stating that

specifying targets can improve task performance of the employees. (Mowday, et al., 2004)

Motivation without PRP

All the theories mentioned above states that PRP increases motivation in an organisation. But

contradicting these, Deci & Ryan in 1971 gave Cognitive Evaluation Theory (CET) which states

that PRP is merely an extrinsic motivational tool which makes the employees more enthusiastic

towards the bonus pay. But when these pay rewards are withdrawn, they loses interest. Hence

only monetary benefits don’t inculcate motivation. Additionally CET specifies that competence

will not develop intrinsic motivation unless supplemented with sense of autonomy and internal

perceived locus of causality. (deCharms, 1968) (Ryan & Deci, January 2000). It needs passion and

desire to drive individuals internally to accomplish something. PRP might reduce the intrinsic

significance as it narrow down the focus and obstruct the creative thinking of an employee

because of controlling, restricting and monitoring which employees might not enjoy. (Petrikovic,

2013). In order to establish the substantial reasons for motivating the individuals, Deci & Ryan

further continued and came up with Self Determination theory (SDT) in 1985, which concentrate

on social-contextual circumstances that facilitate against forestall in instinctive process of self

motivation. They postulated three innate motivational needs; first is ‘relatedness’ which means

valued by others; second ‘competence’ to know employees are good at their job, and finally

‘autonomy’ which is the need for internal locus of control. When these three psychological needs

are contented, self motivation and mental health of the employees will be enhanced. (Ryan &

Deci, January 2000).

The broad usefulness of PRP suggests that, far from being a mere low order motivator, pay can

assist an employee in obtaining virtually any level on Maslow’s motivational hierarchy of needs,

but social esteem and self actualization. (Rynes, Sara L.; Gerhart, Barry; Minette, Kathleen A.,

Winter 2004). Self fulfilment needs are certainly not provided by just pay.

Further, in 1964 Hertzberg gave ‘Two factor theory’ (motivational and hygiene factors)

which says that pay can stop you being dissatisfied but it cannot satisfy either. Motivational

factor leads to job satisfaction while Hygiene factors leads to Dissatisfaction. According to him

job satisfaction is a function of perceived characteristic and includes Achievement,

Responsibility, Recognition, Career and Interest but not pay which is considered as a hygiene

factor and might leads to dissatisfaction. (House & Wigdor, 1967). Hence employees are

motivated by more than just money.

Motivating through Job Characteristics

Apart from PRP, certain amendment in Job characteristics creates a condition that motivates the

enthusiastic employees to perform effectively in the work environment. The change will impact

positively on their psychological state, making them more internally motivated, productive and

satisfied towards work. (Hackman & Oldham, 1976). This is paradoxical in case of people who

don’t want to relate to the organisation and work there in order to make money only. E.g.

BEMM 121 PEOPLE AND ORGANISATION

ORGANISATIONAL BEHAVIOUR

Report by: Ayush Agrawal (Student No. 630058475) (Candidate no. 002330)

4

University Students working part time. But yet these amendments motivate them and affect

their performance growth. (Ref. Chart below)

Impacts of culture in Motivating through PRP

Many of the disparity in employee motivational structures all over the world can be outlined on

the basis of diversity in the collective mental programming of people in different national

cultures. (Hofstede, 1980). In MNC, cultural influence impinges to a great extent in reward

preferences. Generalizing variable pay across all cultures in a MNC is irrational. E.g. Individual

PRP will be greater in countries which have more individualism.

PRP Schemes instigated in different culture have not always been successful. (Steers, et

al., 3 July 2008) Although the evidences are only empirical to show impacts of cross cultural

differences on the PRP schemes but yet it is a potentially important contextual variable and

needs to be focussed especially when in context with an MNC.

Conclusion

Employee motivation is dependent on various factors which differ in diverse cultures. Motivation

through rewards is momentary and is not consistent and same in the long run. PRP schemes

develop insecurity about position for the introvert employees. They get de-motivated because of

being unrewarded. Poor implementation of PRP schemes motivates behaviour that hinders in

achieving organisational goals. Hence applying PRP in all departments of large multi-national

organisation is not a favourable option, this can effect inversely to employee motivation.

Recommendation

The multinational organisation can be successful with the PRP schemes if the rewards are given

as a whole in organisational level. E.g. Annually to all the employees on the basis of company’s

performance in previous financial year.

Category 1 Category 2

PER

FOR

MA

NC

E

Growth Need Strength (GNS) moderates effect of Job Characteristics

High GNS

Low GNS

MOTIVATING POTENTIAL

LOW

H

IGH

LOW HIGH

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BEMM 121 PEOPLE AND ORGANISATION

ORGANISATIONAL BEHAVIOUR

Bibliography

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