Unit 10

Performance

Motivation and

Rewards

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Introduction • What makes people happiest and most productive at work? Is it

money, benefits, opportunities for growth, interesting work, or

something else altogether? And if people desire different things,

how can a company keep everyone motivated?

• Those are the central questions that unit 10 (together with chapter

13), which focuses on motivation, will address. After explaining the

basics of motivation, we will examine the details of a number of

different motivational theories – equity theory, expectancy theory,

reinforcement theory, and goal-setting theory. Each theory gives the

manager a unique perspective on how to motivate employees to do

their very best.

Main topics for class discussion

The main issue – how to manage performance motivation through

financial and non-financial rewards. Specifically:

• Discuss the factors that affect employee performance behavior

• Discuss what managers can do to manage employee

performance motivation

• Use expectancy theory to understand the link between monetary

rewards and employee performance effort.

• Explain some of the widely used pay plans in the light of

expectancy theory

Motivation: True or False?

• I know what motivates me, so I know what motivates my

employees.

• Fear is a damn good performance motivator

Performance Behavior: a Model

Ability

Employee behavior

and results

Motivation (effort)

Direction Intensity Persistenc

e

Role Perception

s

Situational factors

The terms in the model

• Motivation is the willingness of a person that affects direction or a goal

where an employee puts effort, intensity or the amount of effort allocated

to the goal, and persistence or how long the effort continues.

• Ability – the natural aptitudes and learned capabilities required to

successfully complete a task.

• Role perceptions – understanding the specifics, importance, and preferred

behaviors of the tasks. Ways to improve are through clear job descriptions

and coaching.

• Situational factors – the conditions (e.g., organizational architecture)

constraining or facilitating employee performance.

GratificationPerformance

Intrinsic Reward

Extrinsic Reward

Managing Employee Motivation

Work EffortDirection

Intensity Persistence

Needsand

Drives

Goals,expectations

and feedback

Need Gratification and Motivation

• Motivation begins with employee’s own needs and drives. Needs are mostly conscious deficiencies that energize or trigger behaviors to fulfill those needs; are either physical or psychological; and must be met for person’s survival and well-being.

• Drives are instinct tendencies to seek particular goals and maintain internal stability. Examples are a drive to learn, to acquire, to bond, or to defend). For the most part, we are aware of our needs, where as drives operate under the surface to generate our emotions and sometime direct behavior. Needs are produced from our innate drives, but are strengthened or weakened through learning and social forces such as culture and childhood upbringing.

• A person’s unmet need creates an uncomfortable, internal state of tension that must be resolved. People are thus motivated by unmet needs.

• Managers must learn what those unmet needs are and address them.

Goal-setting and Feedback

• According to goal-setting theory, people will be motivated to the

extent that they accept specific and challenging goals and receive

feedback that indicates their progress toward goal achievement.

• In general, people are motivated to satisfy unfulfilled need.

• Goal-setting improves role perceptions and consequently clarifies

the direction of employee effort.

• performance feedback improves role perceptions.

• Job descriptions improve role perceptions

Question

Raj, a new manager at Telecom International, in his first meeting at the company told his employees that the sales goals were significantly enhanced for this year and he expects all of his employees to buckle down and work hard to meet the goals. Raj’s instructions violates which of the aspects of effective goal-setting?

a. Precise and measurable

b. Equitable

c. Expectancy-oriented

d. Timely

Motivating with goal-setting theory

• Assign employees specific and challenging goals (goal specificity and goal difficulty)

• Make sure workers truly accept organizational goals (goal acceptance or commitment)

• Provide frequent, specific, performance-related feedback (performance feedback)

Types of Rewards

• An extrinsic reward is anything , financial or non-financial,

received from someone for the recipient’s service (the

performance of specific tasks or behaviors and valued by the

recipient, such as bonuses and recognition.

• An Intrinsic reward is a positive emotional experience resulting

directly from the individual’s performance such as feeling of

accomplishment, opportunities for personal growth, and learning

a new task.

• What are most important rewards?

Expectancy Theory andPerformance Effort

Effort

Outcome 1

(either + or -)

Outcome 2

(either + or -)

Performance

E-P expectancy (probability that

effort will result in a specific level of

performance)

P-O expectancy (probability that performance will result in specific

outcomes)

Outcome valence (the outcome’s

positive or negative value of the employee)

Motivating employees with expectancy theory

• Systematically gather information to find out what employees want from

their jobs

• Measure performance (e.g., productivity, turnover, absenteeism)

accurately and comprehensively and tie pay to the measured

performance. In order words, take specific steps to link rewards to

individual performance in a clear and understandable way.

• Empower employees to make decisions if management really wants them

to believe that their hard work and effort will lead to good performance.

Contingency principle and Pay plans

• Wage and Salary

• Competency-based pay

• Performance-based Pay

• Seniority-based pay

Wage and Salary

• Wage and salary, sometime called membership-based rewards, potentially attract job applicants, particularly those who desire predictable income or earnings security. Pay variation can hurt those whose income is limited.

• Salary does not directly motivate job performance and. Good performers are lured to better-paying jobs.

• They tend to reduce employee turnover but are more likely to reduce functional turnover rather than dysfunctional one.

Performance-based pay

• Many real estate agents and other sales people typically earn

commissions. Piece rate plans reward employee based on the

number of outputs produced.

• Many employees receive pay increases or bonuses based on a

performance appraisal.

• Many are also finding larger parts of their total paychecks

determined by team more than individual results.

Competency-based rewards• Every job in the National Health Service (NHS), for example, is

described in terms of its required skills and knowledge. Annual pay increases are based on how well employees meet the job’s KSA requirements.

• Skill-based pay is a variant of the competency-based in which employees are paid for the number of skill modules mastered. Employees earn the base pay rate for being able to work in one job and earn more as they learn other skill modules.

• Workforce flexibility and product quality and service tend to improve since employees with multiple skills are more likely to understand the work process and know how to improve it.

Measures of performance at the organization-level• The balanced scorecard (BSC) is a goal-oriented performance measurement

system, which is sometime used to rewards typically executives for improving their performance on a composite of financial, customer, innovation, operational perspectives.

• Profit-sharing, stock options, and ESOPs are examples of organization-level reward strategies for company-wide cooperation.

• How effective are these rewards? Stock options, ESOPs, and BSCs tend to create an “ownership culture” in which employees feel aligned with the organization’s success.

• Profit-sharing tends to create less ownership culture, but it has the advantage of automatically adjusting compensation reducing need for layoffs practices during recessions.

Empowerment and Performance

• Employees experience more empowerment when:

– Information and other resources are easily accessible

– employee learning is valued

– reasonable mistakes are viewed as a natural part of the learning

process

• Empowerment significantly Influences employee performance in

production and reduces voluntary turnover.

Empowerment as a form of intrinsic reward • Empowerment is a psychological concept represented by 4 dimensions.

Employees believe:

– The work they do is important (meaningfulness)

– They have freedom, interdependence, and discretion over their work

activities (self-determination)

– They are able to perform the work well and have a capability to grow

with new challenges (competence)

– They are active participants in the organization—their decisions and

actions influence the company’s success (Impact).

• Empowerment Influences performance in production and voluntary

turnover. It also helps strengthen “employer brand.”