OB Chapter 6 Money as a Motivator According to Maslow and Alderfer, pay should prove especially motivational to people who have

e strong lower-level needs. Pay can be exchanged for food, shelter, and other necessities in life Pay can also function to satisfy social, self-esteem, and self-actualization needs so it should be a good potential motivator According to expectancy theory if pay can satisfy a variety of needs it should be highly valent and it should be a good motivator to the extent that it is clearly tied to performance. Financial incentives and pay-for-performance plans have been found to increase performance and lower turnover. Linking Pay to Performance on Production Jobs Piece rate is set up so that the individual workers are paid a certain sum of money for each unit of production they complete Wage incentive plans are systems that link pay to performance on production jobs Potential Problems with Wage Incentives Lowered Quality wage incentives can increase productivity at the expense of quality Differential Opportunity workers may have different opportunities to produce at a high level. Workers will differ in the expectancy that they can produce at a high level Reduced Cooperation rewarding individual productivity might decrease cooperation among workers Incompatible Job Design the way some jobs are designed can make it very difficult to implement wage incentives. Ex. On an assembly line, it is almost impossible to identify and reward individual contributions to productivity Restriction of Productivity without wage incentives, productivity will be bell shaped, a few workers are low producers, a few are high and most produce in the middle range. When wage incentives are introduced, workers sometimes come to an agreement about what constitutes a fair days work and artificially limit their output. Workers can feel that increased productivity will cause reductions in the workforce. Linking Pay to Performance on White Collar Jobs Merit pay plans systems that attempt to link pay to performance on white collar jobs Performance on white collar jobs is evaluated by the subjective judgement of the performers manager Periodically, managers are required to evaluate the performance of employees on some form of rating scale. Using these evaluations, the managers then recommend that some amount of merit pay be awarded to individuals over and above their basic salaries Individuals who tend to see a strong link between reward and performance tend to perform better Merit pay plans are employed with a much greater frequency than wage incentive plans and has become one of the most common forms of motivation in Canada However, although merit pay can improve performance, many merit systems are ineffective (no clear link between job performance and pay)

OB Chapter 6 Potential Problems with Merit Pay Plans Low Discrimination Managers might be unwilling or unable to discriminate between good performers and poor performers. Subjective evaluations of performance can be difficult to make and are often distorted by a number of perceptual errors (ch. 3) Small Increases effectiveness of merit pay plans are threatened when merit increases are simply too small to be effective motivators. Sometimes a reasonable amount of merit pay is provided, but its motivational impact is reduced because it is spread out over a year Can be solved with: Lump Sum Bonus merit pay that is rewarded in a single payment and not built into base pay Pay Secrecy Management tells employees not to share information on their merit pay. Even if merit pay is administered fairly, is contingent on performance, and is generous, employees have no way of comparing their own merit treatment with that of others. Managers overestimate the pay of their employees and their peers and underestimate the pay of their superiors. Using Pay to Motivate Teamwork Pay Plan Profit Sharing (Most commonly used group-oriented incentive system) Description The return of some of the company profit to employees in the form of a cash bonus or a retirement supplement Advantages Employees have a sense of ownership Aligns employee goals with organization goals Disadvantages Many factors beyond the control of employees can affect profits In large firms, it is difficult to see the impact of ones own actions on profits It is difficult for employees to see the connection between their efforts and the company profits Many factors can influence the value of a companys stock, regardless of employees efforts They lose their motivational potential in a weak economy when a companys share price goes down

Employee Stock Ownership Plans

Allows employees to own a set amount of a companys shares and provide employees with a stake in the companys future earnings and success

Increases employees loyalty and motivation Aligns employees goals and interests to that of the organizations

OB Chapter 6 Gainsharing When measured costs decrease, employees receive a bonus based on a predetermined formula Aligns employee goals with organization goals Encourages teamwork and cooperative behaviour Bonuses might be paid even when the organization does not make a profit Employees might neglect objectives that are not included in the formula Increases the cost of training Labour costs can increase as employees acquire more skills

Skill Based Pay

Employees are paid according to the number of job skills they acquire

Encourages employees to learn new skills Greater flexibility in task assignments Provides employees with a broader picture of the work process

Job Design as a Motivator If the use of money as a motivator is to capitalize on extrinsic motivation, using job design as a motivator capitalizes on intrinsic motivation The goal of job design is to identify the characteristics that make some tasks more motivating than others and to capture these characteristics in the design of jobs. Job Scope and Motivation Job Scope - the breadth and depth of a job. Breadth refers to the different number of activities performed on the job Depth refers to the degree of control the worker has over how these tasks are performed Broad jobs require workers to do a number of different tasks Deep jobs emphasize freedom in planning how to do the work Jobs that have great breadth and depth are called high scope jobs (ex. Professors), low scope jobs consist of a single task repeated with no discretion (ex. Assembly line worker) Maslows need hierarchy and ERG theory both seem to indicate that people can fulfill higher-order needs by the opportunity to perform high scope jobs Expectancy theory suggests that high scope jobs can provide intrinsic motivation if the outcomes derived from such jobs are attractive One way to increase the scope of a job is to assign employees stretch assignments, which offer employees opportunities to broaden their skills by working on a variety of tasks with new responsibilities Another way to increase the scope of a job is job rotation, which involves rotating employees to different tasks and jobs in the organization

OB Chapter 6 The Job Characteristics Model proposes that there are several core job characteristics that have a certain psychological impact on workers Core Job Characteristics 1. Skill Variety: the opportunity to do a variety of job activities using various skills and talents (job breadth) 2. Autonomy: the freedom to schedule ones own work activities and decide work procedures (job depth) 3. Task Significance: the impact that a job has on others 4. Task identity: the extent to which a job involves doing a complete piece of work, from beginning to end 5. Feedback: information about ones performance effectiveness is essential for high intrinsic motivation Work will be intrinsically motivating when it is perceived as meaningful, when the worker feels responsible for the outcomes of the work, and when the workers has knowledge about his or her work progress Job Enrichment Job Enrichment: the design of jobs to enhance intrinsic motivation, the quality of working life and job involvement Job Involvement: identification with ones job and the importance of work to ones total self-image Employees who have challenging and enriched jobs tend to have higher levels of job involvement Employees who are more involved in their job have higher job satisfaction and organizational commitment and are less likely to consider leaving their organization To achieve job enrichment: Combine tasks assign tasks that might be performed by different workers to a single individual Establish external client relationships putting employees in touch with people outside the organizations who depend on their products or service Establish internal client relationships putting employees in touch with people who depend on their products or services within the organization Reduce supervision or reliance on others increase autonomy and control over ones own work Form work teams management can use this format as an alternative to a sequence of small jobs that individual workers perform when a product of service is too large or complex for one person to complete alone Make feedback more direct used in conjunction with other job design aspects that permit workers to be identified with their own product or service Potential Problems with Job Enrichment Poor Diagnosis: increasing job breadth by giving employees more tasks to perform at the same level while leaving the other crucial core characteristics unchanged job enlargement Organizations might attempt to enrich jobs that are already perceived as too rich by their workers Rather than leading to job enrichment, this can lead to role overload and work stress

OB Chapter 6 Lack of Desire or Skill: some workers do not desire enriched jobs Even when people have no objections to job enrichment, they might lack the skills or competence necessary to perform enriched jobs effectively Demand for Rewards: workers who experience job enrichment ask that greater extrinsic rewards, such as pay, accompany their redesigned jobs Union Resistance: Traditionally, North American unions have not been enthusiastic about job enrichment Supervisory Resistance: enrichment increases autonomy of employees, which might disenrich the bosss job Recent Developments in Job Design: Work Design Job characteristics Model and Job Enrichment have been criticized for being too narrow Development of Work Design Model Work design characteristics refer to the attributes of the task, job and social and organization environment and consist of 3 categories: Motivational characteristics task characteristics (autonomy, task variety, task significance, task identity, and feedback) knowledge characteristics (knowledge, skill, and ability demands required to perform a job) Social characteristics interpersonal and social aspects of work and include social support, interdependence, interaction outside the organization and feedback from others Work context characteristics refer to the context within which work is performed and consist of ergonomics, physical demands, work conditions, and equipment use Management by Objectives An ongoing management program designed to facilitate goal establishment, goal accomplishment and employee development. Objective for the organization as a whole are developed by top management and diffused down through the organization through the MBO process Evidence shows that MBO programs result in clear productivity gains, however, MBO is an elaborate, difficult, time consuming process Alternative Working Schedules as Motivators for A Diverse Workforce Flex Time ana lternative work schedule in which arrival and departure times are flexible Compressed Workweek - an alternative work schedule in which employees work fewer than the normal 5 days a week but still put in a normal number of hours Job and Work Sharing Job sharing occurs when two part-time employees divide the work. Work sharing involves reducing the number of hours employees work to avoid layoffs when there is a reduction in normal business activity Telecommuting a system by which employees are able to work at home but stay in touch with their offices through the use of communications technology