PRINCIPLES OF BUSINESS MANAGEMENT

Unit 8
Employee Motivation and Leadership

What is leading?
Leading is the management function of guiding, influencing and motivating people to work
effectively toward organizational goals.

Management vs leadership
- Management is the rational, intellectual and practical side of guiding and organization. It
involves position power
- Leadership is the inspirational, visionary, and emotional side. It involves personal power.

Sources of a leader’s power

- Legitimate power: the power a leader has as a result of his/her position in the organization; his/
her authority.
- Coercive power: the power to punish or control.
- Reward power: the power to give positive benefits or rewards.
- Expert power: the influence a leader can exert as a result of his or her expertise, skills, or
knowledge.
- Referent power: the power of a leader that arises because of a person’s desirable resources or
admired personal traits.

Leadership styles
- Autocratic leader: a leader who dictates work methods, makes unilateral decisions, and limits
employee participation.
- Democratic leader: a leader who involves employees in the decision making, delegates
authority, and uses feedback as an opportunity for coaching employees.
- Laissez-faire leader: a leader who lets the group make decisions and complete the work in
whatever way it sees fit.

Motivation
Motivation is the process by which a person’s efforts are energized, directed, and sustained
towards attaining a goal.

Theories of motivation
Maslow’s hierarchy of need theory
People are motivated by multiple needs; these needs exist in a hierarchical order: lower-orders
needs take priority and must be satisfied before higher-order needs are activated.

Maslow’s hierarchy of needs:

1. Physiological needs: a person’s needs for food, drink, shelter, etc.
2. Safety needs: a person’s needs for security and protection form physical and emotional harm.
3. Social needs: a person’s needs for affection, belongingness, acceptance, and friendship.
4. Esteem needs: a person’s needs for internal esteem factors )e.g. respect, autonomy and
achievement) and external esteem factors (e.g. status, recognition and attention).
PRINCIPLES OF BUSINESS MANAGEMENT

5. Self-actualization needs: a person’s needs for growth, achieving one’s potential, and self-
fulfillment; the drive to become what one is capable of becoming.

Herzberg’s Two-Factor theory

Herzberg’s two-factor theory (also called motivation-hygiene theory) proposes that intrinsic factors
are related to job satisfaction, while extrinsic factors are associated with job dissatisfaction:

- Intrinsic factors (motivators): arise from the job itself (e.g. achievement, recognition,
responsibility, advancement, growth)
- Extrinsic factors (hygiene factors): arise from the job context (e.g. company policy, supervision,
working conditions, salary, and interpersonal relationships) 


According to Herzberg, dissatisfaction is not the opposite of satisfaction.

When extrinsic factors are adequate, people won’t be dissatisfied but they won’t be satisfied
(motivated) either. To motivate people, the intrinsic factors need to be emphasized. 


Goal-setting theory
Managers can increase motivation by setting specific and challenging goals, and providing timely
feedback


Key elements of the goal-setting theory:
- Goal specificity: specific goals are more motivating than vague or ambiguous goals.
- Goal difficulty: challenging but achievable goals are motivating.
- Goal acceptance: individuals have to be committed to the goal.
- Feedback:people get information on a regular basis about how well they are doing in
progressing toward a goal. 


Equity theory
Equity theory focuses on individuals' perceptions of how fairly they are treated compared with
others:
- People evaluate equity by a ratio of inputs (e.g. education, effort, ability, experience, etc.) to
outcomes (e.g. pay, recognition, benefits, promotion, etc.).
- The input-to-outcome ratio is compared to those of relevant others.
- Perceived inequity creates tensions within individuals and motivate them to bring equity into
balance (e.g. by changing work effort, changing outcomes, leaving the job). 


Expectancy theory
Expectancy theory states that the effort employees put forth depends on:
- Their expectations regarding the level of performance they will be able to achieve.
- Their expectations regarding the rewards in response to that performance.
- The attractiveness of those rewards