Cambridge IGCSE and O Level Business Studies

6 Motivating employees
Answers to Coursebook activities
Activity 6.1 (page 74)
1 Many employees leaving the business – increase in labour turnover; absenteeism at an all-time high;
production levels – productivity – fallen; increase in customer complaints; poor quality.
2 Work became boring – less interesting than it used to be; bonus targets are too high; pay is lower than
that of similar businesses.
3 Answers should focus on the effect motivation has on labour turnover, productivity, quality.
4 Answers should discuss the importance of financial motivators v non-financial motivators. Answers
that identify a benefit or a drawback of the new pay system to ZHAF will demonstrate analysis.
An answer that has the student making a judgement about the likely success of the new pay system
supported by evidence from the case study or relevant theories would be evidence of evaluation.

Activity 6.2 (pages 75–76)

Level of need How business helps individuals to satisfy their needs
Physical needs 1 Pay received is high enough to buy basic needs.
9 Employees are given free meals at work.
13 Employees receive payment during periods of illness.
Safety needs 3  Employees are given a contract of employment setting out their pay and
working conditions.
5 Employees are provided with protective clothing.
7 The business is very profitable.
15 Employees are trained how to use equipment correctly.
Social needs 4 Employees are organised into teams or groups.
12 Social activities are organised for employees.
Esteem needs 2 The manager praises employees.
8 Employees are given responsibility for completion of tasks.
11 Employees are given the opportunity for promotion.
14 Respect from other employees.
Self-actualisation 6 Work is challenging.
10 Employees are given the opportunity to develop new skills to increase
their potential.

Activity 6.3 (page 79)

1 Productivity is much lower than average for FF’s other factories; absenteeism is more than double the
average for FF’s other factories; labour turnover is more than double the average for the other factories.
2 40/500 × 100% = 8%
3 Answers should consider the data given in the table, which shows that the average weekly wage in
Factory A is higher than the average for FF’s other factories but productivity is lower, and labour
turnover and absenteeism are higher. This would suggest that money is not motivating employees and
the poor motivation is due to non-financial reasons such as the leadership style of the factory manager,
poor working conditions and what employees see as ‘silly rules’. Students could link these points to
relevant theories to support their answer.

© Cambridge University Press 2018 Chapter 6 Answers to Coursebook activities 1

Cambridge IGCSE and O Level Business Studies

4 Answers should outline Herzberg’s two-factor theory and explain the importance of hygiene factors and
motivators, how a knowledge of these might be used by senior managers to improve the motivation of
employees and why this could lead to improvement in productivity. Better answers will link the theory to
the present situation of the employees and how some of the hygiene factors are present, e.g. high wages,
but others are not, e.g. poor working conditions. Answers should recognise that an improvement in these
factors will not motivate employees but that they need to be present to satisfactory standard in order
to prevent job dissatisfaction. Focus should then be on how senior managers might use ‘motivators’ to
improve employee motivation and productivity. Influence of the leadership style of the factory manager
might also be considered. Senior managers might also consider why the productivity of employees in
their other factories is higher than Factory A, i.e. what is so different between the factories?

Test yourself (page 79)

1 Physical, safety, social, esteem, self-actualisation.
2 Hygiene factors are those factors, such as pay and working conditions, that need to be present in order
to prevent job dissatisfaction, but they will not motivate employees. Motivators, e.g. responsibility and
recognition, are important influences on the motivation of employees.

Activity 6.4 (page 81)

1 A: 40 × $4.75 = $190; B: 2000 × $0.10 = $200; C: (40 × $4.50) + $15 = $195
2 There is no ‘right’ answer. Students need to choose a company and justify their choice, e.g. Company B
because the harder I work, the more pay I will receive; Company A because I am guaranteed $190 per
week even if I don’t work very hard!

Activity 6.5 (pages 82–83)

1 Director: salary + performance-related bonus + fringe benefits; receptionist: hourly.
2 42 × $6 = $252
3 Financial rewards received by an employee in addition to money wage or salary. Include company car,
health insurance, company pension. Note: Relocation expenses are not a fringe benefit because they are
a ‘one-off’ payment used to attract better-quality applicants.
4 To attract the very best candidates. There are fewer people with the required skills and expertise to
carry out the duties of a director so fringe benefits help attract these to apply. No experience is needed
for the receptionist – many more people will be interested in applying so fringe benefits are not
required to attract applicants. Competitors will likely be offering similar benefits.
5 Any appropriate answer that the student can justify, e.g. free membership of health and fitness club.

Activity 6.6 (page 83)

1 Increased automation/new technology; work has become boring and less challenging; employees are no
longer using their skills.
2 Increased productivity – reduces average cost/cost per unit; reduced labour turnover – reduces
recruitment and training costs; reduced absenteeism – increases productivity; better-quality products
– increases sales/reduces waste/reduces customer returns or complaints/improves company image or
brand image.
3 Answers should explain job redesign, i.e. job rotation, job enlargement and job enrichment, and how
each of these might solve some of the problems identified, e.g. reduce boredom, make work more
challenging, provide employees with greater responsibility. Link to relevant theory/theories such as
Maslow or Herzberg. No mention of financial motivation but answer could consider the importance
of money as a motivator. Students need to make a judgement about the likely effect of job redesign on
solving the problems and support it with relevant theory or application.
© Cambridge University Press 2018 Chapter 6 Answers to Coursebook activities 2
 Cambridge IGCSE and O Level Business Studies

Activity 6.7 (page 84)

There are many possible answers – the following are some suggestions.
1 Offer bonus for achieving a certain level of sales, or commission based on amount of sales.
2 What is causing the increase in faulty products? Is the work boring? Will job rotation help reduce boredom?
3 Bonus paid on efficient delivery of pizzas. Pay the driver using the piece-rate system based on number
of deliveries made.
4 Salary + performance-related pay based on sales, fringe benefits, e.g. company car.
5 Training so able to gain promotion to manager.
6 Bonus based on the number of cars they sell. Commission-based salary, i.e. the more they sell, the more
they earn.
7 Hourly wage. Safety equipment.
8 More responsibility.
9 Salary. Profit sharing. Laissez-faire leadership style.
10 Performance-related pay based on the examination results of their students.

Test yourself (page 85)

1 Financial incentives involve paying money for work done, e.g. hourly wage, piece-rate, salary, bonuses,
or providing a benefit that saves employees from spending their own money, i.e. fringe benefits such
as company cars and health insurance. Non-financial methods include job redesign, giving employees
greater responsibility, recognition and opportunities for reaching their full potential.
2 Job rotation – employees move around different tasks to increase the variety of work they do
and reduce boredom. Job enrichment – giving employees other tasks that increase their level of
responsibility. This can motivate employees by helping to satisfy esteem needs (Maslow), or provide
a motivator (Herzberg).

Activity 6.8 (page 86)

1 Environment that employees are working in, e.g. noise levels, cleanliness, temperature, bathroom
facilities, restrooms, health and safety procedures.
2 In addition to a wage based on number of hours worked, employees receive payment based on how well
they perform their tasks. Might be based on achieving production targets, or quality targets.
3 Advantage: employees perform tasks quickly and to a high standard – improves productivity and
quality. Disadvantage: employees become bored with performing the same task, which demotivates
them – reduces productivity and quality, increases absenteeism and labour turnover.
4 New factory pays wages based on hours worked rather than using the piece-rate system. Employees
have greater certainty about how much they will earn each week – not based solely on how hard they
work/how many units they produce. Working conditions in the new factory are much better and
employees might feel healthier and have a safer environment in which to work. New factory probably
uses better technology and is more automated than MFC so the work is easier.
5 Answers should discuss advantages/disadvantages of the piece-rate system. Some employees might
prefer the system if they are hard-working and able to produce a high level of output. However,
employees do not know from one week to the next what their wage will be as it depends on how many
units they produce. Some employees might not be able to earn as much as they would like because their
output is affected by slower employees. Better answers will also consider advantages/disadvantages
to the employer. MFC only pays employees for the work they do; however, employees might pay less

© Cambridge University Press 2018 Chapter 6 Answers to Coursebook activities 3

Cambridge IGCSE and O Level Business Studies

attention to quality if they are trying to produce as many units as possible. Changing from piece-rate
to another system, e.g. hourly rate, might improve quality, could reduce productivity. Decrease in
productivity will increase average costs and this would need to be balanced against any reduction in
average costs as a result of improved quality/reduced wastage.

Exam-style practice questions (pages 87–88)

1 a Non-cash incentives (1) to recruit or retain employees (1). Could reward relevant examples, e.g.
company car, pension, employee discounts, etc. [Total: 2]
b $200/40 = $5 per hour [2]
c Piece-rate (1) based on output (1) – the more employees produce, the higher their wage. (2) [Total: 4]
d Bonus (1), Company A could set production targets (1) – employees will receive additional payment
for reaching target (1). Profit sharing (1), employees will receive payment at end of year based on
profit earned by Company A (1), the higher the profit, the more each employee will receive (1).
[Total: 6]
e Use of relevant motivation theories. For example, according to Taylor, money is most important
motivator (1). Other theorists such as Maslow and Herzberg disagree (1), employees motivated by
other needs such as security, social, esteem or self-actualisation (1), Herzberg’s two-factor theory
identified money as hygiene factor, i.e. needs to be of a satisfactory level but does not motivate
(1), other factors such as responsibility and recognition are more important as motivators (1).
[Maximum: 4] Answer disagrees with Company B management because although they use piece-rate
to motivate employees, they do not stay more than one year, which may suggest not motivated by
money (2). [Total: 6]
2 a Additional payment to employees on top of weekly wage (1) for reaching production target (1). [Total: 2]
b Factors that influence behaviour of employees (1) towards achieving set business goals (1). [Total: 2]
c Financial motivators (1). Managers will work harder (1). Fringe benefits help to recruit the best
managers (1). Improves the quality of ABC’s management (1) or helps to retain managers (1), which
reduces recruitment and training costs (1). (maximum of 4) [Total: 4]
d Maximum 2 marks for identifying non-financial methods of motivation, such as job rotation, job
enrichment, delegation, team working, training, opportunities for promotion. (2 marks each for
explaining how methods identified might be used to motivate employees.) For example, job rotation
(1) introduces variety into their work (1), the work becomes less boring / more interesting (1); ABC
might introduce job enrichment (1), as it gives employees more responsibility (1). It satisfies their
esteem needs (1). [Total: 6]
e Production workers are easier to replace so not necessary to provide them with the same fringe
benefits as the manager (1). More important to retain the manager or use fringe benefits to attract
the best manager to ABC (1). Too costly to give all employees a company car (1). Giving all employees
the same fringe benefits would increase ABC’s costs and reduce profits (1). However, if production
workers receive fringe benefits this will reduce labour turnover (1), reduce recruitment and training
costs (1). Production workers should receive a share of the profits (1) because they, not only the
managers, have worked hard to help ABC earn profits (1). (maximum of 6) [Total: 6]

© Cambridge University Press 2018 Chapter 6 Answers to Coursebook activities 4