Introduction to Business

1. Introduction to Business Motivating Employees

2. Module Learning Outcomes Explain common motivational theories and apply them to business 10.1: Describe the Hawthorne effect, and explain its significance in management 10.2: Explain need-based theories of worker motivation 10.3: Explain process-based theories of motivation 10.4: Differentiate between Theory X, Theory Y, and Theory Z managers 10.5: Explain how managers can use job characteristics and goal-setting theory to motivate employees

3. The Hawthorne Effect

4. Learning Outcomes: The Hawthorne Effect 10.1: Describe the Hawthorne effect, and explain its significance in management 10.1.1: Describe the Hawthorne effect 10.1.2: Explain the role of the Hawthorne effect in management

5. Understanding The Hawthorne Effect The “Hawthorne effect” describes the finding that subjects being studied change their behavior because they are aware of being observed.

6. The Hawthorne Effect (cont.) During the 1920s Elton Mayo conducted experiments on workers at the Hawthorne plant of the Western Electric Company in Illinois. In contrast to Taylor’s work viewing “man as machine”, Mayo argued that employees’ performance is influenced by work surroundings and coworkers as much as by ability and skill. Mayo originally set out to study the effects that physical conditions had on worker productivity, but he found that workers were highly responsive to additional attention from their managers and the feeling that their managers actually cared about and were interested in their work. Researchers concluded that the employees worked harder because they thought they were being monitored individually.

7. Additional Findings of the Hawthorne Effect Researchers hypothesized that choosing one’s own coworkers, working as a group, being treated as special, and having a sympathetic supervisor were the real reasons for the productivity increase. The Hawthorne studies showed that people’s work performance is dependent on social issues and job satisfaction. The studies also found that social factors are equally important as financial factors in driving worker productivity.

8. Practice Question 1 The Hawthorne effect identified an increase in worker productivity based on: A. optimization of the mechanics of the job B. optimization of environmental factors such as lighting and temperature C. the knowledge that one is being observed D. implementation of team competitions

9. Practice Question 2 A manager who seeks to leverage the Hawthorne effect should: A. adopt a command and control approach B. implement monitoring software without notifying employees C. separate employees so they focus on production rather than socialization D. engage employees in a manner that demonstrates that their work is important and their ideas are valuable

10. Need-Based Theories

11. Learning Outcomes: Need-Based Theories 10.2: Explain need-based theories of worker motivation 10.2.1: List the various levels of needs in Maslow’s hierarchy 10.2.2: Explain the impact that Maslow’s levels of needs have on worker motivation 10.2.3: Summarize the changes to Maslow’s hierarchy of needs in Alderfer’s ERG theory 10.2.4: Explain the difference between intrinsic and extrinsic motivators in Herzberg’s two-factor theory 10.2.5: Describe how employees might be motivated using McClelland’s acquired needs theory

12. Understanding Need-based Theories Need-based theories proposed that people are mainly motivated by trying to meet certain needs. If you can understand their needs, you can better motivate them. Examples of need-based theories • Maslow’s hierarchy of needs • ERG theory • Herzberg’s two-factor theory • McClelland’s acquired-needs theory

13. Abraham Maslow was a social psychologist who is best known for his hierarchy-of-needs theory. The theory organizes the different level of human psychological and physical needs in order of importance, depicted as a pyramid. This hierarchy can be used by managers to better understand employees needs and motivations and address them in a way that leads to higher productivity and satisfaction.

14. Class Discussion: The Famous Triangle Consider Maslow’s psychological/socialogical hierarchy as it applies to the workplace. Let’s use the existing categories of the hierarchy and fill in the triangle with specific needs that the workplace can or cannot provide: • Self-actualization • Esteem • Social • Security • Physiological

15. Implications of Maslow’s Hierarchy of Needs • Some people work primarily for money and fulfill their higher order needs elsewhere. • Others want to meet higher order needs at work. • If an employee works hard for a promotion and doesn’t get it, they may lose motivation and put in less effort. • If employees lack job security, they will be far more concerned about their financial well-being and meeting lower needs than about gaining esteem at work. • Keeping one’s employees motivated can seem like something of a moving target.

16. ERG Theory • Alderfer developed Maslow’s hierarchy of needs into a theory of his own. He proposed three groups of core needs:  • Existence needs concern our basic material requirements for living. • Relatedness needs have to do with the importance of maintaining interpersonal relationships. • Growth needs describe our intrinsic desire for personal development. • Alderfer proposed that when a certain category of needs isn’t being met, people will redouble their efforts to fulfill needs in a lower category.

17. Herzberg’s Two Factor Theory American psychologist Frederick Herzberg set out to determine the effect of attitude on motivation. He asked people to describe the times when they felt really good and really bad about their jobs. He hypothesized that there are two different set of factors governing job satisfaction and dissatisfaction: hygiene factors (extrinsic motivators) and motivation factors (intrinsic motivators).

18. Figure: Herzberg’s Two Factor Theory

19. Implications of Herzberg’s Two Factor Theory • The concept of employee expectationplays a large role in this motivational model • Hygiene factors / Extrinsic motivators (salary, benefits, etc.) are expected, so they won’t increase motivation when they are present, but they will cause dissatisfaction when they are missing. • Motivation factors / Intrinsic motivators (challenging work, growth potential) can be a source of additional motivation when they are present. • To increase satisfaction, management must focus on motivation factors —the opportunities it presents employees for gaining status, assuming responsibility, and achieving self-realization. • To decrease dissatisfaction, management must focus on hygiene factors or the job environment—policies, procedures, supervision, and working conditions.

20. McClelland’s Acquired-needs Theory Acquired-needs theory splits the needs of employees into three categories: • Employees who are strongly achievement-motivated are driven by the desire for mastery. • Employees who are strongly affiliation-motivated are driven by the desire to create and maintain social relationships. • Employees who are strongly power-motivated are driven by the desire to influence, teach, or encourage others.

21. Acquired-needs Theory: Tailored Motivation The acquired-needs theory claims that all people are motivated by all of these needs in varying degrees and proportions. An individual’s balance of these needs forms a kind of profile that can be useful in creating a tailored motivational paradigm for the employee.

22. Practice Question 3 In applying Maslow’s hierarchy of needs, managers should take the following approach to worker motivation: A. threaten employees with the loss of their jobs B. at a minimum, provide workers with a living wage C. assume that financial incentives will result in the highest level of motivation D. assume all employees are motivated to achieve their peak potential at work

23. Practice Question 4 In Herzberg’s two-factor theory, a distinction is drawn between factors related to job satisfaction and factors that contribute to job dissatisfaction. Herzberg’s research indicated that “hygiene” or _____ factors contributed to job satisfaction and motivator or _____ factors contributed to job dissatisfaction. A. extrinsic; intrinsic B. environmental; financial C. environmental; aspirational D. intrinsic; extrinsic

24. Process-Based Theories

25. Learning Outcomes: Process-Based Theories 10.3: Explain process-based theories of motivation 10.3.1: Describe the role of inputs and outputs in equity theory 10.3.2: Explain the implications of equity theory for business managers 10.3.3: Describe the ways in which managers can use expectancy theory to motivate employees 10.3.4: Explain how reinforcement theory can be used as a management tool

26. Understanding Process-based Theories Process-based theories view motivation as a rational process. Individuals analyze their environment, develop reactions and feelings, and respond in certain predictable ways. The three best-known process-based theories are • Equity theory • Expectancy theory • Reinforcement theories

27. Equity Theory Proposes that people value fair treatment, which motivates them to maintain a similar standard of fairness with their coworkers and the organization. Is based on the ratio of inputs (employees contributions) to outcomes (salary, job security, promotion, praise etc).

28. Equity Theory: Employee Inputs and Outputs Inputs are the employee’s contribution to the workplace and can be tangible and intangible. Examples: time spent working, level of effort, loyalty, commitment, and enthusiasm. Outputs/outcomes are what the employee receives from the employer and can be tangible or intangible. Examples: salary, job security, recognition, praise, and a sense of achievement.

29. Insights of Equity Theory • Individuals will try to maximize their outcomes. • Individuals can maximize collective rewards by evolving accepted systems for equitably apportioning resources among members. As a result, groups will evolve such systems and will attempt to induce members to adhere to these systems. In addition, groups reward members who treat others equitably and punish members who do not. • When individuals find themselves participating in inequitable relationships, they will become distressed. • Individuals who discover they are in inequitable relationships will attempt to eliminate their distress by restoring equity.

30. Applications of Equity Theory to Management • Employees measure the totals of their inputs/outcomes. • Different employees ascribe different personal values to inputs and outcomes. • Employees are able to adjust for purchasing power and local market conditions. • While it is accepted for senior staff to receive higher salary, there are limits to the balance of the scales of equity. Employees can find excessive executive pay demotivating. • Staff perceptions of inputs and outcomes of themselves and others may be incorrect, and perceptions need to be managed effectively.

31. Expectancy Theory Suggests that behavior is motivated by anticipated results or consequences and a person will behave in a certain way based on the expected result of the chosen behavior. • Expectancy is the individual’s belief that effort will lead to the intended performance goals. • Instrumentality is the belief that a person will receive a desired outcome if the performance expectation is met. • Valence is the unique value an individual places on a particular outcome.

32. Insights of Expectancy Theory • Expectancy theory can help managers understand how individuals are motivated to choose various behavioral alternatives • Having clear policies in place – preferably spelled out in a contract – guarantees that the reward will be delivered if the agreed-upon performance is met • To enhance the connection between performance and outcomes, managers should use systems that tie rewards very closely to performance • An outcome that one employee finds motivating may not be motivating to another employee • Managers can use training to help their employees improve their abilities and believe that added effort will, in fact, lead to better performance

33. Reinforcement Theory An individual’s behavior is a function of the consequences of that behavior. 

34. Reinforcement Theory: Operant Conditioning Figure

35. Reinforcement Positive Reinforcement: Rewarding an employee in response to desired behavior. • Example: an employee identifies a new market opportunity and as a result, the company gives her a bonus Negative Reinforcement: Taking away something the employee doesn’t like in response to desired behavior. • Example: An employee finishes a few projects faster than expected. Knowing that he has a long commute, the manager tells him he can work from home for a few days because of all the progress he has made

36. Factors Affecting Reinforcement • Satiation: the degree of need. • Immediacy: the time elapsed between the desired behavior and the reinforcement. The shorter the time between the two, the better. • Size: the magnitude of a reward or punishment can have a big effect on the degree of response.

37. Punishment Positive Punishment: Providing an adverse stimulus in response to an undesired behavior • Example: Suspending an employee for inappropriate behavior Negative Punishment: The removal of or withholding of something that the employee desires in response to an undesired behavior • Example: An employee in the IT department prefers unconventional work hours of 10:30am to 7:00pm, but her performance has been suffering recently. Her manager revokes her ability to work her preferred hours until her performance improves.

38. Punishment (continued) In business organizations, punishment and deterrence theory play a vital role in shaping the work culture. If employees know exactly what they are not supposed to do, and understand the repercussions of violating those expectations, they will generally try to avoid crossing the line. Prevention is a cheaper and easier approach than waiting for something bad to happen, so preemptive education regarding rules—and the penalties for violations—is common practice.

39. Practice Question 5 The equity theory proposes that people value fair treatment and fairness motivates a similar standard of employee behavior. In evaluating fairness, employees consider the ratio of inputs to outcomes and wil: A. perceive a peer’s higher salary and greater responsibilities as inequitable and demotivating B. perceive a manager’s higher salary and greater responsibilities as inequitable and demotivating C. select a colleague with more experience or greater expertise as a point of reference for salary negotiation D. consider non-financial factors; for example, perceiving a lower income as equitable if it is coupled with more flexible work hours or a telecommuting arrangement

40. Practice Question 6 According to Vroom’s expectancy theory, managers can improve employee motivation if they: A. Increasing instrumentality by clearly defining successful performance and designing reward systems tied to this performance B. Increasing expectancy by designing rewards that are of value to individual employees C. Increasing instrumentality by investing in training and development D. Increasing valence by eliminating any rewards that can’t be quantified and “sold” to employees

41. Theory X, Theory Y, and Theory Z

42. Learning Outcomes: Theory X, Theory Y, and Theory Z 10.4: Differentiate between Theory X, Theory Y, and Theory Z managers 10.4.1: Differentiate between Theory X, Theory Y, and Theory Z managers 10.4.2: Explain the implications of Theory X, Theory Y, and Theory Z for employee management

43. Theory X, Theory Y, and Theory Z Douglas McGregor theorized that worker motivation is closely linked to the way managers view and treat their workers and that all managers fall into one of two types—Theory X and Theory Y.   Later, William Ouchi combined Eastern and Western management practices to develop Theory Z.

44. Theory X Managers Management assumes the following: • Work is distasteful and people will attempt to avoid it. • Most people are not ambitious, have little desire for responsibility, and prefer to be directed. • Most people have little aptitude for creativity in solving organizational problems. • Motivation occurs only at the physiological and security levels of Maslow’s hierarchy of needs. • Most people are self-centered. They must be closely controlled to achieve organizational objectives. • Most people resist change. • Most people are gullible and unintelligent.

45. Motivation Under Theory X • Hard approach: motivation relies on coercion, implicit threats, micromanagement, and tight control. Hard approach results in hostility, purposely low output, and extreme union demands. • Soft approach: seek harmony in hopes that, in return, employees will cooperate when asked. Soft approach results in a growing desire for greater reward in exchange for diminished work output.

46. Insights from Theory X McGregor asserts that basic assumptions of Theory X are incorrect. Drawing on Maslow’s hierarchy of needs, McGregor argues that a need, once satisfied, no longer motivates. Once the company uses monetary rewards and benefits to satisfy employee’s lower level needs, the motivation disappears. Theory X management hinders the satisfaction of higher-level needs because it doesn’t acknowledge that those needs are relevant in the workplace.

47. Theory Y Managers Management assumes the following: • Employees are motivated by higher-level needs of esteem and self-actualization. • Work can be as natural as play. • People will be self-directed and creative to meet work objectives if they are committed to them. • People will be committed to their quality and productivity objectives if rewards address higher needs such as self-fulfillment. • Most people can handle responsibility because creativity and ingenuity are common in the population. • Under these conditions, people will seek responsibility.

48. Implications of Theory Y If Theory Y holds true, an organization can apply the following principles of scientific management to improve employee motivation: • Decentralization and delegation: if firms decentralize control, managers will have more subordinates and need to delegate some responsibility to them • Job enlargement: broadening the scope of an employees job adds variety and opportunities to satisfy ego needs • Participative management: consulting employees in the decision-making process taps their creative capacity and provides them with some control over the work environment • Performance appraisals: Having the employees set objectives and participate in self-evaluation increases engagement and dedication

49. Theory Z William Ouchi blended Eastern and Western management practices. He proposed that if a company wants to reduce employee turnover, increase commitment, improve morale and job satisfaction, and increase productivity it needs: • A strong company philosophy and culture • Long-term staff development and employment • Consensus in decisions • Generalist employees • Concern for the happiness and well-being of workers • Informal control with formalized measures • Individual responsibility recognized within the context of the team as a whole

50. Limitations to Theory Z • It can be difficult for organizations and employees to make life-time employment commitments • Participative decision-making is not always feasible or successful • Slow promotions, group decision-making, and life-time employment may not be a good fit with companies operating in cultural, social, and economic environments where those work practices are not the norm