Motivating & Rewarding Employees

1. Motivating & Rewarding Employees IGCSE Business Studies tutor2u™ Revision Presentations 2004

2. Motivation • What is it? • Motivation is will to work • Comes from enjoyment of work itself and/or from desire to achieve certain goals e.g. earn more money or achieve promotion • Methods available to motivate employees • Financial methods (e.g. salary, bonus) • Non-financial methods (passing on responsibility or praise)

3. Advantages of a Well Motivated Workforce • Better productivity (amount produced per employee) • Better quality • Lower levels of absenteeism • Lower levels of staff turnover (number of employees leaving business) • Lower training and recruitment costs

4. Four Main Motivational Theorists • Taylor • Mayo • Maslow • Herzberg

5. Taylor’s Theory of Motivation • Managers should maintain close control and supervision over their employees. • Autocratic style of management- managers make all decisions themselves • Theory X approach to workers- believe workers are lazy and are only motivated by money • Motivate by pay via piece-rate.

6. Mayo’s Theory of Motivation • Workers are not just motivated by money but by having their human/social needs met • Concluded that increase motivation by: • Better communication between managers and workers • Greater manager involvement in employees working lives • Working in groups • In practice therefore businesses should introduce team working and personnel departments to look after employees interests

7. Maslow’s Theory of Motivation • Maslow put forward a theory that there are five levels of human needs which employees need to have fulfilled at work. • Only once a lower level of need has been fully met, would a worker be motivated by the opportunity of having the next need up in the hierarchy satisfied. • A business should therefore offer different incentives to workers in order to help them fulfill each need in turn and progress up the hierarchy

8. Herzberg’s Theory of Motivation • Believed in two-factor theory • Motivators • Factors that directly motivate employees to work harder • Giving responsibility, recognition for good work, sense of achievement, opportunities for promotion • Hygiene factors • Factors that can de-motivate if not present but do not actually motivate employees to work harder • Pay, working conditions, job security • Motivate by using motivators plus ensuring hygiene factors are met • Use job enrichment and empowerment (delegating more power to employees to make their own decisions).

9. Autocratic Management Style • Description • Senior managers make all important decisions • Closely supervise and control workers • Managers do not trust workers and simply give orders (one-way communication) • When suitable • When quick decisions are needed in a company • E.g. in a time of crises • When controlling large numbers of low skilled workers

10. Democratic Management Style • Managers trust employees • Encourage employees to make decisions • Delegate authority/power to employees and listen to their advice

11. McGregor’s - Theory X and Theory Y • McGregor believed that managers have two very different views of workers in terms of their attitudes to work and motivation • Theory X view of workers: • Workers dislike work and are lazy • Workers must be controlled and punished were necessary • Workers try to avoid responsibility • Theory Y view of workers: • Workers like to work and enjoy new challenges • Workers like to make decisions and are creative and imaginative • Workers seek responsibility.

12. Best Approach/Style for Management? • Depends on circumstances • Whether workers are skilled or experienced • Level of genuine motivation • Whether quick decisions are needed etc • Best managers are those that are versatile and can call upon right style at right time

13. Reasons Why People Go To Work • To earn money • To feel a sense of achievement or job satisfaction • To feel a sense of belonging to a group • To achieve a sense of security • To obtain a feeling of self-worth

14. Main Types of Financial Incentives • Wages Normally paid per hour worked and receive money at end of week • Salaries - Normally an annual salary which is paid at end of each month • Bonus system - Usually only paid when certain targets have been achieved • Commission - Some workers, often salesmen, are partly paid according to number of products they sell • Profit sharing - A system whereby employees receive a proportion of company’s profits • Performance related pay - paid to those employees who meet certain targets • Share options - common incentive for senior managers who are given shares in company rather than a straightforward bonus or membership of a profit sharing scheme • Fringe benefits - Often known as ‘perks’, these are items an employee receives in addition to their normal wage or salary e.g. company car, private health insurance, free meals

15. Main Types of Non-Financial Incentives • Empowerment - delegating power to employees so they can make their own decisions • Praise - recognition for good work • Promotion opportunities - promoting employees to a position of higher responsibility • Job enrichment - giving employees more challenging and interesting tasks • Job enlargement - giving employees more tasks of a similar level of complexity • Better two-way communication - employees have a chance to give feedback and advice to managers • Better working environment - providing a safe, clean, comfortable environment to work in • Team working - offers employees an opportunity to meet their social needs and often accompanied by some form of empowerment for team

16. Fringe Benefits • Known as ‘perks’ • Items an employee receives in addition to their normal wage or salary • E.g. company car, private health insurance, free meals • Often increases loyalty to company as these benefits are not always taxed or are taxed at a reduced rate • More likely to recruit best people to company

17. Wages and Salaries • Wages • Paid by hour with pay packet normally received at end of each week • Often paid to lower skilled workers or to temporary staff • Any additional hours worked normally paid a higher rate on an overtime basis • Salaries • Often set on an annual basis but payment is made at end of each month • Normally paid to managers or those higher up in a company • A set number of hours is not normally agreed but employment contract requires enough hours worked to get job done

18. Gross and Net Pay • Gross pay: • Pay each month or week before any deductions have been removed • E.g. before income tax, national insurance contributions • Net pay: • Pay after deductions have been taken off • Sometimes known as take-home pay

19. Overtime and Bonus Pay • Overtime • Additional hours worked over and above normal working hours • E.g. at weekends or on bank holidays • Paid at a higher rate - often 1.5 or 2 times normal hourly wage • Bonus pay • Given out when certain performance targets have been met • Normally applicable at manager level in a company • How bonuses are used: • By motivating employees to work harder in order to meet a realistic yet challenging target and therefore achieve a bonus payment • Would only be effective if bonus payments were a significant sum

20. Profit Sharing • What it is: • A system whereby employees receive a proportion of business profits • Advantages • Creates a direct link between pay and performance • Creates a sense of team spirit- helps remove ‘them and us’ barrier between managers and workers if all employees involved • May improve employee’s loyalty to company • Employees more likely to accept changes in working practices if can see that profits will increase overall

21. Performance Related Pay • Increasingly popular method of paying people • Paid to those employees who meet certain targets • Advantages • Senior managers can easily monitor and assess individual employee performance during appraisal process • Setting of targets for employees can ensure they are all closely focused to company objectives • Disadvantages • Discourages a team based approach- can create unhealthy rivalry between managers • Can be difficult to accurately measure performance of some workers e.g. in service sector firms • Incentives may not be larger enough to motivate employees

22. Motivational Theorist Views on Pay • Taylor was only theorist to emphasis pay, in particular piece-rate, as best way of motivating employees • Mayo, Maslow and Herzberg all felt that non-financial rewards, such as teamworking, empowerment or job enrichment, acted as a better incentive for employees to work harder

23. Job Enrichment and Job Enlargement • Job enrichment • Giving workers more interesting and challenging tasks • Seen as more motivating as it gives workers chance to further themselves • Herzberg in particular recommended this approach • Job enlargement • Giving workers more tasks to do of a similar nature or complexity • Job rotation is a part of this

24. Reasons for Pay Differentials • Mainly due to supply and demand • People with skills that are in demand, but are in short supply, get paid more • Cost of living varies between regions • Some jobs require qualifications (e.g. accountants, lawyers)

25. Piece Rate Payment • Now a relatively unusual and old-fashioned way of paying people • Pay per item produced in a certain period of time • Advantages • Requires low levels of manager supervision • Encourages high speed production • Provides good incentive for workers who are mainly motivated by pay • Disadvantages • Workers are focused on quantity not quality • It is repetitive for workers and can be de-motivating • Workers are only used to one set method of production and may resistant change