Chapter Ten Motivating Employee Performance Copyright 2005 Houghton

Chapter Ten Motivating Employee Performance Copyright © 2005 Houghton Mifflin Company. All rights reserved. Power. Point Presentation by Charlie Cook.

Chapter Outline • The Nature of Motivation • Content Perspectives on Motivation – The Need Hierarchy Approach – The Two-Factor Theory – Individual Human Needs • Process Perspectives on Motivation – Expectancy Theory – Equity Theory – Goal-Setting Theory Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 2

Chapter Outline (cont’d) • Reinforcement Perspectives on Motivation – Kinds of Reinforcement in Organizations – Providing Reinforcement in Organizations • Popular Motivational Strategies – Empowerment and Participation – Alternative Forms of Work Arrangements • Using Reward Systems to Motivate Performance – Merit Reward Systems – Incentive Reward Systems – Team and Group Incentive Reward Systems – New Approaches to Performance-based Rewards Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 3

Learning Objectives After studying this chapter, you should be able to: – Characterize the nature of motivation, including its importance and basic historical perspectives. – Identify and describe the major content perspectives on motivation. – Identify and describe the major process perspectives on motivation. – Describe reinforcement perspectives on motivation. – Identify and describe popular motivational strategies. – Describe the role of organizational reward systems in motivation. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 4

The Nature of Motivation • Motivation – The set of forces that cause people to behave in certain ways. – The goal of managers is to maximize desired behaviors and minimize undesirable behaviors. • The Importance of Motivation in the Workplace – Determinants of Individual Performance • Motivation—the desire to do the job. • Ability—the capability to do the job. • Work environment—the resources needed to do the job. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 5

Figure 10. 1 The Motivation Framework Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 6

Content Perspectives on Motivation • Content Perspectives – Focus on needs and deficiencies of individuals – Approaches to motivation that try to answer the question, “What factors in the workplace motivate people? ” • Content Perspectives of Motivation – Maslow’s Hierarchy of Needs – Herzberg’s Two-Factor Theory – Mc. Clelland’s Achievement, Power, and Affiliation Needs Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 7

The Need Hierarchy Approach (Maslow) • People must, in a hierarchical order, satisfy five needs: – Physiological needs for basic survival and biological function. – Security needs for a safe physical and emotional environment. – Belongingness needs for love and affection. – Esteem needs for positive self-image/self-respect and recognition and respect from others. – Self-actualization needs for realizing one’s potential for personal growth and development. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 8

Figure 10. 2 Maslow’s Hierarchy of Needs Source: Adopted from Abraham H. Maslow, “A Theory of Human Motivation, ” Psychology Review, 1943, Vol. 50, pp. 370 -396. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 9

The Need Hierarchy Approach • Weaknesses of Maslow’s theory – Five levels of need are not always present. – Ordering or importance of needs is not always the same. – Cultural differences in categories and hierarchies. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 10

The Two-Factor Theory (Herzberg) • People’s satisfaction and dissatisfaction are influenced by two independent sets of factors— motivation factors and hygiene factors. • Theory assumes that job satisfaction and job dissatisfaction are on two distinct continuums: – Motivational factors (work content) are on a continuum that ranges from satisfaction to no satisfaction. – Hygiene factors (work environment) are on a separate continuum that ranges from dissatisfaction to no dissatisfaction. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 11

Figure 10. 3 The Two Factor Theory of Motivation Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 12

The Two-Factor Theory (Herzberg) (cont’d) • Motivation is a two-stage process: – Ensuring that the hygiene factors are not deficient and not blocking motivation. – Providing employees the opportunity to experience increase motivational factors through the use of job enrichment and the redesign of jobs. • Criticisms of the Two-Factor Theory – Interview findings are subject to different explanations. – Sample population was not representative. – Subsequent research has not upheld theory. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 13

Individual Human Needs (Mc. Clelland) • The need for achievement – The desire to accomplish a goal or task more effectively than in the past. • The need for affiliation – The desire for human companionship and acceptance. • The need for power – The desire to be influential in a group and to be in control of one’s environment. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 14

Process Perspectives on Motivation • Process Perspectives – Focus on why people choose certain behavioral options to satisfy their needs and how they evaluate their satisfaction after they have attained their goals. • Process Perspectives of Motivation – Expectancy Theory – Porter-Lawler Extension of Expectancy Theory – Equity Theory – Goal-Setting Theory Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 15

Expectancy Theory • Motivation depends on how much we want something and how likely we are to get it. • Assumes that: – Behavior is determined by a combination of personal and environmental forces. – People make decisions about their own behavior in organizations. – Different people have different types of needs, desires, and goals. – People choose among alternatives of behaviors in selecting one that leads to a desired outcome. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 16

Expectancy Theory (cont’d) • Model of Motivation – Suggests that motivation leads to effort, when combined with ability and environmental factors, that results in performance which, in turn, leads to various outcomes that have value (valence) to employees. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 17

Figure 10. 4 The Expectancy Model of Motivation Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 18

Elements of Expectancy Theory • Effort-to-Performance Expectancy – The individual’s perception of the probability that effort will lead to a high level of performance. • Performance-to-Outcome Expectancy – The individual’s perception of the probability that performance will lead to a specific outcome, or consequence or reward in an organizational setting. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 19

Elements of Expectancy Theory (cont’d) • Outcomes (Consequences) and Valences – Valence is an index of how much an individual values a particular outcome. It is also the attractiveness of the outcome to the individual. – Attractive outcomes have positive valences and unattractive outcomes have negative valences. – Outcomes to which an individual is indifferent have zero valences. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 20

Elements of Expectancy Theory (cont’d) • For individual motivated behavior (effort) to occur: – Effort-to-performance expectancy (the belief that effort will lead to high performance) must be greater than zero. – Performance-to-outcome expectancy (performance will result in certain outcomes) must be greater than zero. – The sum of the valences must be greater than zero— the outcome/reward must have value to the individual. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 21

Porter-Lawler Extension of Expectancy Theory • Assumptions: – If performance in an organization results in equitable and fair rewards, people will be more satisfied. • High performance can lead to rewards and high satisfaction. • Types of rewards: – Extrinsic rewards—outcomes set and awarded by external parties (e. g. , pay and promotions). – Intrinsic rewards—outcomes that are internal to the individual (e. g. , self-esteem and feelings of accomplishment). Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 22

Figure 10. 5 Porter-Lawler Extension of Expectancy Theory Source: Edward E. Lawler III and Lyman W. Porter, “The Effect of Performance on Job Satisfaction, ” Industrial Relations, October 1967, p. 23. Used with permission of the University of California. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 23

Equity Theory • People are motivated to seek social equity in the rewards they receive for performance. • Equity is an individual’s belief that the treatment he or she receives is fair relative to the treatment received by others. • Individuals view the value of rewards (outcomes) and inputs of effort as ratios and make subjective comparisons of themselves to other people: Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 24

Equity Theory (cont’d) • Conditions of and reactions to equity comparisons: – Feeling equitably rewarded. • Maintain performance and accept comparison as fair estimate. – Feeling under-rewarded—try to reduce inequity. • Change inputs by trying harder or slacking off. • Change outcomes by demanding a raise. • Distort the ratios by altering perceptions of self or of others. • Leave situation by quitting the job. • Change comparisons by choosing another object person. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 25

Equity Theory (cont’d) • Conditions of and reactions to equity comparisons: – Feeling over-rewarded. • Increase or decrease inputs. • Distort ratios by rationalizing. • Help the object person gain more outcomes. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 26

Goal-Setting Theory • Assumptions – Behavior is a result of conscious goals and intentions. – Setting goals influences the behavior of people in organizations. • Characteristics of Goals – Goal difficulty • Extent to which a goal is challenging and requires effort. • People work harder to achieve more difficult goals. • Goals should be difficult but attainable. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 27

Goal-Setting Theory (cont’d) • Characteristics of Goals (cont’d) – Goal specificity • Clarity and precision of the goal. • Goals vary in their ability to be stated specifically. – Acceptance • The extent to which persons accept a goal as their own. – Commitment • The extent to which an individual is personally interested in reaching a goal. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 28

Figure 10. 6 The Expanded Goal-Setting Theory of Motivation Source: Reprinted by permission of the publisher, from Organizational Dynamics, Autumn/1979, copyright © 1979 by American Management Association, New York. All rights reserved. (http: //www. amanet. org) Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 29

Reinforcement Perspectives on Motivation • Reinforcement Theory – The role of rewards as they cause behavior to change or remain the same over time. – Assumes that: • Behavior that results in rewarding consequences is likely to be repeated, whereas behavior that results in punishing consequences is less likely to be repeated. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 30

Kinds of Reinforcement in Organizations • Positive reinforcement – Strengthens behavior with rewards or positive outcomes after a desired behavior is performed. • Avoidance – Strengthens behavior by avoiding unpleasant consequences that would result if the behavior is not performed. • Punishment – Weakens undesired behavior by using negative outcomes or unpleasant consequences when the behavior is performed. • Extinction – Weakens undesired behavior by simply ignoring or not reinforcing that behavior. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 31

Providing Reinforcement in Organizations • Reinforcement schedules – Fixed interval schedule—reinforcement applied at fixed time intervals, regardless of behavior. – Variable interval—reinforcement applied at variable time intervals. – Fixed ratio—reinforcement applied after a fixed number of behaviors, regardless of time. – Variable Ratio—reinforcement applied after a variable number of behaviors, regardless of time. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 32

Providing Reinforcement in Organizations (cont’d) • Behavior modification (OB Mod) – A method for applying the basic elements of reinforcement theory in an organizational setting. – Specific behaviors are tied to specific forms of reinforcement. Specific Behavior Copyright © 2005 by Houghton Mifflin Company. All rights reserved. Specific Reinforcement 33

Popular Motivational Strategies • Empowerment and Participation – Empowerment • The process of enabling workers to set their own work goals, make decisions, and solve problems within their sphere of influence. – Participation • The process of giving employees a voice in making decisions about their work. – Areas of Participation for Employees • Making decisions about their jobs. • Making decisions about administrative matters. • Participating in decision making about broader issues of product quality. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 34

New Forms of Working Arrangements • Variable Work Schedules – Compressed work schedule—working a full forty-hour week in less than five days. – “Nine-eighty” schedule—working one full week (five days) and one compressed week (four days), yielding one off-work day every other week. • Flexible work schedules (flextime) – Allowing employees to select, within broad parameters, the hours they will work. • Job sharing – When two part-time employees share one full-time job. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 35

Effects of Organizational Rewards • Effect of Rewards on Attitudes – Satisfaction is influenced by how much is received and how much the person thinks should have been received. – Satisfaction is affected by comparison with others. – The rewards of others are often misperceived. – Overall job satisfaction is affected by employee satisfaction with intrinsic and extrinsic rewards. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 36

Effects of Organizational Rewards (cont’d) • Effect of Rewards on Behaviors – Extrinsic rewards affect employee satisfaction and reduce turnover. – Rewards influence patterns of attendance and absenteeism. – Employees tend to work harder for rewards based on performance. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 37

Effects of Organizational Rewards (cont’d) • Effect of Rewards on Motivation – Employees will work harder when performance will be measured. – Employees will work harder if performance is closely followed by rewards. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 38

Designing Effective Reward Systems • Reward system must meet an individual’s needs. • Rewards should compare favorably with other organizations. • Distribution of rewards must be perceived to be equitable. • Reward system must recognize different needs. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 39

Merit Reward Systems • Pay is awarded to employees on the basis of the relative value of their contribution to the organization. • Merit pay plans are compensation plans that formally base at least some portion of compensation on merit. • Employees get annual salary increases depending on their overall job performance. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 40

Incentive Reward Systems • One-shot rewards that do not become a permanent part of an employee’s base compensation. • Monetary incentives – Piece-rate incentive plans that pay a certain amount of money for every unit the employee produces. – Sales commissions are the percentage of an employee’s sales to customers that is paid to an employee as a reward for selling the firm’s products or services. • Nonmonetary incentives – Days off, additional paid vacation time Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 41

Team and Group Reward Systems • Gainsharing – Sharing the cost savings that result from productivity improvements. • Scanlon plan – Similar to gainsharing, but the distribution of gains is tilted toward the employees and is spread across the organization. • Profit sharing plans – Provide an organizationwide incentive in the form of an annual bonus to all employees based on corporate profits. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 42

Forms of Executive Compensation • Standard Forms of Executive Compensation – Base salary is the guaranteed portion of an executive’s compensation. – Bonuses paid for performance of the organization. • Special Forms of Executive Compensation – Stock options allow executives to purchase company stock at a predetermined price. • If the current stock price is above the predetermined price, the executive profits from exercising the option. • If the current stock price is below the predetermined price, the option has no value. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 43

Criticisms of Executive Compensation • Levels of executive compensation are perceived are inordinately large. • Compensation levels for executives do not reflect the performance of their firms. • The earnings gap between the typical employee and the CEO is enormous. • Executive stock options represent potentially huge liabilities for companies, yet do not appear on their financial statements as such. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 44

New Approaches to Performance-based Rewards • Allowing employee participation in the deciding the distribution of rewards. • Offering stock options to all employees. • Individualizing reward systems such that different employees can be offered different incentives. Copyright © 2005 by Houghton Mifflin Company. All rights reserved. 45