Motivating Employees Chapter 5 Entrepreneurship: Starting and Managing Your Own Business Motivating Employees © George Doyle / Stockbyte / Getty Images

Early Theories of Motivation Chapter 5 Entrepreneurship: Starting and Managing Your Own Business 1 What are the basic principles of Frederick Taylor’s concept of scientific management? People can be a firm’s most important resource, and also the most challenging one to manage well. Employees who are motivated and work hard to achieve personal and organizational goals can become a crucial competitive advantage. The key is understanding the process of motivation, what motivates individuals, and how an organization can create a workplace that allows people to perform to the best of their abilities. 1

Taylor’s Principles of Scientific Management Chapter 5 Entrepreneurship: Starting and Managing Your Own Business 4. Divide work and responsibility according to who is better suited to each task. 3. Encourage cooperation between workers and managers. 2. Scientifically select, train, teach, and develop workers. 1. Develop a scientific approach for each elements of a person’s job. Frederick W. Taylor, a mechanical engineer, was one of the most influential figures of the classical era of management, which lasted from 1900 to the mid-1930s. Taylor, called the “father of scientific management,” based his approach on economic incentives and the premise that there is “one best way” to perform any job. Taylor was frustrated at the inefficiency of the laborers at the steel mills where he worked. His four principles of scientific management are listed here. However, it had a fundamental flaw in its assumption that all people are primarily motivated by economic means. Motivation is much more complex than Taylor envisioned. 1

Herzberg’s Two-Factor Theory Chapter 5 Entrepreneurship: Starting and Managing Your Own Business Extrinsic vs. Intrinsic Extrinsic conditions or job context include pay, status, working conditions. The presence of these conditions does not motivate the person but the absence results in dissatisfaction. Also called hygiene factors Intrinsic conditions or job content include feelings of achievement, increased responsibility and recognition. The absence does not lead to dissatisfaction but when present they build levels of motivation that result in good job performance. Also called motivators. 2

Maslow’s Hierarchy of Needs Chapter 5 Entrepreneurship: Starting and Managing Your Own Business 3 What is Maslow’s hierarchy of needs, and how do these needs relate to employee motivation? 3

Maslow’s Hierarchy of Needs Chapter 5 Entrepreneurship: Starting and Managing Your Own Business Maslow’s hierarchy of needs A theory of motivation developed by Abraham Maslow; holds that humans have five levels of needs and act to satisfy their unmet needs. At the base of the hierarchy are fundamental physiological needs, followed in order by safety, social, esteem, and self-actualization needs. Psychologist Abraham Maslow proposed a theory of motivation based on universal human needs. Maslow’s theory contends that people act to satisfy their unmet needs. When hungry, they eat. Once a need is satisfied, its importance diminishes and a higher level need is more likely to motivate the person. 3

Maslow Self-Actualization Desire for self-fulfillment. Esteem Need for reputation, prestige, and recognition from others. Love The desire to love and be loved. Safety Consists of the need to be safe. Physiological Most basic need.

McClelland’s Need Theory Chapter 5 Entrepreneurship: Starting and Managing Your Own Business McClelland’s Need Theory Need For Achievement: Desire to excel and accomplish something difficult. Achievement-motivated people prefer tasks of moderate ability that they can achieve situations in which their performance is due to their own efforts more feedback on their success and failures than do low achievers Need For Affiliation: Desire to spend time in social relationships and activities. Need For Power: Desire to influence, coach, teach, or encourage others to achieve. 4

Theories X, Y and Z Chapter 5 Entrepreneurship: Starting and Managing Your Own Business 4 How are McGregor’s Theories X and Y used to explain worker motivation? 4

Chapter 5 Entrepreneurship: Starting and Managing Your Own Business McGregor’s Theory X The average person dislikes work and will avoid it if possible People must be controlled, directed, or threatened with punishment The average person prefers to be directed, avoids responsibility, is unambitious, and wants security Douglas McGregor, one of Maslow’s students, influenced the study of motivation with his formulation of two contrasting sets of assumptions about human nature: Theory X and Theory Y. The Theory X view of people, based on a pessimistic view of human nature, suggests that managers must constantly prod workers to perform and must closely control their on-the-job behavior. 4

McGregor’s Theory Y 4 Work is as natural as play or rest Chapter 5 Entrepreneurship: Starting and Managing Your Own Business McGregor’s Theory Y Work is as natural as play or rest Workers can be motivated using positive incentives The average person seeks out responsibility In contrast, Theory Y management style is based on a more optimistic view of human nature. Managers who operate on Theory Y recognize individual differences and encourage workers to learn and develop their skills. 4

Contemporary Views on Motivation Chapter 5 Entrepreneurship: Starting and Managing Your Own Business 6 What four contemporary theories on employee motivation offer insights into improving employee performance? 6

Expectancy Theory Chapter 5 Entrepreneurship: Starting and Managing Your Own Business Managers should do the following to motivate employees: Determine the rewards valued by each employee Determine the desired performance level and communicate it to employees Make the performance level attainable Link rewards to performance Determine what factors might counteract the effectiveness of an award Make sure the reward is adequate for the level of performance Based on the expectancy theory, managers should utilize the list shown on this slide to motivate employees. 6

Equity Theory Chapter 5 Entrepreneurship: Starting and Managing Your Own Business Employees evaluate their outcomes in relation to their inputs and compare to their past experience in… A different position in the current organization A different organization or… Another employee’s experience inside the organization Another employee’s experience outside the organization Equity theory is based on individuals’ perceptions about how fairly they are treated compared with their coworkers. Employees evaluate their own outcomes (salary, benefits) in relation to their inputs (number of hours worked, education, training) and then compare the outcomes-to-inputs ratio to one of the following: the employee’s own past experience in a different position in the current organization the employee’s own past experience in a different organization another employee’s experience inside the current organization another employee’s experience outside the organization 6

Employee Choices if an Inequity Exists Chapter 5 Entrepreneurship: Starting and Managing Your Own Business Leave the situation Look at situation from different perspective Distort their perception of others Distort their perception of themselves Change job benefits and income Change work habits According to equity theory, if employees perceive that an inequity exists, they will make one of the choices shown on this slide. 6

Reinforcement Theory 6 reinforcement theory Chapter 5 Entrepreneurship: Starting and Managing Your Own Business Reinforcement Theory reinforcement theory People do things because they know that certain consequences will follow. Consequences: Positive Negative None Reinforcement theory says that behavior is a function of its consequences. The three basic types of consequences may be positive, negative, and none. Motivating with the reinforcement theory can be tricky because the theory is functional. The consequences can operate differently for different people and in different situations. For example, a punishment for one person may be an award for another. 6

From Motivation Theory to Application Chapter 5 Entrepreneurship: Starting and Managing Your Own Business 7 How can managers redesign existing jobs to increase employee motivation and performance? 7

Motivational Job Design Chapter 5 Entrepreneurship: Starting and Managing Your Own Business Job Enlargement Job Enrichment Job Rotation Options for increasing employee motivation and performance include: Job enlargement: the horizontal expansion of a job, increasing the number and variety of tasks a person performs Job enrichment; the vertical expansion of an employee’s job, increasing job depth by providing the employee with more autonomy, responsibility, and decision-making authority. Job rotation: the shifting of workers from one job to another to broaden an employee’s skill base or because an employee is interested in or challenged by a particular job. 7

Work-Scheduling Options Chapter 5 Entrepreneurship: Starting and Managing Your Own Business Flextime Employees decide what their work hours will be Compressed Workweek Fitting 40 hours into a shorter workweek Job Sharing Allows two individuals to split the tasks and hours of a workweek Telecommuting Employees work from home via a linked computer Finding new ways to keep workers motivated may include alternatives to the traditional work schedule, such as the compressed workweek, flextime, job sharing, and telecommuting. 7

Economic Incentives 7 Piece-Rate Plans Profit Sharing Gain Sharing Chapter 9 Motivating Employees Bonuses Stock Options Gain Sharing Profit Sharing Piece-Rate Plans Any discussion of motivation has to include the use of monetary incentives to enhance performance. Variable pay means that a portion of an employee’s pay is linked to an individual or organizational performance measure. Piece-rate plans: employees are paid a given amount for each unit they produce. Profit-sharing plans: a portion of company profits are distributed to all employees. Gain-sharing plans: employees share in the financial gains attributed to increased productivity of the group. Stock options: giving employees the right to purchase company stock, typically at below-market prices. Bonuses: a one-time lump-sum monetary reward. 7

Trends in Employee Motivation Chapter 5 Entrepreneurship: Starting and Managing Your Own Business 8 What initiatives are organizations using today to motivate and retain employees? How are companies investing in their human resources? 8

Trends in Employee Motivation Chapter 9 Motivating Employees Work-life benefits Employee ownership Education and training Companies in the Fortune list of 100 best companies to work for know the importance of treating employees right. They have programs that allow them to invest in their employees through programs such as these. Companies that provide educational and training opportunities reap the benefits of a more motivated, productive, and skilled workforce. Employee ownership programs cause workers to act more like partners than clock watchers. Work-life benefits: companies are helping employees to achieve a balance between their work responsibilities and their personal obligations. Absenteeism is a challenge for today’s businesses. Some of the ways to motivate employees include education and training, praise, employee ownership, and work-life benefits. 8

The Rising Costs of Absenteeism Chapter 9 Motivating Employees Top programs for reducing unscheduled absences Alternative work arrangements Ability to leave for children’s school functions Telecommuting Compressed work weeks The rate of employee absenteeism averages about 2.4 percent of scheduled workdays. Companies can lower absenteeism by offering work-life programs, which are successful for reducing unscheduled absences. 8

Biggest reasons for increasing turnover rates Chapter 9 Motivating Employees Biggest reasons for increasing turnover rates Better compensation elsewhere Career opportunities elsewhere Dissatisfaction with potential for career development Another trend related to absenteeism is turnover. The number of employees who are searching for jobs is on the rise. A high rate of turnover can be expensive and harm the moral of other employees who watch colleagues leave. The reasons for higher turnover rates are shown on this slide. In order to stay competitive, companies need to have programs in place to motivate employees to be at work each day and stay with the company year after year. 8