Expectancy Theory Individual Effort Individual Performance Organizational Rewards 1 2 3 3. Are the rewards personally desirable? 1. If I try hard, can I do it? 2. Do I need to perform at a high level to receive rewards? Expectancy theory argues that an employee will be motivated to produce more when he or she believes that the effort will lead to a good performance appraisal; that a good appraisal will lead to organizational rewards; and that the rewards will satisfy the employee’s personal goals. This theory focuses on three relationships. 1. The effort-performance relationship is the probability perceived by the individual that exerting a given amount of effort will lead to performance. 2. The performance-rewards relationship is the degree to which an individual believes that performing at a particular level will lead to the attainment of a desired outcome. 3. The rewards-personal goals relationship is the degree to which the rewards of an organization satisfy an individual’s personal goals or needs and the attractiveness of those rewards. Personal Goals Prentice Hall, 2001 Chapter 6

Expectancy Theory & Performance Issues Effort – performance relationship Training & education Performance – rewards relationship Will my performance be recognized & rewarded? How are rewards allocated? Seniority versus merit Is the evaluation process fair? Rewards – personal goals Is the reward personally desirable? “If you perform well, we will put you in charge of our overseas office” Use expectancy theory to diagnose performance issues Courses & grades

Open Book Management Background at SRC Employees wanted more challenge Extreme financial difficulties High level of distrust Employees wanted more challenge High in growth need strength (Job characteristics)

Changes Implemented at SRC Sharing financial information Principle of job enrichment Trust Soliciting employee input Recognition Ideas are valued Bonus plans & employee stock ownership plan Financial incentives (short-term and long-term)

Outcomes at SRC Employees “When I first came here, I didn’t realize that as a worker on the floor you could have a direct impact on the profit.” Task significance (JCM) Pay attention to costs, quality, and time to complete work Responsibility (Herzberg)

Employee Outcomes (cont.) Ideas are valued Recognition (Herzberg) New product Reading and understanding financial information Skill variety (JCM) Growth (Herzberg)

SRC’s Financial Performance Growth Stock price From 10 cents to $18.60 Employees Profitability Accuracy Inventory counts