1. IB Business Management
Unit 2/Section 2.4
Motivation

2. 2.4 MOTIVATION On completing this chapter you should be able to
Compare and contrast motivation theories.
Distinguish between types of financial rewards.
Distinguish between types of non-financial rewards.
Explain how financial and non-financial rewards may affect job satisfaction, motivation and productivity in different cultures.

3. MOTIVATION The desire effort and passion to achieve something.
The willingness to complete a task or job with enthusiasm.
The intrinsic and extrinsic factors that stimulate people to take actions that lead to achieving a goal.
Motivation Theory: Looks at how managers seek to motivate their workforce to maximize job satisfaction, staff morale and labour productivity.

4. MOTIVATORS
Extrinsic Motivation: Comes from external rewards associated with working on a task, for example pay and other benefits.
Intrinsic Motivation: Comes from the satisfaction derived from working on and completing a task.

5. MOTIVATION THEORIES
Frederic Winslow Taylor (1911) - Scientific Management:
Workers are primarily motivated by money, productivity can be improved by setting output and efficiency targets related to pay.
Managers Role: plan, direct and control. (select the right people for each job & observe and record the performance of staff: time and motion study, establish the best method of doing a job: method study).
Division of labour, specializing production process to improve efficiency and output.
Ignores non-financial factors that motivate people.
Failed to acknowledge that workers can be innovative and independent thinkers.
Repetitive and monotonous tasks lead to job dissatisfaction.

6. MOTIVATION THEORIES 2 . Abraham Maslow (1943) – Hierarchy of Needs
Levels of needs and how much they are satisfied are difficult to measure.
Assumes that everyone is motivated in the prescribed order of his model.

7. MOTIVATION THEORIES
3. Frederick Herzberg (Motivation–Hygiene theory) (1959)
Hygiene factors: Job context – cause of dissatisfaction: Aspects of a workers job that do not motivate but must be met to prevent dissatisfaction. Factors that meet basic needs: pay, status, job security, physical security, supervision and coordination, physical working conditions, organizational policies -rules and regulations, relations with peers, subordinates and supervisors.
Motivators: Factors that can lead to psychological growth, increased job satisfaction and performance such as achievement, meaningful & interesting tasks, advancement at work, opportunities for promotion, personal growth, recognition, responsibility, the work itself.
He used professional and skilled workers: his theory doesn’t apply to low-skilled low-paid jobs. Some employees may not want enriched jobs as this involves extra responsibility and stress.

8. MOTIVATION THEORIES 4. John Stacy Adams (Equity theory) (1963)
Equity Norm: workers expect equitable remuneration for their contributions: Ratio of inputs (contribution) to outcomes (financial and non-financial rewards)
Inputs: expertise, experience, enthusiasm, loyalty, commitment, effort.
Outcomes: remuneration, recognition (praise), security, rank and responsibilities.
Social Comparison: workers define what is fair comparing with their peers (co- workers)
Inequities: cause absenteeism, disruptions, and resignations.
The concept of fairness is subjective, people have different perceptions of what is fair. Some people are more sensitive to issues of equity.

9. MOTIVATION THEORIES 5. Daniel H. Pink (Intrinsic motivation) (2009)
Autonomy: Self-sufficient to direct our lives. Autonomy in aspects of their work: Tasks (what), Time (when), Technique (how), Team (with whom).
Mastery: Self-improvement to learn and create new things. Allows people to become better at something that matters to them
Purpose: Self-esteem and drive to do better by ourselves. Understand how individual roles contribute to the purpose of the organization. Enabling to have autonomy over how the organization gives back to the community can improve motivation more than using profits for individual rewards and bonuses.
Theory does not apply across professions, national boarders and cultures.

10. MOTIVATION in practice Payment or financial reward systems
1. Salary: Annual income that is usually paid on a monthly basis.
Financial rewards set at a fixed annual rate but paid on a monthly basis. Usually directly to the worker´s bank account (safer and more convenient).
Workers aren’t paid for extra work/overtime is part of the job.
Used where output or productivity is not easily measured or linking pay to speed can lead to lower quality standards. (doctors & teachers)
Advantage:
Security of income
Status
Suitable for jobs where output is no measurable.
Suitable for management positions where staff are expected to put extra time to complete a task or assignment
Disadvantages: Difficult to reward those who are more productive. Little incentive to work harder (can encourage slack and procrastination). Businesses deal with this by introducing: performance management and performance appraisal.

11. MOTIVATION in practice Payment or financial reward systems
2. Wages: Reward for labour services (usually unskilled workers).
Time Rate: Employees are paid for each hour, day, or week worked. National minimum wage is set by government. Often are paid over-time rate (usually time and a half -50% or double pay 100%)
Advantages: Straight forward, easily understood by employees.
Disadvantage: Workers are not rewarded for effort – might encourage slack and poor productivity.
Piece rate: Pays workers a fixed amount for each item that they produce or sell per time period.
Applicable if there is a measurable quantity of output.
Advantages: Workers are paid for the amount of work they actually do. Incentive to work hard to maximise income.
Disadvantage: There might be a trade off between the quantity and quality of output, so there is a need for supervision and quality control. Staff may be demoralised due to uncertain level of income, often caused by factors beyond their control (mechanical failures).

12. MOTIVATION in practice Payment or financial reward systems
3. Commission: Pays workers based on a percentage of sales or output contributed by a worker. (Real Estate agents, insurance brokers). Usually they also receive a basic salary.
Limitations:
Speedy production or aggressive selling techniques do not necessarily correlate with high quality output or good customer care.
Pressure on workers
Tasks can be repetitive = boredom
Commission fluctuates: difficulty to meet security needs of workers.
Necessary to hire quality controllers (especially in manufacturing jobs).

13. MOTIVATION in practice Payment or financial reward systems
4. Profit-related pay: A bonus for staff based on profits of the business – usually paid as a proportion of basic salary. Linking pay to the level of profits in the firm. Usually as an annual bonus. Amount paid is usually linked to employees salary and length of service. Advantages: Strengthens loyalty and fosters team spirit, should boost labour efficiency and limit labour conflict. Disadvantages: Profit paid to employees is often seen as too small to provide an incentive. Individual efforts are not explicitly recognised. Often used to reward senior managers, rather than the whole workforce (who have no influence in changing the firm´s overall level of profits.

14. MOTIVATION in practice Payment or financial reward systems
5. Performance-related pay (PRP): Rewards employees (as individuals, teams or whole workforce) who meet certain goals. Bonus scheme to reward staff for above-average work performance Advantages: Creates incentives to work & preform better, is seen as fair, helps develop a performance culture. Disadvantages: Targets might be unrealistic or unachievable, pressure causes stress, not appropriate where quality is more important than quantity. Might not encourage teamwork (if targets are individual). Non-financial motivators are ignored.

15. MOTIVATION in practice Payment or financial reward systems
6. Employee share ownership schemes: Rewards employees (workers, managers and directors) by giving them shares in the company or by selling the shares at a discounted price.
Can be:
a Bonus
b. An employees savings plan whereby employees are allowed to purchase shares through a payroll deduction, without having to pay brokerage fees. Some employees also offer a match programme (for every $1 the employee invests the company will match with $,5)
Advantages: Employees who become shareholders, will have a more direct interest in the wellbeing of the organization, lower rates of absenteeism and staff turnover.
Disadvantages: Tend to be used for senior leadership team - the majority of employees don’t qualify even if they did the amount distributed is hardly sufficient to sustain motivation. Might prove impractical for many businesses.

16. MOTIVATION in practice Payment or financial reward systems
7. Fringe payments (perks) Non-cash forms of reward Financial benefits in addition to wage or salary: health insurance, housing allowance, contribution to retirement fund, staff discounts, subsidised meals, gym membership, paid holidays, paid sick leave, private medical cover, free uniforms, business class travel and company cars. Perks vary from firm to firm & depend on the employees position or rank. Advantages: Encourage employee loyalty, help to meet safety needs (Maslow) make workers feel valued. Disadvantages: Potentially high costs- become a burden on the cash flow position.

17. MOTIVATION in practice Non-financial rewards
Non-monetary factors that motivate people by offering psychological and intangible benefits 1.Job redesign: Restructuring of a job- usually with the employees´ involvement and agreement – to make work more interesting, satisfying and challenging. Job enrichment: Attempting to motivate employees by giving them opportunities to use the full range of their abilities. Gives workers more challenging jobs with more responsibilities. Greater autonomy and authority. An example is switching from line production to cell production: a lean method of producing similar products using cells, or groups of team members to facilitate operations by eliminating setup time between operations.

18. MOTIVATION in practice Non-financial rewards
b. Job Rotation: Having an individual rotate through different divisions in a business over a period of time.
Workers preforming different tasks at the same level of complexity. Often used as a form of training.
c. Job Enlargement: Attempting to increase the scope of a job by broadening or deepening the tasks undertaken . It might involve giving additional duties.
d. Empowerment: Developing potential of workers and teams to achieve the best they can. Involves giving access to resources and information and granting authority to be in charge, execute their own ideas to solve business problems. Workers have some autonomy in decision-making.
Delegation: when managers pass on authority to subordinates, allowing them to take charge of a task and get recognition for accomplishments.
Worker participation: workers have opportunity to participate in decision making, so they feel empowered (employee suggestion schemes, and quality circles).
e. Teamwork: Working cooperatively with a group of people to achieve a goal.
When employees work with fellow colleagues: departmental teams, cellular manufacturing, quality circles

19. Motivation - summary
Motivation is a strategic issue: people are an important aspect of business strategy. Productivity depends on employee´s level of ability and motivation. Failure to motivate: Higher absenteeism, increased labour turnover, poor customer service and lower quality output. Benefits of motivation: Better labour retention, lower costs of recruitment, selection induction and training of new staff, better corporate image, skills and knowledge are kept in the firm, strong corporate culture, improved competitiveness, profitability. Intrinsic Motivation: When people engage in an activity out of their own desire. Extrinsic Motivation: People participate in an activity because of the benefits and rewards associated with doing it. Benefits can be tangible (wages, salary, bonuses) or intangible (recognition & praise) or (pressure &threats).

20. Motivation - summary
There is no general rule on how best to motivate all employees. Each worker is different in what motivates them. Cultural norms make some motivators better suited for different cultures. What works for some groups of workers will not be effective with others. Managers need to be flexible and adapt the methods and approaches.
Main factors that influence: Leadership style and culture of the organisation. A great deal depends on the attitudes and beliefs of senior managers.
Change has a major impact on motivation, productivity and job satisfaction.
Motivation is complex: it depends on many factors, each of which is subject to change.
Managers must weigh up costs of using various methods of motivation with the expected benefits.

21. Cultural differences & Reward systems
Managers in multinational corporations need to adapt financial and non financial reward systems to the different cultures that the business operates in.
Geert Hofstede: 3 cultural differences that seem to have the most impact on the reward systems:
Performance orientation: the extent to which performance improvement, innovation and striving for excellence is encouraged. (performance related pay, bonus payments, share purchase schemes) (stronger in Germany, Europe, UK and China, weakest in Latin America)
Future orientation: the degree to which individuals are focused on delaying immediate reward and engaging in future-oriented behavior such as planning and investing for the future. (share ownership schemes) (stronger in Germany, Europe, UK and China, weakest in Latin America)
Institutional collectivism: the degree to which organizations reward or encourage the distribution of resources to groups and focus on collective action. (team based incentives and employee profit-sharing schemes) (stronger in Nordic & Germanic Europe, lowest in Asia)

22. Fringe Benefits and Cultural differences
Any reward system needs to consider local differences in culture.
Multinational businesses vary their rewards: i.e.. In India tickets for a Bollywood film, in France – vouchers for a gourmet dinner. In Asian cultures giving a watch means the boss is watching time and an employee is not putting in the effort.
In multi-country and multicultural teams (locals and expatriates) it is important that there is support in recognizing one employee to another.
Even though English is the international business language, employees want to receive recognition in their local language.
Varying import duties can apply to differing types of goods, which can impact on the cost-effectiveness of the programme. One solution is using reloadable, prepaid reward cards that can be company branded and used worldwide.

23. Cultural Differences – non-financial rewards
Recognition of an employees contribution is considered to be an important motivator but different cultures prefer to be recognized in different ways:
Individualistic cultures (US & Australia): Employee of the month schemes. This would be counter productive in Asia – employees prefer to be recognized as part of a team, being singled could be embarrassing and damage the dynamics of the group.
In relationship-focused cultures, motivators are likely to be based on personal and professional factors such as how well supported by managers employees feel and how good relationships are with superiors.
In some cultures it is more acceptable to use the stich approach as well as the carrot to motivate employees. In some Asian countries it is common to use demotions when performance is considered below acceptable standards. This approach in a western culture will lead employee to start looking for alternative employment.