1. UGBA 105 Sections 102,104,106 Week 10: Motivation I

2. Agenda Review theories of motivation Review theories of motivation Video of Lincoln Electric Video of Lincoln Electric Discuss motivation at Lincoln Electric & People Express Discuss motivation at Lincoln Electric & People Express

3. A Definition of Motivation Performance =  (Motivation x Ability) Motivation is an internal state that energizes, directs and maintains human action. Greenberg, Jerald (2002) Managing Behavior in Organizations

4. Earlier Theories of Motivation The learning (Skinnerian) approach to motivation: if you do _____, I’ll give you ______. Homo economicus (e.g.Theory X) suggests: the greater the promised reward, the greater the motivation.

5. Dilbert on Motivation

6. Motivation is complicated: Expectancy Theory Motivation determines the level of employee effort. Motivation determines the level of employee effort. Performance depends on motivation and ability. Performance depends on motivation and ability. Motivation is partly determined by perceptions of linkages from effort to performance to outcomes. Motivation is partly determined by perceptions of linkages from effort to performance to outcomes. The environment (incentive system) partly determines the strength of the linkage from effort to performance, and from performance to outcomes. The environment (incentive system) partly determines the strength of the linkage from effort to performance, and from performance to outcomes. MotivationEffort Performance Outcomes Environment Ability Edward Lawler, Motivation in Work Organizations, Brooks/Cole, 1973.

7. Tightening E-P-O Linkages MotivationEffort Performance Outcomes If I put forth the effort, will it fulfill the organization’s performance goals? EXPECTANCY Will meeting the organization’s performance goals earn me the promised rewards? INSTRUMENTALITY Do I value this reward? VALENCE

8. Equity and Motivation If I perceive these as unequal I may: reduce my effort (my input) increase my outcomes in other ways change my referent other change my perception of my input MY OUTCOMES MY INPUTS = OTHER’S OUTCOMES OTHER’S INPUTS ? To determine valence, people compare their input/output ratios to those of people around them. M. Patchen, The Choice of Wage Comparisons, Prentice-Hall, 1961. J. Adams, “Toward an understanding of inequity,” Journal of Abnormal & Social Psychology, 1963.

9. Motivation and Money: It DOES Matter

10. The Problem With Strong Monetary Incentives … … is that they work TOO well! Sears Auto Centers Sears Auto Centers –1989 – Unveiled a new incentive system that based compensation on the average revenue per customer visit. –1999 – A class-action lawsuit claimed Sears had defrauded $400M from its customers nationwide by selling them unnecessary services. Nortel Networks Nortel Networks –After the 2000/01 dot-com crash, the Board of Directors offered top executives $13.6M in incentive compensation if the firm broke even for one quarter; $30M more if the firm broke even for three consecutive quarters. –The firm massively under-reported income in 2002 to make sure 2003 was a break-even year. 2003 bonuses: CEO Frank Dunn $2.15M; CFO $831K. The firm’s performance crashed in 2004.

11. Alternatives to Strong Monetary Incentives:The Importance of Context Customer Satisfaction Customer Satisfaction –“We [at Nordstrom] remain committed to the simple idea our company was founded on, earning the trust of our customers, one at a time.” Technological Innovation Technological Innovation –The mission of Cray Research (founded 1972 by Seymour Cray, designer of the world’s first supercomputer) is “to design and build a larger, more powerful computer than anyone has now.” –“Google’s mission is to organize the world's information and make it universally accessible and useful.” What other overarching goals do firms use to keep monetary incentives in context?

12. Extrinsic and Intrinsic rewards ExtrinsicIntrinsic

13. Lessons Learned Implications of Motivation Theories for Managers Figure out what outcomes each employee values. Figure out what outcomes each employee values. Determine what kinds of behavior you desire. Determine what kinds of behavior you desire. Make sure desired levels of performance are reachable. Make sure desired levels of performance are reachable. Link desired outcomes to desired performance. Link desired outcomes to desired performance. Analyze the total situation for conflicting expectancies. Analyze the total situation for conflicting expectancies. Create opportunity for intrinsic and extrinsic rewards. Create opportunity for intrinsic and extrinsic rewards. Check the system for its equity! Check the system for its equity!

14. Motivation at People Express Describe the reward system at PE? Describe the reward system at PE? What were its strengths? Weaknesses? What were its strengths? Weaknesses? What recommendations would you suggest to improve the long term success of People Express? What recommendations would you suggest to improve the long term success of People Express?