1. Unit 1.2- MOTIVATION & REWARD Theoretical Perspectives which affect Compensation.

2. Motivation defined A motive is a reason for doing something – for moving in a certain direction. People are motivated when they expect that a course of action is likely to lead to the attainment of a goal – a valued reward that satisfies their particular needs. Well-motivated people are those with clearly defined goals who take action that they expect will achieve those goals.

3. Management 8/e - Chapter 143 How does Motivation impact Compensation  To achieve maximum motivational potential in linking rewards to performance … –Respect diversity and individual differences to best understand what people want from work. –Allocate rewards to satisfy the interests of both individuals and the organization.

4. TYPES OF MOTIVATION There are two types of motivation as originally described by Herzberg, Intrinsic motivation – this was defined by Herzberg as ‘motivation through the work itself’. It takes place when people feel that the work they do is,  intrinsically interesting  challenging and important and involves the exercise of responsibility (having control over one’s own resources)  autonomy or freedom to act  scope to use and develop skills and abilities  opportunities for advancement and growth

5. TYPES OF MOTIVATION Extrinsic motivation – what is done to or for people to motivate them. This includes rewards such as increased pay, recognition, praise or promotion, and punishments such as disciplinary action, withholding pay, or criticism.

6. TYPES OF REWARDS

7. Management 8/e - Chapter 147 Maslow Needs Hierarchy  Hierarchy of needs theory –Developed by Abraham Maslow. –Lower-order and higher-order needs affect workplace behavior and attitudes. –Lower-order needs: Physiological, safety, and social needs. Desires for physical and social well being. –Higher-order needs: Esteem and self-actualization needs. Desire for psychological growth and development.

8. Management 8/e - Chapter 148 Maslow Needs Hierarchy  Hierarchy of needs theory –Deficit principle A satisfied need is not a motivator of behavior. –Progression principle A need at one level does not become activated until the next lower-level need is satisfied.

9. Management 8/e - Chapter 149 Herzberg theory  Two-factor theory –Developed by Frederick Herzberg. –Hygiene factors: Elements of the job context. Sources of job dissatisfaction. –Satisfier factors: Elements of the job content. Sources of job satisfaction and motivation.

10. Management 8/e - Chapter 1410 Process theories of motivation  Process theories of motivation … –How people make choices to work hard or not. –Choices are based on: Individual preferences. Available rewards. Possible work outcomes.  Types of process theories: –Adam’s Equity theory. –Vroom’s Expectancy theory.

11. Management 8/e - Chapter 1411 Adam’s Equity Theory  Equity theory –Developed by J. Stacy Adams. –When people believe that they have been treated unfairly in comparison to others, they try to eliminate the discomfort and restore a perceived sense of equity to the situation. Perceived inequity. Perceived equity.

12. Management 8/e - Chapter 1412 Adam’s Equity Theory  Equity theory –People respond to perceived negative inequity by changing … Work inputs. Rewards received. Comparison points. Situation.

13. Management 8/e - Chapter 1413 Managerial implications of equity theory  Managerial implications of equity theory— – Underpaid people experience anger. – Overpaid people experience guilt. – Perceptions of rewards determine motivational outcomes. – Negative consequences of equity comparisons should be minimized, if not eliminated. – Do not underestimate the impact of pay as a source of equity controversies in the workplace. Gender equity. Comparable worth.

14. Management 8/e - Chapter 1414 Vroom’s Expectancy theory  Expectancy theory –Developed by Victor Vroom. –Key expectancy theory variables: Expectancy — belief that working hard will result in desired level of performance. Instrumentality — belief that successful performance will be followed by rewards. Valence — value a person assigns to rewards and other work related outcomes.

15. Management 8/e - Chapter 1415 Vroom’s Expectancy Theory  Expectancy theory –Motivation (M), expectancy (E), instrumentality (I), and valence (V) are related to one another in a multiplicative fashion: M = E x I x V –If either E, I, or V is low, motivation will be low. –Victor Vroom’s expectancy motivation theory posits that people will pursue rewards they desire when they believe that they are likely to be successful in obtaining the rewards.

16. Management 8/e - Chapter 1416 Managerial implications of Vroom’s expectancy theory— –To maximize expectancy, managers should: Select workers with ability. Train workers to use ability. Support work efforts. Clarify performance goals.

17. Management 8/e - Chapter 1417 Managerial implications of Vroom’s Expectancy theory  Managerial implications of expectancy theory— –To maximize instrumentality, managers should: Clarify psychological contracts. Communicate performance-outcome possibilities. Identify rewards that are contingent on performance. –Employee confidence building and training, accurate appraisals, and knowledge of workers’ desired rewards can increase employee motivation.

18. Management 8/e - Chapter 1418 Managerial implications of Vroom’s Expectancy theory  Managerial implications of expectancy theory— –To maximize valence in a positive direction, managers should: Identify individual needs. Adjust rewards to match individual needs.

19. Management 8/e - Chapter 1419 How Does Motivation impact the Organization  Integrated model of motivation –Motivation leads to work effort that, when combined with appropriate individual abilities and organizational support, leads to performance accomplishment. –The motivational impact of any rewards received for this performance accomplishment depends on equity and reinforcement considerations. –Ultimately, satisfaction with rewards should lead to increased motivation to work hard in the future.

20. Management 8/e - Chapter 1420 Implication of Motivational Theories on Compensation  Pay for performance –Paying people for performance is consistent with: Equity theory. Expectancy theory. –Merit pay Awards a pay increase in proportion to individual performance contributions. Provides performance contingent reinforcement. May not succeed due to weakness in performance appraisal system or lack of consistency in application.

21. Motivation Theory & their Link to Compensation Theory Theorist Summary of Theory Practical Implications NeedsMaslowUnsatisfied needs create tension and dis- equilibrium. To restore the balance a goal is identified that will satisfy the need, and a behavior pathway is selected that will lead to the achievement of the goal. Only unsatisfied needs motivate. Identifies a number of key needs for consideration in developing total reward policies.

22. Motivation theories and their practical implications Theory Theorist Summary of TheoryPractical Implications Two-factor HerzbergThe factors giving rise to job satisfaction (and motivation) are distinct from the factors that lead to job dissatisfaction. Any feeling of satisfaction resulting from pay increases is likely to be short- lived compared with the long- lasting satisfaction from the work itself. Makes a distinction between intrinsic motivation arising from the work itself and extrinsic motivation provided by the employer, eg pay. A useful distinction is made between intrinsic and extrinsic motivation that influences total reward decisions. The limited motivational effects of pay increases are worth remembering when considering the part contingent pay can play in motivating people.

23. Motivation theories and their practical implications Theory Theorist Summary of TheoryPractical Implications Expectancy VroomMotivation is likely only when: 1) a clearly perceived and usable relationship exists between performance and outcome; and 2) the outcome is seen as a means of satisfying needs. Provides the foundation for good practice in the design and management of contingent pay. The basis for the concept is the ‘line of sight’, which emphasizes the importance of establishing a clear link between the reward and what has to be done to achieve it.

24. Motivation theories and their practical implications Theory Theorist Summary of Theory Practical Implications Equity AdamsPeople will be better motivated if they are treated equitably and demotivated if they are treated inequitably. Emphasizes the need to develop an equitable reward system involving the use of job evaluation

25. THE KEY MESSAGES OF MOTIVATION THEORY The key practical messages delivered by motivation theory are summarized below. Extrinsic and intrinsic rewards Extrinsic rewards provided by employers in the form of pay will help to attract and retain employees and, for limited periods, may increase effort and minimize dissatisfaction. Intrinsic non-financial rewards related to responsibility, achievement and the work itself may have a longer-term and deeper impact on motivation. Reward systems should therefore include a mix of extrinsic and intrinsic rewards.

26. THE KEY MESSAGES OF MOTIVATION THEORY The significance of needs People will be better motivated if their work satisfies their social and psychological needs as well as their economic needs. Needs theory underpins the concept of total reward, which recognizes the importance of the non-financial rewards as motivators. Performance management processes provide a basis for redesigning jobs or roles and for agreeing and implementing development programmes.

27. Employee engagement/ Job Satisfaction Employee engagement takes place when people are committed to their work and their employer and are motivated to achieve high levels of performance. An "engaged employee" is one who is fully involved in, and enthusiastic about, his or her work, and thus will act in a way that furthers their organization's interests. According to Scarlett Surveys, "Employee Engagement is a measureable degree of an employee's positive or negative emotional attachment to their job, colleagues and organization which profoundly influences their willingness to learn & perform at work".

28. Frederick Taylor popularized using financial incentives— financial rewards paid to workers whose production exceeds some predetermined standard—in the late 1800s. Compensation experts argue that managers need to have a better understanding of the motivational bases of incentive plans in order for their plans to succeed. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 12–28

29. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 12–29 Motivation, Performance, and Pay Incentives –Financial rewards paid to workers whose production exceeds a predetermined standard. Frederick Taylor –Popularized scientific management and the use of financial incentives in the late 1800s. Systematic soldiering Fair day’s work Linking Pay and Performance –Understanding the motivational bases of incentive plans

30. Abraham Maslow Need Hierarchy Abraham Maslow made what may be the most popular observation on what motivates people in proposing that people have a hierarchy of needs that they are motivated to satisfy. Maslow’s theory has many practical implications for managers using incentive programs. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 12–30

31. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 12–31 The Hierarchy of Needs Maslow’s Hierarchy of Needs: –Physiological (food, water, warmth) –Security (a secure income, knowing one has a job) –Social (friendships and camaraderie) –Self-esteem (respect) –Self-actualization (becoming a whole person) Maslow’s prepotency process principle: –People are motivated first to satisfy each lower- order need and then, in sequence, each of the higher-level needs.

32. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 12–32 Herzberg’s Hygiene–Motivator Theory Hygienes (extrinsic job factors) –Satisfy lower-level needs –Inadequate working conditions, salary, and incentive pay can cause dissatisfaction and prevent satisfaction. Motivators (intrinsic job factors) –Satisfy higher-level needs –Job enrichment (challenging job, feedback, and recognition) addresses higher-level (achievement, self- actualization) needs. Premise: –The best way to motivate someone is to organize the job so that doing it provides feedback and challenge that helps satisfy the person’s higher-level needs.

33. Frederick Herzberg said the best way to motivate someone is to organize the job so that doing it provides the feedback and challenge that helps satisfy the person’s “higher-level” needs for things like accomplishment and recognition. Herzberg’s theory makes the point that relying exclusively on financial incentives is risky. The employer should also provide the recognition and challenging work that most people desire. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 12–33

34. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 12–34 Victor Vroom’s Expectancy Theory Victor Vroom’s expectancy motivation theory posits that people will pursue rewards they desire when they believe that they are likely to be successful in obtaining the rewards. Motivation = (E x I x V) –If any factor (E, I, or V) is zero, then there is no motivation to work toward the reward. –Employee confidence building and training, accurate appraisals, and knowledge of workers’ desired rewards can increase employee motivation.

35. Employee Job Satisfaction The factors that influence engagement Engagement will be affected by, work and job design the quality of life provided by the working environment the quality of leadership The role of reward in enhancing engagement A total rewards approach is required to increase engagement. Financial rewards are insufficient and the major levers are provided by non-financial reward, especially those provided by intrinsic motivation, the work environment and line managers.

36. MODEL OF FACTORS AFFECTING ENGAGEMENT

37. Six steps to enhancing job satisfaction through reward 1. Analyse the existing performance culture of the organization and develop an engagement. 2. Define the drivers of engagement (and disengagement) for different categories of employees. 3.Assess and define the reward elements that affect engagement and develop reward programmes that will enhance these different aspects of engagement. 4.Introduce a total rewards approach that brings together all the reward elements (pay and non-pay) that engage staff. 5.Segment total reward to take account of key employee differences. 6.Implement the total rewards approach and measure and evaluate its impact and success.

38. The role of job design in motivation Intrinsic motivation is provided when jobs are well designed. This is the case when the job has the following characteristics: autonomy, discretion, self-control and responsibility; variety; use of abilities; availability of constructive feedback; belief that the work is significant.

39. The role of rewards and incentives in motivation Rewards provide recognition to people for their achievements and contribution. If rewards are worth having and attainable and people know how they can attain them, they can act as motivators. Rewards can be either financial or non-financial. Incentives are designed to encourage people to achieve objectives. They are intended to provide direct motivation: ‘do this and we will make it worth your while’. Incentives are generally financial but they can promise non-financial rewards such as recognition, promotion or a particularly interesting assignment.

40. Ref: Retrieved from http://www.authorstream.com/Presentation/aSGuest125592 -1321940-motivation-reward-ppt/ on January 7, 2013. http://www.authorstream.com/Presentation/aSGuest125592 -1321940-motivation-reward-ppt/