BUSINESS 12 AS MOTIVATION _ 2

REASONS WHY PEOPLE GO TO WORK money Achievement or job satisfaction Belonging to a group Security Self-worth

MAIN TYPES OF FINANCIAL INCENTIVES Wages Normally paid per hour. Receive money at end of week Salaries - Normally an annual salary. Paid at end of each month Bonus system - Paid when certain targets have been achieved Commission - Some workers, often salesmen, are partly paid according to number of products they sell Profit sharing - A system whereby employees receive a proportion of company’s profits Performance related pay - paid to employees who meet targets Share options - common incentive for senior managers who are given shares in company rather than a straightforward bonus or membership of a profit sharing scheme Fringe benefits - Often known as ‘perks’, these are items an employee receives in addition to their normal wage or salary e.g. company car, private health insurance, free meals

MAIN TYPES OF NON-FINANCIAL INCENTIVES Empowerment - delegating power to employees so they can make their own decisions Praise - recognition for good work Promotion opportunities - promoting employees to a position of higher responsibility Job enrichment - giving employees more challenging and interesting tasks Job enlargement - giving employees more tasks of a similar level of complexity Better two-way communication - employees have a chance to give feedback and advice to managers Better working environment - providing a safe, clean, comfortable environment to work in Team working - offers employees an opportunity to meet their social needs and often accompanied by some form of empowerment for team

FRINGE BENEFITS Known as ‘perks’ Items an employee receives in addition to their normal wage or salary E.g. company car, private health insurance, free meals Often increases loyalty to company as these benefits are not always taxed or are taxed at a reduced rate More likely to recruit best people to company

WAGES AND SALARIES Wages Paid by hour with pay (time rate) Paid on output (piece rate) Receive $$$ at end of each week Often paid to lower skilled workers or to temporary staff Any additional hours paid at a higher rate (overtime) Salaries Often set on an annual basis Paid at the end of each month Normally paid to managers or those higher up in a company A set number of hours is not normally agreed but employment contract requires enough hours worked to get job done

PIECE RATE PAYMENT Now a relatively unusual and old-fashioned way of paying people Pay per item produced in a certain period of time Advantages Requires low levels of manager supervision Encourages high speed production Provides good incentive for workers who are mainly motivated by pay Disadvantages Workers are focused on quantity not quality It is repetitive for workers and can be de-motivating Workers are only used to one set method of production and may resistant change

OVERTIME AND BONUS PAY Overtime Additional hours worked over and above normal working hours E.g. at weekends or on bank holidays Paid at a higher rate - often 1.5 or 2 times normal hourly wage Bonus pay Given out when certain performance targets have been met Normally applicable at manager level in a company How bonuses are used: By motivating employees to work harder in order to meet a realistic yet challenging target and therefore achieve a bonus payment Would only be effective if bonus payments were a significant sum

PROFIT SHARING What it is: A system whereby employees receive a proportion of business profits Advantages Creates a direct link between pay and performance Creates a sense of team spirit- helps remove ‘them and us’ barrier between managers and workers if all employees involved May improve employee’s loyalty to company Employees more likely to accept changes in working practices if can see that profits will increase overall

PERFORMANCE RELATED PAY Increasingly popular method of paying people Paid to those employees who meet certain targets Advantages Senior managers can easily monitor and assess individual employee performance during appraisal process Setting of targets for employees can ensure they are all closely focused to company objectives Disadvantages Discourages a team based approach- can create unhealthy rivalry between managers Can be difficult to accurately measure performance of some workers e.g. in service sector firms Incentives may not be larger enough to motivate employees

MOTIVATIONAL THEORIST VIEWS ON PAY Taylor was only theorist to emphasis pay, in particular piece-rate, as best way of motivating employees Maslow and Herzberg all felt that non-financial rewards, such as teamworking, empowerment or job enrichment, acted as a better incentive for employees to work harder

JOB ENRICHMENT AND JOB ENLARGEMENT Job enrichment Giving workers more interesting and challenging tasks Seen as more motivating as it gives workers chance to further themselves Herzberg in particular recommended this approach Job enlargement Giving workers more tasks to do of a similar nature or complexity Job rotation is a part of this

REASONS FOR PAY DIFFERENTIALS Mainly due to supply and demand People with skills that are in demand, but are in short supply, get paid more Cost of living varies between regions Some jobs require qualifications (e.g. accountants, lawyers)

REDUCTION OF LABOUR COSTS Flexible employment Flexible working multi-skilling – have one worker able to do many jobs responding to change (a task can be removed due to automation) Reducing staff costs through redundancy or dismissal

Quiz Do you remember how to calculate Labour productivity? A business has 30 employees. They work a total of 900 hours in February. The cars are painted 3 different colours In February they produce 45 Cars. 10 employees are paid $10/ hour, 20 employees are paid $12/ hour. Peer Assessment task Ryan Air Questions 8 and 11

Peer Assessment Task: Review your answers to Question 8 and 11 using the marking scheme in the following lesson.

Ryan Air Question 11