Motivating & Rewarding Employees tutor2u ™ IGCSE Business Studies

Motivation  What is it?  Motivation is will to work  Comes from enjoyment of work itself and/or from desire to achieve certain goals e.g. earn more money or achieve promotion  Methods available to motivate employees  Financial methods (e.g. salary, bonus)  Non-financial methods (passing on responsibility or praise)

Advantages of a Well Motivated Workforce  Better productivity (amount produced per employee)  Better quality  Lower levels of absenteeism  Lower levels of staff turnover (number of employees leaving business)  Lower training and recruitment costs

Four Main Motivational Theorists  Taylor  Maslow  Herzberg

Taylor’s Theory of Motivation  Managers should maintain close control and supervision over their employees.  Autocratic style of management- managers make all decisions themselves  Motivate by pay via piece-rate.

Maslow’s Theory of Motivation  Maslow put forward a theory that there are five levels of human needs which employees need to have fulfilled at work.  Only once a lower level of need has been fully met, would a worker be motivated by the opportunity of having the next need up in the hierarchy satisfied.  A business should therefore offer different incentives to workers in order to help them fulfill each need in turn and progress up the hierarchy

Herzberg’s Theory of Motivation  Believed in two-factor theory  Motivators  Factors that directly motivate employees to work harder  Giving responsibility, recognition for good work, sense of achievement, opportunities for promotion  Hygiene factors  Factors that can de-motivate if not present but do not actually motivate employees to work harder  Pay, working conditions, job security  Motivate by using motivators plus ensuring hygiene factors are met  Use job enrichment and empowerment (delegating more power to employees to make their own decisions).

Autocratic Management Style  Description  Senior managers make all important decisions  Closely supervise and control workers  Managers do not trust workers and simply give orders (one-way communication)  When suitable  When quick decisions are needed in a company  E.g. in a time of crises  When controlling large numbers of low skilled workers

Democratic Management Style  Managers trust employees  Encourage employees to make decisions  Delegate authority/power to employees and listen to their advice

Best Approach/Style for Management?  Depends on circumstances  Whether workers are skilled or experienced  Level of genuine motivation  Whether quick decisions are needed etc  Best managers are those that are versatile and can call upon right style at right time

Reasons Why People Go To Work  To earn money  To feel a sense of achievement or job satisfaction  To feel a sense of belonging to a group  To achieve a sense of security  To obtain a feeling of self-worth

Main Types of Financial Incentives  Wages Normally paid per hour worked and receive money at end of week  Salaries - Normally an annual salary which is paid at end of each month  Bonus system - Usually only 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 those employees who meet certain 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 packet normally received at end of each week  Often paid to lower skilled workers or to temporary staff  Any additional hours worked normally paid a higher rate on an overtime basis  Salaries  Often set on an annual basis but payment is made at 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

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)

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