1. IB Business Management
2.4 Motivation
IB Business Management

2. Motivation
Refers to a keen determined drive toward achievement of a set goal or result.

3. What is Motivation at work?
The process of encouraging workers to enjoy their work toward higher productivity and improved performance.

4. Why is it significant?
Many businesses regard employees as the most valuable asset. Employees (labor) handle all other factors of production and as such, they represent a firm’s greatest strength (if motivated)…

5. or greatest weakness (if de-motivated)!!

6. Intrinsic or Extrinsic motivation?
Intrinsic motivation is where people engage in an activity driven from an inward desire due to an intense interest in an area or through altruistic (philanthropic, humane) reasons.

7. Intrinsic indeed!!

8. Extrinsic??
Where people participate in an activity because of the expected benefits or gains associated with that activity.

9. Motivation in Theory and practice
Motivation holds a noteworthy position in successful business management and as such has been the subject of much research.
This section will examine five motivation theories: Taylor, Maslow, Herzberg, Adams, and Pink.
It will also uncover motivation in practice through financial and non-financial techniques in order to analyze how these rewards influence job satisfaction and productivity in various cultures.

11. 1. Frederick Taylor Principles of Scientific Management
As an engineer living during the industrial revolution, Taylor was a stern believer in motivating workers by money quoted as saying: “What the workmen want from employers beyond anything else is higher wages.”
His research focused on factories and believed strongly in the Division of Labor and Specialization. He concluded it was the manager’s role to direct and control factory floor workers who are unable to plan properly for their work.

12. Taylor’s focus

13. He introduced Piece rate payment and differentiated piecework
The higher the worker output the higher the pay (piece rate).
Receiving a certain payment based on a standard productivity level and a higher rate if that level is exceeded (differentiated piecework).
E.g. receiving $20 a day if the standard production target of 10 units a day is produced ($2 per unit) but receiving $3 for each additional unit produced beyond 10 units per day.
Clearly the motive here is money! No other motivation is considered…

14. Taylor’s accomplishments
He found viable ways to increase productivity and efficiency that continue to be used today, especially in factories.
In his time, US workers came mostly from migrant unskilled labor who needed the ‘scientific management’ technique.
He assumed people are rational and would work and produce more if rewarded. Largely true, this makes his research applicable till this day.

15. Criticisms of Taylor Non financial factors ignored
Non-physical contributions of workers ignored (Labor is defined as the mental and physical human effort into production)
Difficult to measure physical output in some professions such as doctors or teachers
Scientific management leads to boredom and monotony
Modern workers are creative and innovative due to education and training and would require more than payment to keep them stimulated

16. Abraham Maslow’s Hierarchy of Needs (1943)
This American psychologist focused on human’s emotional and social needs arguing they must be met to motivate employees. His research concluded there are five human needs:

17. Physiological Needs (Physical needs including food, shelter, etc
Physiological Needs (Physical needs including food, shelter, etc.) In a business context, this means a person’s wage or salary must cover those basic needs.
Safety and security needs: people need to feel safe and stable. In a business context, people need to feel protected from physical harm and secure in their jobs.
Social needs: people need to feel care and belonging through friendships and team working.
Esteem needs: people have a need to excel for their ego and self worth. Hence, they need to be promoted and have challenging tasks.
Self-actualization: the highest level of needs, which means people reaching their full potential. In a business context, this may mean receiving promotions and climbing up the corporate ladder.
Maslow’s theory was illustrated in a pyramid:

19. Criticisms…
Maslow identified needs that are difficult to measure.
He assumed all humans have their needs in his prescribed order.
What happens after self-actualization?
Now What?

20. Herzberg’s Two-Factor Theory
Herzberg’s research focused on accountants and engineers. He conducted a series of interviews with them and summarized his results using 2 headings:
Hygiene or maintenance factors
Motivators

21. Hygiene Factors
These must be met to prevent legal problems and retain workers. They include payment, company policy, supervision, and working conditions.

22. Motivators
Factors that lead to psychological satisfaction and personal growth, such as recognition, achievement, and responsibility.

23. More motivators …. Job enlargement More variety, so more interesting
Job enrichment
More complex, so more challenging
Job empowerment
More decision-making involvement,
so more power.

24. Summary of Hygiene and Motivator Factors
Motivators
(Causes of Satisfaction)
Hygiene (Maintenance Factors)
Causes of dissatisfaction
Achievement
Advancement
Interesting challenging tasks
Promotion Opportunities
Personal Growth
Recognition
Responsibility
Company Policy
Rules and Regulations
Relationship with manager, colleagues, and subordinates
Payment
Security
Status
Supervision and Coordination
Working Conditions

27. John Stacey Adams’ equity theory
He suggested that workers measure their work and remuneration against others with similar effort and skill expecting to receive same pay for same work.
Fairness is key to motivation.
Hence, job analysis and job evaluation are chief in setting pay and benefits to ensure ‘EQUITY’.

28. Adam’s equity theory
Adams suggested that equity influences motivation on 3 levels:
Equity norm: workers expect equal remuneration for equal work.
Social comparison: workers compare their inputs and outcomes to others and believe they should receive more if their input is higher than others.
Cognitive distortion: workers who, in spite of high inputs, receive low wages due to substandard outcomes, opt to negotiate higher pay or reduce their input eventually losing goodwill.

29. Cognitive distortion

30. Inequality according to Adams
Inequality reduces goodwill and increases absenteeism. its most severe of consequence is worker’s resignation.

32. Pink 2009
Daniel H. Pink differs with traditional theorists over what motivates employees.
He challenges the idea that extrinsic motivation is effective arguing that intrinsic motivation is what drives us all in our personal and work lives.
Autonomy
Mastery
Purpose

33. Autonomy, Mastery, Purpose
Autonomy-freedom and self sufficiency to direct our own lives.
Mastery-ability and skill to do things well and continuous learning to improve and develop.
Purpose-confidence and drive to further and improve ourselves.

34. Pink
Pink argues that today’s workforce is beyond extrinsic motivation techniques.
However, critics respond that it is not possible to determine whether an actor for instance took a role because of higher pay or simply because the role was one of a message.

35. Theorist Theory Main findings
F.W. Taylor 1911
Scientific management
Pay is the main source of motivation
Maslow 1943
Hierarchy of Needs
Five needs in all humans
F. Herzberg 1959
Two Factor Theory
Hygiene factors and motivators
J.S. Adams 1963
Equity theory
Fair remuneration determines motivation
Pink 2009
Intrinsic driving motivators
Autonomy, mastery, and purpose drive 21st century people

36. Motivation in practice
While businesses may use motivation theories in the long term planning and strategy, in reality, and for practical purposes, they can’t expected to use particular theories on a day-to-day basis, primarily financial rewards.

37. Financial rewards
Financial motivation-where some form of monetary rewards are awarded for a job such as salaries or wages.
These are awarded at a fixed monthly or annual rate. Thus, salaries are a form of time-based payment.

38. wages
Wages, regular or overtime. Overtime can be 1.5 or 2 times the regular pay. Any excess of the legal working day hours constitutes overtime. Generally over 8 hours a day.
Some countries have a national minimum wage below which no business can pay any worker.
Again, wages are usually a time-based payment system.

39. Time-based pay Pay rises as more time is spent in the workplace. Pay

40. Benefits and drawbacks
+ the benefit to wages as a form of payment is that it is a simple straight forward calculation
The drawback is that workers are rewarded according to the time spent not effort put into work. This can be demotivating for fast productive workers.
Lazy workers have no incentive to exert additional efforts to produce more.

41. Careful!!!!!
Do not use wages and salaries interchangeably as wages are a variable cost and salaries are a fixed cost.
The total wage or salary earned by a worker is known as ‘gross earnings’. I.e. income before taxes (income tax and social security contributions)are deducted.
Net earnings (disposable income): Income after taxes have been deducted. They are also known as take-home-pay.

42. Production based payment
Paying workers according to the quantity produced. An example of that would be the piece rate system and the differentiated piece rate.
Frederick Taylor invented this form of payment in his Taylor’s Scientific Management Theory.

43. Piece rate is a production based payment system where workers are rewarded based on the number of units they produce. It is a viable alternative to wages where a fixed amount is paid per unit of production.
+encourages productive speedy workers
-quality may be compromised in favor of quantity
Pay
Units produced

44. Differentiated Piece rate is a production based payment system where workers who produce more than the average amount of units are rewarded at a higher amount per unit.
For instance if 8 units per day is the average at $2 per unit, then a worker who produces 10 per day receives $2 per unit for the first 8 units and $3 for instance for the last 2 additional units.
Pay
Units produced 8

45. Commission
Another production or output based payment system where workers receive a percentage on the output produced.
Workers often receive a low basic pay to sustain their needs and rewarded if they produce more. Sales people are often rewarded by commission to encourage higher sales.
+speedy production and sales result
-pressured workers may push to sell while ignoring after sale service
-insecurity and income fluctuation due to high and low seasons

46. Profit related pay
Linking workers’ pay to the business profit level-the higher the profit, the higher the pay

47. Profit share BUT!!! +boosts individuals’ efforts
+workers care about the business as do the owners suspending the ‘them and us’ culture.
BUT!!!
The proportion shared with employees may be so small that it doesn’t provide the incentive it was designed for
Individual differences go unrecognized as the % is given to all indiscriminately

48. Performance related pay -PRP
A system rewarding employees who meet set goals in terms of quantity and quality.
It can be paid in the following forms:
1. performance bonus-amount for meeting a target
2. loyalty bonus-workers who stay a long time in the business
3. pay raise-increment in salary for exceeding targets
4. gratuity-payment at the end of a contract as a reward for completing it. It is common among expatriate employees

49. PRP
+Great system as it rewards workers and encourages objective achievement
+Seen as fair especially through supporters of the ‘Equity theory’
+provides promotion prospects for those who achieve objectives
BUT…
-Unrealistic targets discourage workers
-Pressure on workers to achieve and compete
-Quality in some professions is difficult to assess
-May discourage teamwork
-Non financial motivators are ignored

50. Employee share schemes
Selling shares to employees and managers at a discounted price whereby they become owners.
+they have a direct interest in the business success
+They can receive dividends
B U T ! !
-Tends to be given to upper management only
-the ownership is often too small to motivate

51. Fringe Benefits Known as ‘perks’
Payments or benefits awarded to employees over and above their earnings/(wages/salaries) such as:
Subsidized meals
Discounts on business products
Housing allowance
Health insurance
Company car
Children‘s education
Child care centers at work
Other…

53. Company car???

54. Benefits of the benefits??
They can fulfill employees needs other than the physiological ones such as safety-child care
They encourage worker loyalty
Some workers may accept lower wages when ‘perks’ are attractive
H O W E V E R !!!
They can be potentially highly costly
They can cause jealousy when awarded to certain employees only

55. Non-Financial motivation
These involve encouragement/incentive in non-monetary terms

56. Examples of Non-Financial motivators
Job Enrichment
Recognition
Job enlargement
Job rotation
Worker participation
Empowerment
Team working
Training

57. Job enrichment
Giving interesting challenging, more difficult tasks to workers especially those who have a need for achievement. It is also known as vertical loading
Can encourage psychological and skill improvement in workers
Can raise self confidence fulfilling Maslow’s self-esteem need
Multi skilling is beneficial
B U T ….
The time and cost invested can be high
Skill of the employee may be deficient

58. Recognition and praise

59. A small ‘thank you’ can go a long way
Herzberg believed in recognizing efforts and a job well done. Research proved this to be true.

60. Job Enlargement
Broadening the number of tasks an employee has to do to reduce boredom or monotony such as job rotation-known as horizontal loading.

61. Empowerment
Granting workers the authority to make minor decisions and take charge of their work while executing their ideas and creativity.

62. Job rotation
Where employees are given a variety of tasks of the same degree of difficulty to relieve boredom

63. Training
Instruction given to workers to develop new skills or improve existing skills.

64. Teamwork
The process of grouping workers into teams to work together. This may occur in one of the following situations:
Departmental/divisional teams
Cell production
Quality circles

65. Teamwork It can serve to increase people’s belonging and social needs.
It can reduce boredom
Workers may teach each other new skills
Thus, labor absenteeism and turnover may fall

66. However…
It is important to remember that time may be wasted socializing
Workers may learn poor habits from one another
There may be conflict that, in the absence of an effective leader, reduces efficiency