0. Management, Organizational Policies & Practices
Dr. Amna Yousaf
PhD (HRM)
University of Twente, the Netherlands
Lecture 12

1. Recap Lecture 11 Reinforcement Theory Equity Theory
Justice and Equity Theory
Expectancy Theory
Job Characteristics Model
How can Jobs be Redesigned?
Alternative Work Arrangements
Conclusions

2. Motivation: From Concepts to Applications (2)
CHAPTER THREE
Motivation: From Concepts to Applications (2)
Lecture 12

3. Outline Employee Involvement
Participative Management
Representative Participation
Quality Circles
Linking Employee Involvement programs & Motivation Theories
Using Rewards to Motivate Employees
What to Pay: establishing a Pay Structure
How to Pay: Rewarding individual Employees Through Variable-Pay Programs
Piece-Rate Pay
Merit Based Pay
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4. Outline Global Implications Bonuses Skill Based Pay
Profit-sharing plans
Gain –sharing
Employee Stock Ownership Plans
Global Implications
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5. What is Employee Involvement?
Employee Involvement Program
A participative process that uses the entire capacity of employees and is designed to encourage increased commitment to the organization’s success.
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6. Examples of Employee Involvement Programs
Participative Management
A process in which subordinates share a significant degree of decision-making power with their immediate superiors.
MBO an Example
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7. Examples of Employee Involvement Programs (cont’d)
Representative Participation
Workers participate in organizational decision making through a small group of representative employees.
Works Councils Groups of nominated or elected employees who must be consulted when management makes decisions involving personnel.
Board Representative A form of representative participation; employees sit on a company’s board of directors and represent the interests of the firm’s employees.
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8. Representative Participation
Does not enhance employee involvement
Representative employee’s involvement and motivation may increase
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9. Examples of Employee Involvement Programs (cont’d)
Quality Circle
A work group of employees who meet regularly to discuss their quality problems, investigate causes, recommend solutions, and take corrective actions.
Mixed results of enhanced productivity
No effects on employee job satisfaction
Being discontinued – band-wagon by management
Limited employee involvement – one or two hours out of 40 hours of work
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10. Linking EI Programs and Motivation Theories
Theory Y (Believing employees want to be involved)
Employee Involvement Programs
Two-Factor Theory (Intrinsic Motivation)
ERG Theory (Employee Needs)
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11. Rewarding Employees: Four Aspects
What to Pay (Internal vs. external equity)
How to Pay (e.g Piece rate, merit based, bonuses, profit sharing, gain sharing, ESOPs, skill-based pay)
What Benefits to Offer (e.g.,Flexible benefits)
How to Recognize Employees
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12. Rewarding Employees: Four Aspects
What to pay: Setting pay structures can be complex to organization
Internal equity:
worth of job to organization usually established through job evaluation
External Equity:
pay equity with reference to industry competitors
Best pay systems attains strategic balance
Pay leaders versus less payers (Wal-Mart – outsources to China)
Pay more, get the best but what are the costs – small firm case – trade offs
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13. How to Pay: Rewarding Employees
Variable Pay Programs
A portion of an employee’s pay is based on some individual and/or organization measure of performance.
Piece rate pay plans
Profit sharing plans
Gain sharing plans
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14. Rewarding Employees: Four Aspects
Piece-rate Pay Plans
Workers are paid a fixed sum for each unit of production completed.
No base salary
Not feasible for many jobs – footballer may not be ready to get piece-rate pay package from his league tied to every win
Can lead to unethical behaviors such as cheating – Example of Sears
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15. Rewarding Employees: Four Aspects
Merit Based Pay
Unlike piece-rate pay plans which are linked to objective outcomes; these are linked to individual performance – performance ratings
Can be motivating if designed correctly otherwise can cause unfairness perceptions in employees
Employers increasing use these systems and keep high differentials between high and low performers
Can be an important means of goal achievement ; not just a way to change wages
Accuracy depends on accuracy of performance ratings
Pay raise pool fluctuates based on economic conditions – can be sometimes demotivating for top performers
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16. Rewarding Employees: Four Aspects
Bonuses
For many jobs, bonuses important component of overall pay
Net increasing to lower ranked jobs
Advantage is bonuses reward employees for recent performance rather than past performance as in merit based pay
Downside: employees may start viewing them only as pay; may not remain motivating
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17. Skill-Based Pay Plans
Pay levels are based on how many skills employees have or how many jobs they can do.
Benefits of Skill-based Pay Plans:
Provides staffing flexibility.
Facilitates communication across the organization.
Lessens “protection of territory” behaviors.
Meets the needs of employees for advancement (without promotion).
Leads to performance improvements.
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18. Skill-Based Pay Plans (cont’d)
Drawbacks of Skill-based Pay Plans:
Lack of additional learning opportunities that will increase employee pay.
Continuing to pay employees for skills that have become obsolete.
Paying for skills which are of no immediate use to the organization.
Paying for a skill, not for the level of employee performance for the particular skill.
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19. Linking Skill-based Plans and Motivation Theories
Reinforcement Theory
Skill Based Pay Plans
Equity
Theory
ERG Theory (Growth)
McClelland’s Need for Achievement
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20. Rewarding Employees: Four Aspects
Profit-Sharing Plans
Organization wide programs that distribute compensation based on some established formula designed around a company’s profitability.
Can be direct case outlays or allocation of stock options to top managers
Gain Sharing
An incentive plan in which improvements in group productivity determine the total amount of money that is allocated.
In gain sharing rewards are tied to productivity unlike profit sharing so employees can receive awards even when company profits are not too high
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21. Rewarding Employees: Four Aspects
Employee Stock Ownership Plans (ESOPs)
Company-established benefit plans in which employees acquire stock as part of their benefits at below market price.
Increase employee satisfaction and motivation, however links with performance not clear
Employees need have ownership feelings by keeping them updated on status of business and opportunity to exercise influence
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22. Variable Pay Programs & Motivation
Profit-sharing programs and gain sharing programs reported to increased organizational performance, profitability, positive employee attitudes compared to organizations not having them
Claims by sociologists that monetizing incentives undermines performance seem to be refuted by data
Caution: Not every one responds alike to variable pay plans such as risk averse persons!
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24. Intrinsic Motivation: Employee Recognition Programs
Intrinsic rewards: stimulate intrinsic motivation
Can have long term effects
Personal attention given to employee
Approval & appreciation for a job well done
Growing in popularity and usage
Benefits of programs
Fulfill employees’ desire for recognition
Inexpensive to implement – can start with a Thank you note
Encourages repetition of desired behaviors
Drawbacks of programs
Susceptible to manipulation by management for political motives especially where performance is not objective
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25. © 2007 Prentice Hall Inc. All rights reserved.
E X H I B I T 7–2
From the Wall Street Journal, October 21, Reprinted by permission of Cartoon Features Syndicate.
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26. Global Implications Job Characteristics Model and Job Enrichment
Model more applicable to individualistic culture as is more individual oriented
Job enrichment strategies may not have same effect on collectivist cultures
Caution: Conflicting findings – job involvement seems to work well in Japan and Hungary as well!
Telecommuting
Data on US and Europe available but not with rest of world: not tested on cultural dimensions
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27. Global Implications Variable pay Employee involvement Programs
Do individual pay systems such as pay for performance work well for individual cultures while gain sharing and profit sharing as group based rewards work well for collectivist cultures? No empirical answer!
Employee involvement Programs
Seem to work well in individualistic cultures than collectivist cultures such as India where society is high power distance and accepts a high authority from managers!
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28. Implications for Managers
In Order to Motivate Employees
Recognize individual differences.
Use goals and feedback.
Allow employees to participate in decisions that affect them.
Link rewards to performance.
Check the system for equity.
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29. Check-Up: Motivation Applications
Flexible benefits are recommended most strongly by __________ Theory.
Expectancy theory suggests that individuals should be rewarded with something they value.
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30. Check-Up: Motivation Applications
According to Expectancy Theory, a student will not be motivated to attend class if s/he doesn’t care about grades. What other kind of application might be plausible for a professor to implement as a reward theory in class? Use models from this chapter to discuss with a classmate and arrive at a suggestion.
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31. Thank You
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