Chp 5: Motivation in Action

Creating Effective Reward Systems

Four major strategic rewards decisions:
1

What to pay employees - establishing a pay structure

Balancing internal equity and external equity
o
Internal Equity - The worth of the job to the organization established
through technical process called job evaluation
o
External Equity - The external competitiveness of an organization's
pay relative to pay elsewhere in its industry established through pay
surveys

How to pay individual employees - variable-pay plans

and skill-based pay plans

Variable-Pay Program - A reward program in which a portion of an

employee's pay is based on some individual and/or organizational measure of
performance
o
Allows companies to fluctuate pay quicker in response to the economy,
changing fixed labour costs to more variable costs

Individual-Based Incentives

Piece-Rate Pay Plan - An individual-based incentive plan in which

employees are paid a fixed sum for each unit of production completed
o
Often modified where employees earn a base hourly wage plus a
piece-rate differential

Merit-Based Pay Plan - An individual-based incentive plan based on

performance appraisal ratings
o
Effective because individuals perceive strong relationship between
performance and rewards
o
Based on performance appraisals can make it valid or invalid
o
Sometimes pay raise pool fluctuates based on economic conditions,
not performance
o
Unions typically resist merit-based pay plans

Bonus - An individual-based incentive plan that rewards employees for

recent performance rather than historical performance
o
Incentive effects higher because it rewards recent performance

Skill-Based Pay - An individual-based incentive plan that sets pay levels on

the basis of how many skills employees have or how many jobs they can do
o
Increase flexibility in workforce, employee skills are interchangeable
o
Employees get frustrated when they learn all the skills
o
Don't address level of performance
o
Skills acquired may not be needed immediately
o
Is not agreed to be equitable

Group-Based Incentives

Gainsharing - A group-based incentive plan in which improvements in group

productivity determine the total amount of money to be shared
o
Focus on productivity allows employees to receive incentive even when
organization isn't profitable

Organizational-Based Incentives

Profit-Sharing Plan - An organization-wide incentive plan in which the

employer shares profits with employees based on a predetermined formula
o
Focus on past financials, ways to cut cost today without considering
longer-term needs
o
Tend to ignore factors such as customer service, not directly linked to
profits

Employee Stock Ownership Plan (ESOP) - A company-established benefit

plan in which employees acquire stock as part of their benefits

What benefits to offer - flexible benefits

Flexible Benefits - A benefits plan that allows each employee to put together
a benefits package individually tailored to his or her own needs and situation

Three most popular types of benefit plans

Modular Plans - Predesigned packages of benefits, with each module put
together to meet the needs of a specific group of employees
Core-Plus Plans - Consist of a core of essential benefits and a menu-like
selection of other benefit options from which employees can select and add to
the core
Flexible Spending Accounts - Allow employees to set aside up to the
dollar amount offered in the plan to pay for particular services

How to construct employee recognition programs

o Recognition can take many forms, informal or formal

o Rewarding a behaviour with recognition immediately following that
behaviour is likely to encourage is repetition

o Recognizing an employee's superior performance often costs little or no

money

Caveat Emptor: Apply Motivation Theories

Wisely
October-10-11
2:08 PM

Motivation Theories Are Culture-Bound

US workers rather have Rolex watches or expensive dinners, while Japanese

workers wanted a night out sale team bowling
Productivity in Moscow didn't increase for Saturday shift because rewards
have little impact

GLOBE/Hofstede Cultural
Dimension

Reward Preference

High uncertainty avoidance

Certainty in compensation
systems:
Seniority-based pay

Skill-based pay

Greece
Portugal
Japan

Individualism

Compensation based on individual

performance
Pay for performance

Individual incentives

Stock options

Australia
UK
US

Humane orientation
(masculinity vs. Femininity dimension)

Social benefits and programs:

Flexible benefits

Workplace child-care programs

Career-break schemes

Maternity leave programs

Sweden
Norway
Netherland

Provide Performance Feedback

1
1
1

Exampl

Managers are often reluctant to give performance feedback.

They are often uncomfortable in discussing performance weaknesses directly
with employees
Employees tend to become defensive when their weaknesses are pointed out
Employees tend to have an inflated assessment of their own performance

Beware Signals Sent by Rewards

1

Individuals are unable to break out of old ways of thinking about rewards
o
Management emphasizes quantifiable behaviours and is reluctant to
change the existing system
o
Employees feel entitled

Organizations often don't look at the big picture of performance system

Both management and shareholders focus on short-term results

Can We Eliminate Rewards?

Creating a Motivating Work Environment

Alfie Kohn proposes actions organizations can take to create motivating work
environment

Abolish Incentive Pay: Pay employees generously and fairly to take pay off
their minds and put focus on goals of organization

Re-evaluate Evaluation: Performance system structured like a two-way

conversation to trade ideas and questions, and should not be accompanied by
compensation

Create Conditions for Authentic Motivation: Helping employees,

listening to concerns, thinking from their viewpoint, providing plenty of
feedback

Encourage Collaboration: People more likely to perform better in groups

where they get feedback and learn from each other

Enhance Content: People most motivated when their jobs give them
opportunity to learn, so matching people to their jobs, and giving opportunity
to try new ones

Provide Choice

Job Redesign
Job Design - How tasks are assigned to form a job

Job Rotation
Job Rotation (Cross-Training) - The periodic shifting of an employee from one
task to another
o
Reduces boredom and increases motivation by diversifying employee's
activities
o
Employees with wider range of skills give management more flexibility
o
Training costs are increased
o
Productivity is reduced because worker moves when efficiency is
achieved
o
Members have to adjust to new employee and managers must spend
more time monitoring and answering questions
o
Demotivate those who seek specific responsibilities and specialty

Job Enlargement
Job Enlargement - The horizontal expansion of jobs
o
Have sometimes been met with less than enthusiastic results
o
Ensures all employees in work unit can perform tasks of others in unit,
reducing need for meetings, cost of office equipment, and job continuity
during holidays
o
Does little to add challenge or meaningfulness to worker's activities

Job Enrichment and the Job Characteristics

Model
Job Characteristics Model (JCM) - A model that identifies five core job
dimensions and their relationship to personal and work outcomes
Job Enrichment - The vertical expansion of jobs
o
Increases degree to which worker controls planning, execution and
evaluation of their work
o
Expands freedom and independence, increases responsibility
1

Five Core Job Dimensions:

Skill Variety - The degree to which a job requires a variety of different
activities so the employee can use a number of different skills and talents

Task Identity - The degree to which a job requires completion of a whole and
identifiable piece of work

Task Significance - The degree to which the job has a substantial impact on
the lives or work of other people

Autonomy - The degree to which the job provides substantial freedom,

independence, and discretion to the individual in scheduling the work and
determining the procedures to be used in carrying it out

Feedback - The degree to which carrying out the work activities required by
the job results in the individual obtaining direct and clear information about the
effectiveness of his or her performance

1
1
1

Three Critical Psychological States:

Meaningfulness: view job as important, valuable and worthwhile (skill variety,
task identity, and task significance)
Responsibility: personal responsibility for results (autonomy)
Knowledge: know whether they are performing effectively (feedback)
Motivating Potential Score (MPS) - A predictive index suggesting the
motivation potential in a job

Appears the MPS model does not work, we can better derive motivating
potential by adding together characteristics

Creating More Flexible Workplaces

October-10-11
3:12 PM

Compressed Workweek
A four-day week, with employees working 10 hours a day
Nine days of work over two weeks
o
Conceived to allow more leisure and shopping time, permit travel
outside rush hours
o
Make it easier for organizations to recruit
Flextime - An arrangement where employees work during a common core
period each day but can form their total workday from a flexible set of hours
outside the core
o Tends to reduce absenteeism and improves productivity and satisfaction
o Allows for schedule of hours on their own, reducing tardiness and
absences
o Not applicable to every job - not viable for receptionists, salespeople, etc.
Job Sharing - The practice of having two or more people split a 40-hour-aweek job
o Allows organizations to draw upon talents of multiple individuals for given
job

o Opens acquisition of those workers who might not be available full-time

o Difficulty is finding compatible pairs
Telecommuting - An arrangement where employees do their work at home on
a computer that is linked to their office
o Saves commuting time and productivity has increased
o Appropriate for routine information-handling tasks, mobile activities, and
professional and other knowledge-related tasks
o Causes some to miss out on important meetings and informal interactions
that lead to new policies and ideas
o Miss social contact that occurs at work
o Decreases commitment to organization

Putting It All Together

DRIVE

PRIMARY
LEVER

1 Acquire

Reward System

ACTIONS

1 Bond

Culture

1 Compre
hend

Job Design

1 Defend

Performance
Management and
Resource
Allocation
Processes

Sharply differentiate good performers

from average or poor performers
Tie rewards clearly to performance
Pay as well as your competitors
Foster mutual reliance and friendship
among co-workers
Value collaboration and teamwork
Encourage sharing of best practices
Design jobs that have distinct and
important roles in the organization
Design jobs that are meaningful and
foster a sense of contribution to the
organization
Increase the transparency of all processes
Emphasize their fairness
Build trust by being just and transparent
in granting rewards, assignments, and other
form of recognition