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Chapter 6

BUS 2090 Chapter Notes - Chapter 6: Telecommuting, Job Enrichment, Peter Drucker

Course Code
BUS 2090
Hassan Wafai

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Chapter 6 Individuals, Groups & Organizations
Motivation in Practice
Money as a Motivator
The money employees receive in exchange for organizational membership is in reality a package made up
of pay & various fringe benefits that have dollar values
Pay can satisfy all types of needs
For those w/ lower level needs, pay can be used to buy shelter, food etc.
For those w/ higher needs, the pay that comes with promotion can lead to prestige
According to expectancy theory, if pay can satisfy a variety of needs. It should be highly valent &
should be a good motivator to the extent its clearly tied to performance
Linking Pay to Performance on Production Jobs
Piece-rate: A pay system in which individual workers are paid a certain sum of money for each unit of production
This is very common
More common is a system where workers are paid a basic hourly rate and paid piece rate differential on
top of that
Wage Incentive Plans: Various systems that link pay to performance on production jobs
Introduction of incentives on top on straight hourly pay usually leads to substantial increase in
Potential Problems w/ Wage Incentives
Lowered Quality
Wage incentives are sometimes said to increase quality but reduce quality
Differential Opportunity
A threat to the establishment of wage incentives exists when workers have different opportunities to
produce at a high level
If supply of raw materials or the quality of production equipment varies from workplace to workplace,
some workers will be at an unfair disadvantage under incentive system
Reduced Cooperation
Wage incentives that reward individual productivity might decrease cooperation among workers
Incompatible Job Design
Sometimes the way jobs are designed can make it hard to implement wage incentives
Restriction of Productivity
The artificial limitation of work output that can occur under wage incentive plans
When wage incentives are introduced, workers sometimes come to an informal agreement about what
constitutes a fair day’s work and artificially limit their output accordingly
Linking Pay to Performance on White-Collar Jobs
Compared to production jobs, white-collar jobs (clerical, professional & managerial) frequently offer fewer
objective performance criteria to which pay can we tied
Company presidents often paid annual bonuses tied to profitability of the firm
Salespeople paid commissions on sales
Merit Pay: Systems that attempt to link performance to pay on white-collar jobs
Usually yearly, managers required to evaluate the performance of employees on some form of rating
scale or by means of written description of performance
Using evaluations, managers then recommend some amount of merit pay
Merit pay plans are employed much more than wage incentive plans
Recent reports say merit pay is becoming ineffective
Potential Problems w/ Merit Pay Plans
Low Discrimination
Managers are unable or unwilling to discriminate b/t good & poor performers
In absence of performance rating systems designed to control these problems, mangers might feel that the
only fair response if to rate most employees equally on performance
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Small Increases
When merit increases are simply too small to be effective motivators
To overcome this some firms have replaced conventional merit pay w/ a lump sum bonus that is paid out
all at 1 time and not built into base pay
Lump Sum Bonus: Merit pay that's awarded in a single payment & not built into base pay
Such bonuses have become a method to motivate & retain employees at all org. levels
This has become a very contentious issue b/ of recent financial crises
Pay Secrecy
It has long been a principle of HR that salaries are confidential info & management implores employees
who receive merit increases not to discuss these increases w/ their coworkers
This secrecy might severely damage the motivational impact of a well-designed merit plan
Many organizations fail to inform employees about the average raise received by those doing similar work
Using Pay to Motivate Teamwork
People sometimes end up pursuing their own agendas at the expense of the goal of their work group,
department or org.
Firms in response sometimes have either replaced or supplemented individual incentive pay w/ plans
designed to foster more cooperation & teamwork
Profit Sharing
The return of some company profit to employees in the form of a cash bonus or a retirement supplement
Its unlikely that profit sharing as normally practiced is highly motivational
Its biggest problem is that too many factors beyond control of the workforce can affect profits no matter
how well people perform their jobs
Employee Stock Ownership Plans (ESOPs)
Incentive plans that allow employees to own a set amount of a company’s shares and provide employees w/ a stake
in the company’s future earnings and successes
Employees often allowed to purchase shares at a fixed price and some organizations match employee
Also serve a number of other purposes including attracting & retaining talent, motivating employee
performance, focusing employee attention or org. performance, creating a culture of ownership, educating
employees about the business etc.
ESOP believed to increase employee’s loyalty and motivation b./c they align employee’s goal & interests
w/ those of organizations and create a sense of legal and psychological ownership
Work best in small organizations that regularly turn profit
Gain Sharing
A group pay incentive plan based on productivity or performance improvements over which the workforce has
some control
Often include reductions in the cost of labour, material or supplies
When measured costs decrease, the company pays a monthly bonus according to a predetermined formula
that shares this “gain” between employees & the firm
Most plans include all members of the work unit, including production people, managers & support staff
Skill-Based Pay
A system in which people are paid according to the number of job skills they have acquired
Idea behind this is to motivate employees to learn a wide variety of work tasks, irrespective of the job that
they might be doing at any given time
The more skills acquired the higher the person’s pay
Training costs can be high w/ a skill based pay system
Job Design as a Motivator
If the use of money as a motivator is primarily an attempt to capitalize on extrinsic motivation, current
approaches to using job design as a motivator represent an attempt to capitalize on intrinsic motivation
Goal of job design is to identify the characteristics that make some tasks more motivating than others and
to capture these characteristics in the design of jobs
Many workers are more motivated by stimulating, challenging & meaningful work than by money
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