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Chapter 6

Chapter 6 Organizational Behaviour

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BUS 2090
Hassan Wafai

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 completed  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 productivity 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 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 contributions  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 Traditional View of Job Design  The historical roots of job simplification are found in social, economic & technological forces that existed even before the industrial revolution  Division of labour within society occurred  The zenith of job simplification occurred in early 1900s w/ industrial engineer Fredric Taylor  The motivational strategies used in this period consisted of close supervision and the use of piece-rate pay  Job simplification helped unionized, un-uneducated workers to achieve a reasonable standard of living Job Scope & Mo
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