BUS 2090 Chapter Summary: Chapter 6 – Motivation in Practice
Both employees and managers underestimate the importance of money as a
According to Maslow & Alderfer, pay should be especially important to people
with strong lower-level needs such as food and shelter.
Using “hierarchy terminology” (Maslow’s hierarchy of needs), pay can satisfy
social, self-esteem and self-actualization needs.
According to expectancy theory, pay should be a good motivator if it is clearly
tied to performance.
Research supports the motivational effects of pay, it even suggests that it may be
the most effective motivator.
Piece-rate – A pay system where individual workers are paid a certain sum of
money for each unit of production completed.
Wage incentive plans – Various systems that link pay to performance on
production jobs. Not a very high percentage of production companies use this
system. However, several major corporations such as Lincoln Electric Company
have used it successfully i.e. high paying jobs, low employee turnover.
Potential problems with Wage Incentives:
(1) Lowered quality
(2) Differential opportunity – When workers have different opportunities to
produce at a high level. For example, if the supply of raw materials or
equipment quality varies from workplace to workplace. Workers will differ in
the “expectancy” that they can produce at a high level.
(3) Reduced cooperation – Individual performances are rewarded, not team
effort. For example, machinists may refuse peripheral tasks such as cleaning
(4) Incompatible job design – Sometimes job design can make it more difficult
to implement individual wage incentives, e.g. assembly lines. As the size of
the team increases, the relationship between any individual’s productivity and
his or her pay decreases. (5) Restriction of Productivity – When wage incentives are introduced, workers
come to an informal agreement about what constitutes a fair day’s output and
artificially limit output.
Merit pay plans – Systems that attempt to link pay to performance on
Potential Problems with Merit Pay Plans
(1) Low discrimination – Managers are often reluctant to discriminate
between good performers and poor ones and tend to feel that the most fair
response is to evaluate most employees equally.
(2) Small increases – Increases or merit pay often lack “visibility.” This may
be due to a number of reasons such as the fact that the pay is spread
throughout the year, or the firm fails to communicate what percentage of
the merit pay is owing to good performance and what percentage to
increases in cost of living, etc. To overcome the visibility problem, some
firms now implement the lump sum bonus (not built into base pay). Merit
pay must ultimately benefit the organization itself, employees should not
be tempted to earn the yearly bonus at the expense of long-term
(3) Pay secrecy – Extreme secrecy surrounds salaries in most firms. Long
standing HR principle that salaries are confidential information.
Recipients of merit pay are often asked not to report it to their co-workers.
Owing to this secrecy, managers have a tendency to overestimate pay of
their peers and underestimate the pay of their superiors.
Profit sharing – The return of some company profit to employees in the
form of a cash bonus or a retirement supplement.
Employee stock ownership plans (ESOPS) – Incentive plans that allow
employees to own a set amount of a company’s shares and provide
employees with a stake in the company’s future earnings and success. Gainsharing – A group pay incentive plan based on productivity or
performance improvements over which the workforce have some control.
Skill-based pay – A system in which people are paid according to the number of job
skills they have acquired.
Profit sharing – The return of some company profit to employees in the form of
a cash bonus or a retirement supplement. Reinforces identification with the
company. Profit sharing usually works best in smaller firms that regularly turn a
profit such as Westjet.
Job scope – The breadth and depth of a job. Breadth refers to the number of
different activities performed on the job, depth refers to the degree of discretion
the worker has. A professor’s job is an example of a “high-scope” job, it has
breadth owing to the variety of tasks professors are required to perform.
Occasionally, jobs can have high breadth but little scope, such as a utility worker
filling in for absentees in different parts of an assembly line.
Maslow’s need hierarchy and ERG theory both indicate that people can fulfill
higher-order needs by the performing high-scope jobs. Expectancy theory
suggests that high-scope jobs can provide intrinsic motivation if the outcomes
from such jobs are attractive.
Job rotation – Rotating employees to different tasks and jobs in an organization.
This is an approach for increasing the scope of a job. Used by Bell Canada and
Telus Corp. Rotation can also help employees develop new skills.
THE JOB CHARACTERISTICS MODEL – Developed by J. Richard Hackman
and Greg Old