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Chapter 5

OB Ch.5 (c) Alyssa Leung

Course Code
COMM 292
Tracey Gurton

of 3
Alyssa Leung
September 30, 2010
Motivation in Action
-money may be the most commonly used and desired reward
-BUT relationships (with coworkers, boss) are equally if not more important
What to Pay: Establishing a Pay Structure
-internal equity: worth of the job to the organization -- established through job evaluation
-external equity: competitiveness of the pay relative to a competitor’s pay (of same industry) -- established through pay surveys
-best pay system is to consider the internal and external equity (worth+competitions’)
-higher pay -> more motivated and high performance employees -> increase costs
How to Pay: Rewarding Individuals through Variable-Pay Programs
-variable-pay programs
-a portion of the pay is based on the employee’s PERFORMANCE (earnings fluctuate)
-turns FIXED costs into VARIABLE costs -> reduces expenditure when performance is low
Individual-Based Incentives – greater emphasis on extrinsic motivation
1. Piece-Rate Wages (piece-rate pay plan)
-paid a fixed sum for each unit of production completed
-‘pure’ piece-rate plan: paid solely for what is produced
-‘modified’: base hourly wage + piece-rate differential
2. Merit-Based Pay (merit-based pay plan)
-based on performance appraisal ratings
-high performers -> bigger raises
-can lead to an increase of overall performance -> achieve company’s goals
-may be misleading as appraisals maybe be invalid
-pay raise pool fluctuates and may have little relation to performance
-seniority-based pay dominates in most workplaces
3. Bonuses
-one-time rewards for defined work
-reward employees for recent (rather than old) performance
-may result in negative behaviour -> employees may believe they should receive bonuses
4. Skill-Based Pay (competency-based/knowledge-based pay)
-paying an employee based on how many skills/how many jobs they can do
- “top out” - learn all skills the program requires -- no more challenge
-do not address the level of performance -> only if they can perform the SKILL
-rewards may not always be equitable
Group-Based Incentives
1. Gainsharing
-formula-based group incentive plan
-improvements in group productivity determine the total amount of $$ to be shared
-focuses on PRODUCTIVITY GAINS rather than profits
-employees can receive awards even when no profit is made
Organizational-Based Incentives
1. Profit-Sharing Plans
-employers share profits with employees based on a predetermined formula
-direct cash outlays or stock options
Alyssa Leung
September 30, 2010
-based on a % of the employee’s salary
-focus on PAST financial results -- don’t focus employees on the future as costs are cut today, w/o considering future
-ignore factors (eg customer service) which is a direct link to profits
-industries with inconsistent incomes will cause an inconsistency in rewards
-employees may be less motivated during economic downturns (expectancy theory)
2. Stock Options and Employee Stock Ownership Plans
-employees can become owners of the company either through
-stock options: the right to buy stocks in the company at a later date for a guaranteed price
-employee stock ownership plan (ESOP): company-established benefit plans in which employees acquire stock as part of
their benefits
-ownership increases commitment to the organization
3. Teamwork
-to encourage employees to work as “teams”, team-based rewards should be given out over individual rewards
4. Unions
-paid on basis of seniority and job categories -> few receive performance-based pay
-variable pay may cause competition, speeding up pace of work -> elder workers may not be able to keep up
5. Public Sector Employees
- local, provincial, federal government workers
-performance-based pay is hard to evaluate (mostly services)
-goal-setting theory is a better alternative to improve performance
6. Ethical Considerations
-although some behaviours/actions are unethical, they are RATIONAL from the managers’ perspective as it maximizes
profits (rewarded for performance)
Flexible Benefits: Developing a Benefits Package
- allow each employee to have customized benefits packaged -- tailored to own needs
- (eg. medical plans for family vs more vacation time)
1. modular plans: predesigned packages - meet needs of a specific group
2. core-plus plans: has a core of essential benefits plus a list of additional selections
3. flexible spending accounts: set aside up to the dollar amount offered in the plan to pay for particular services; don’t have to pay
Intrinsic Rewards: Employee Recognition Programs
-motivation = performance + rewards --> have work recognized
-private “thank you” or publicized announcement
Linking Employee Recognition Programs and Reinforcement Theory
-rewarding a behaviour with RECOGNITION immediately following that behaviour is likely to encourage its repetition
Employee Recognition in Practice
-recognition costs little or no money for an employer
Motivation Theories Are Culture-Bound
-do not work as well in other cultures
-different cultures prefer different pay and benefit practices
Evaluating Motivation Theories Cross-Culturally
-most motivation theories were developed in US (American cultural norms)
Alyssa Leung
September 30, 2010
-assume some consistency in needs across society - different characteristics = different needs
-must consider the internal norms of a country before developing an incentive plan
Provide Performance Feedback (pg 185)
-managers dislike giving performance feedback to employees
i. uncomfortable with discussing weaknesses directly to employees
ii. employees challenge negative evaluation -- criticize manager or blame others
iii. employees tend to have inflated assessment of their own performance -- may feel that feedback is not good
-train managers to properly conduct constructive feedback sessions
-review should be more of a counseling activity rather than a judgment process
Beware the Signals That Are Sent by Rewards (pg 186)
1. Individuals are unable to break out of old ways of thinking about reward and recognition practices.
-emphasizes quantifiable behaviours, excludes non-quantifiable behaviours
-management doesn’t want to change the existing performance system
-employees don’t accept change as they are content with the current system
2. Organizations often don’t look at the big picture of their performance system.
-rewards given to SUBunit levels -> result in competition b/w units
3. Both management and shareholders often focus on short-term results.
-don’t reward employees for longer-range planning
Creating a Motivated Work Environment
-actions an organization can take to create a more motivating work environment:
Abolish Incentive Pay
-paying employees more generously will allow them to concentrate on the goals of the organization
Re-evaluate Evaluation
-performance evaluation altered to be like a two-way conversation -- trade ideas and questions
-feedback is given to improve performance, and not to control them with rewards
Create the Conditions for Authentic Motivation
-change conditions rather than pay by productivity
-eg helping employees rather than supervising, listening to their concerns, provide feedback what what needs to be improved
Encourage Collaboration
-well-functioning groups/teams -- exchange feedback and learn from each other
Enhance Content
-learn new things, variety in tasks, enable employees to demonstrate competence (efficiency)
-when jobs are unappealing: manager acknowledges that the job isn’t fun -> then describe rationally why the task must be
completed and give people CHOICE to how it is to be done
Provide Choice
-extrinsic rewards remove choice --> focus on rewards rather than on tasks/goals
-allow employees to have their input in decisions -- full participation by everyone