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Chapter 6

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Department
Administration
Course
ADM2336
Professor
All Professors
Semester
Fall

Description
Chapter 6I Money as a MotivatorThe money that employees receive in exchange for organizational membership is usually a package made up of pay and various other fringe benefits that have dollar values such as insurance plans sick leave and vacation time We are mainly concerned with the motivational characteristics of pay Employees and managers however seriously underestimate the importance of pay as a motivator Motivation theories suggest that money can be a motivator to the extent that it satisfies a variety of needs is highly valent and it is clearly tied to performance Research has found that financial incentives and payforperformance plans increase performance and lower turnover In general the ability to earn money for outstanding performance is a competitive advantage for attracting motivating and retaining employees A Linking Pay to Performance on Production Jobs The prototype of all schemes to link pay to performance on production jobs is piecerate Under a piecerate system workers are paid a certain sum of money for each completed unit of production completed Various schemes that link pay to performance on production jobs are called wage incentive plans which often offer a bonus for production over a minimum quota These wage incentives have often resulted in increases in productivity B Potential Problems with Wage Incentives Despite their theoretical and practical attractiveness wage incentives have some potential problems when they are not managed with care Lowered Quality It is sometimes argued that wage incentives can increase productivity at the expense of quality While adequate systems can usually be put in place to monitor and maintain quality in manufacturing operations wage incentives that increase throughput in service contexts are more difficult to control Differential OpportunityA threat to the establishment of wage incentives exists when workers have differential opportunities to produce at a high level Sometimes access to raw materials or the quality of production equipment can give some workers an unfair advantage over others in their opportunity to earn incentives Reduced Cooperation Wage incentives that reward individual productivity might decrease cooperation among workers who might hoard materials intended for common use or neglect common tasks like housekeeping that do not contribute directly to production quotas Incompatible Job Design In some cases the way jobs are designed can make it very difficult to install wage incentives It is very difficult to identify individual productivity in such contexts as assembly line work or where teams are large As the size of the team increases the relationship between any individuals productivity and his or her pay decreases Restriction of Productivity A chief psychological impediment to the use of wage incentives is
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