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MGHB02H3 (269)
Chapter 6

Chapter 6 summary

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Department
Management (MGH)
Course
MGHB02H3
Professor
Julie Mc Carthy
Semester
Summer

Description
Page 1 of 7 Questions and Exercises prepared by Alan Saks. I. Money as a Motivator The 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 pay-for-performance 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 piece-rate. Under a piece- rate 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 through-put in service contexts are more difficult to control. Differential Opportunity . A 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 house-keeping 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 the tendency for workers to restrict productivity. Restriction of productivity refers to the artificial limitation of work output that can occur under wage incentive plans. Workers come to an informal www.notesolution.com
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