Textbook Notes (363,074)
Canada (158,173)
MGHB02H3 (268)
Chapter 6

ch.6 for MGTB23

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University of Toronto Scarborough
Management (MGH)
Samantha Montes

MONEY AS A MOTIVATOR Employees and managers seriously underestimate the importance of pay as a motivator Pay should be motivating to those people who have strong lower-level needs, according to Maslow and Alderfer According to Expectancy theory, if pay can satisfy a variety of needs, it should be highly valent, and it should be a good motivator to the extent that it is clearly tied with performance According to Need hierarchy, pay can also function to satisfy social, self-esteem, and self-actualization needs Financial incentives and pay-for-performance plans have been found to increase performance and lower turnover Linking Pay to Performance on Production Jobs Piece rate is a pay system in which individual workers are paid a certain sum of money for each unit of production completed o Group incentives are employed when difficult to measure individual productivity Wage incentive plans are various system that link pay to performance on production jobs o Leads to substantial increases in productivity Potential Problems with Wage Incentives Lowered Quality Increases productivity at expense of quality Quality issue can be a problem when employers use incentives to motivate faster Quality control is difficult Differential Opportunity A threat to the establishment of wage incentives exists when workers have different(better) opportunities to produce at a high level Reduced Cooperation Wage incentives that reward individual productivity might decrease cooperation among workers Incompatible Job Design The way jobs are designed can make it very difficult to implement wage incentives o Example: on an assembly line, it is almost impossible to identify and reward individual contributions to productivity www.notesolution.com As size of team increases, the relationship between any individuals productivity and their pay decreases Restriction of Productivity A chief psychological impediment to the use of wage incentives is the tendency for workers to restrict productivity When wage incentives are introduced, workers sometimes come to an informal agreement about what constitutes a fair days work and artificially limit their output accordingly Restriction of Productivity is the artificial limitation of work output that can occur under wage incentive plans Link Pay to Performance on White-Collar Jobs White-collar jobs offer few objective performance criteria to which pay can be tied Performance in many jobs is evaluated by the subjective judgement of the performers manager Merit pay Plans are systems that attempt to link pay to performance on white-collar jobs o Using evaluations, managers recommend that some amount of merit pay be awarded to individuals over and above their basic salaries o Merit pay can provide an especially intangible signal that the organization considers an employees performance on track o Employed more frequently than wage incentive plans o Many of these systems now in use are ineffective Research suggests pay is not related to performance under some merit plans Potential problems with Merit Pay Plans Low Discrimination Managers might be unable or unwilling to discriminate between good performers and low performers Good rating systems are rarely employed If there are true performance differences among employees, equalization overrewards poorer performances and underrewards better performers Small Increases Merit increases are simple too small to be effective motivators Sometimes a reasonable amount of merit is provided, but its motivational impact is reduced because it is spread out over a year Lump sum bonus is a merit pay that is awarded in a single payment and not built into base pay o A way to overcome the visibility problem of small increases of merit pay www.notesolution.comPay Secrecy The extreme secrecy that surrounds salaries in most organizations is a threat to the effectiveness of merit pay Even if merit pay is administered fairly, is contingent on performance, and is generous, employees might remain ignorant of these facts because they have no way of comparing their own merit treatment with that of others o Secrecy can severely damage the motivational aspect of well-designed merit plan Managers have that tendency to overestimate the pay of their employees and their peers and to underestimate the pay of their superiors o This leads to reduced satisfaction with pay, damage perceptions of the linkage between performance and rewards, and reduce the valance of promotion to a higher level of management Using Pay to Motivate Teamwork People sometimes end up pursuing their own agendas at the expense of the goals of their work group, department, or organization Profit Sharing Profit sharing is one of the most commonly used group-orientated incentive systems o In years which the firm makes a profit, some of
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