Organizational Behaviour - Chapter 6.docx

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University of Toronto Scarborough
Management (MGH)
Pascal Riendeau

Organizational Behaviour – Chapter 6 – Motivation in Practice Money as a Motivator • Linking pay to performance on production jobs ->Prototype is Piece Rate • Piece Rate – A pay system in which individual workers are paid a certain sum of money for each unit of production completed Eg. $2 paid for each dress stitched + wage • Wage Incentive Plans – Various systems that link pay to performance on production jobs • Introduction of wage incentives usually leads to substantial increases in productivity • Potential problems with wage incentives: Lowered quality, differential opportunity, reduced cooperation, incompatible job design and restriction of productivity • Differential opportunity –When workers have different opportunities to produce at a high level • Reduced cooperation – Workers might refuse to engage in tasks such as keeping the shop clean or unloading supplies and machinists might hoard raw materials • Incompatible job design – The way jobs are designed can make it difficult to implement wage incentives. Eg. Assembly line. As the size of the team increases, the individual’s productivity and pay decreases. • Restriction of Productivity – The artificial limitation of work output that can occur under wage incentive plans. Workers may feel that increased productivity due to the incentive will lead to reductions in the workforce or an employer will reduce the rate of payment to cut labour costs. Linking Pay to Performance on White Collar Jobs • Compared to production jobs, white-collar jobs (clerical, professional, managerial) frequently offer fewer objective performance criteria to which pay can be tied • Merit Pay Plans – Systems that attempt to link pay to performance on white-collar jobs • The prototype for most payment plans: Periodically managers are required to evaluate the performance of employees on some form of rating scale or provide a written description • Managers then recommend that some amount of merit pay be awarded to individuals over and above their basic salaries (usually incorporated in the subsequent year’s salary) • Merit pay can indicate that an employee’s performance is “on track” and is more commonly used than wage incentive pay • In a tight labour market, merit pay is often used by organizations to attract and retain employees and as an alternative to wage increases; can improve performance of professionals • However many of these systems now in use are ineffective: individuals do not perceive a link between job performance and pay • Potential problems with merit pay plans include: low discrimination, small increases, and pay secrecy • Low discrimination – Merit pay plans can fail due to managers unable/unwilling to discriminate between good performers and poor performers. Managers may rate most employees as equal performers. • Small Increases – Merit increases are simply too small to be effective motivators. Sometimes a reasonable amount is provided, but its motivational impact is reduced because it is spread out over a year. To overcome this visibility problem, some firms replaced the usual merit pay with a lump sum bonus. • Lump Sum Bonus – Merit pay that is awarded in a single payment and not built into base pay • Pay Secrecy – Extreme secrecy that surrounds salaries in most organizations • Secrecy may damage the motivational impact of a well-designed merit plan: reduce satisfaction with pay, damage perceptions of the linkage between performance and rewards, and reduce the valence of promotion to a higher level of management. Using Pay to Motivate Teamwork • Profit Sharing – The return of some company profit to employees in the form of a cash bonus or a retirement supplement • Employees have a sense of ownership, goals are aligned, and only pays when there’s a profit • It is unlikely that profit sharing is highly motivational due to too many factors beyond the control of the workforce that can affect profits no matter how well people perform • Profit sharing works best in smaller firms -> difficult for employees in large firms to see the impact of their actions on organization profits • 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 • Aligns employees’ goals and interests with those of the organization, sense of ownership • Employees lose motivation in a weak economy when the value of stocks decline and it can be difficult to see a connection between their efforts and the value of the stocks • Gainsharing – A group pay incentive plan based on productivity or performance improvements over which the workforce has some control • Aligns goals, encourages teamwork • However, bonuses might be paid even when there’s no profit, employees might neglect objectives that are not included in the formula • Skill-based Pay – A system in which people are paid according to the number of job skills they have acquired; also known as pay for knowledge • Encourages employees to learn new skills, greater flexibility with assignments, provides a broader picture of the work process • However, increases the cost of training and potentially labour Job Design as a Motivator • Job Design – The structure, content, and configuration of a person’s work tasks and roles • The goal of job design is to identify the characteristics that make some tasks more motivating than others and to capture these characteristics in the design of jobs • From the Industrial Revolution-1960s, non-managerial jobs were based on job simplification • Specialization was the key to efficient productivity • Job Scope – The breadth and depth of a job • Breadth – The number of different activities performed on a job • Depth – The degree of discretion or control a worker has over how work tasks are performed • High scope jobs have great breadth and depth Eg. Professor • Low scope jobs are shallow and narrow Eg. Assembly line job • High scope jobs provide more intrinsic motivation that low scope jobs • Increase the scope of a job by assigning employees to stretch assignments or applying job rotation • Stretch assignments offer challenging opportunities to broaden their skills by working on a variety of tasks with new responsibilities
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