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MGHB02H3 (269)
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Chapter 6

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Management (MGH)
All Prof.

Chapter 6Motivation in PracticeMoney as a MotivatorMoney as a motivator represents an attempt to capitalize on extrinsic motivationPay is motivational to people with strong lowerlevel needs pay can be exchanged for necessities Pay can also satisfy social pay can give you prestige among friends and family selfesteem pay can signal your competence as a worker and selfactualization pay can demonstrate that your boss cares about you needs According to the 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 to performance Financial incentives and payforperformance plans increase performance and decrease turnover Pay may be the most important and effective motivator of performance Linking Pay to Performance on Production JobsPieceRate A pay system in which individual workers are paid a certain sum of money for each unit of production completed Wage Incentive Plans Various systems that link pay to performance on production jobsUsually leads to substantial increases in productivityPotential Problems with Wage IncentivesLowered Quality Wage incentives can increase productivity at the expense of quality Differential Opportunity Workers may have different opportunities to produce at a high level If the supply of raw materials or the quality of production equipment varies from workplace to workplace some workers will be at an unfair disadvantage under an incentive system Workers will differ in the expectancy that they can produce at a high level expectancy theoryReduced Cooperation Wage incentives that reward individual productivity might decrease cooperation among workers Incompatible Job Design The way jobs are designed can make it hard to implement wage incentives On an assembly line it may be impossible to identify and reward individual contributions to productivity As the size of the team increases the relationship between any individuals productivity and his or her pay decreases removes the intended incentive effect eg the impact of your productivity in a team of two is greater than the impact of your productivity in a team of tenRestriction of Productivity The artificial limitation of work output that can occur under wage incentive planso Under normal circumstances without wage incentives productivity is distributed in a bellshaped mannero Why it happens workers may feel that increased productivity due to the incentive will lead to reductions in the workforce or workers may fear that if they produce at an especially high level an employer will reduce the rate of payment to cut labour costs o Hypothetical productivity distributions with and without wage incentives when incentives promote restrictionLinking Pay to Performance on WhiteCollar JobsWhitecollar jobs frequently offer fewer objective performance criteria to which pay can be tied Performance in many such jobs is evaluated by the subjective judgment of the performers managerMerit Pay Plans Systems that attempt to link pay to performance on whitecollar jobs Periodically usually yearly managers evaluate the performance of employees Using these evaluations the managers then recommend that some amount of merit pay be awarded to individuals usually incorporated into the subsequent years salary cheques Merit pay plans are used more often than wage incentive plansMany payforperformance systems are now ineffectivein most organizations seniority the number of employees and job level account for more variations in pay than performance does Potential Problems with Merit Pay PlansLow Discrimination Managers might be unable or unwilling to discriminate between good performers and poor performers Subjective evaluations of performance may be difficult to make and may be distorted by perceptual errors Therefore manager might feel that the only fair response is to rate most employees as equal performers equalization strategy If there are true performance differences among employees equalization overrewards poorer performers and underrewards better performers Small Increases Occurs when merit increases are too small to be effective motivators Sometimes a reasonable amount of merit pay is provided but its motivational impact is reduced because it is spread out over a year or because the organization fails to communicate how much of a raise is for merit and how much is for cost of living o Lump Sum Bonus Merit pay that is awarded in a single payment and not built into base pay Used to overcome the small increases problemo When merit pay makes up a substantial portion of the compensation package management has to take extreme care to ensure that it ties the merit pay to performance criteria that benefit the organization Otherwise employees could be motivated to earn their yearly bonus at the expense of longterm organizational goals Pay Secrecy Even if merit pay is administered fairly is contingent on performance and is generous employees have no way of comparing their own merit treatment with that of others As a result pay secrecy might damage the motivational impact of a welldesigned merit plan o Without better information employees are inclined to invent salaries for other organizational members reduces job satisfaction and motivation These tendencies will reduce satisfaction with pay damage perceptions of the linkage between performance and rewards and reduce the valence of promotion to a higher level of managemento If performance evaluation systems are inadequate and poorly implemented a more open pay policy will simply expose the inadequacy of the merit system and lead managers to evaluate performance in a manner that reduces conflicto A managers estimates of pay earned by boss peers and subordinates
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