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Chapter 6

MGHB02H3 Chapter Notes - Chapter 6: Highscope


Department
Management (MGH)
Course Code
MGHB02H3
Professor
Samantha Montes
Chapter
6

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Chapter Six-Motivation in Practice
Money as a Motivator
Employees and managers underestimate the importance of pay as a motivator
According to Maslow
Pay can function to satisfy social, self-esteem and self-actualization need
Expectancy theory: of pay can satisfy a variety of needs, it should be highly valent, should be a
good motivator to the extent that it is clearly tied to performance
Pay is most important and effective motivator of performance
Ability to earn money for outstanding performance is competitive advantage for attracting,
motivating and retaining employees
Linking Pay to Performance on Production Jobs
Piece-rate- individual workers are paid a certain sum of money for each unit of production
they complete
Usually for workers who are paid a basic hour wage ($8), and a piece-rate on top of
hourly wage ie. $8.00/hour & $0.30 for each unit produced
Group incentives-when individual productivity is hard to measure ex. Monthly bonus for
production over minimum quota
Wage incentive plans-various schemes to link pay to performance on production jobs
Wage incentives usually lead to substantial increases in productivity
Potential Problems with Wage Incentives
Lowered Quality
wage incentives increase productivity at the expense of QUALITY
especially hard to control for customer service, faster people process
Differential Opportunity
workers have different opportunities to produce at a high level
raw materials or quality of product equipment varies from workplace to workplace
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expectance theory: workers will differ in expectancy that they can produce at a high level
Reduced Cooperation
rewarding individual productivity decrease cooperation among workers
Incompatible Job Design
Sometimes impossible to identify and reward individual contributions to productivity ie.
Assembly lineuse group incentives
as size of time increases, relationship b/t individual productivity and pay decreases ie.
You may be slacking off, but the rest of your team (20 ppl) works really hard, and you
all get bonus, the bonus does not reflect on your individual productivity
Restriction of Productivity
Restriction of productivity-workers sometimes con to an informal agreement about what
constitutes a fair days work and artificially limit their output accordinglydecrease the
expected benefits of the incentive system
Linking Pay to Performance on White Collar Jobs
White collar jobs offer fewer objective performance criteria to which pay can be tied
Paid bonuses that are tied to profitability of firm, or commission on sales
Job performance evaluated by the subjective judge of managervery subjective evaluations
Merit pay plans-systems that attempt to link pay to performance on white collar jobs
Periodically, managers are required to evaluation the performance of employees on
some form of rating scale or written descriptionthis determines merit pay
Managers especially support that performance is an important determinant of pay
Merit plans do not work b/c ppl who work under such plans do not perceive a link b/t their job
performance and their pay
In most cases, seniority, # of employees, job level affect pay more than performance
Potential Problems with Merit Pay Plan
Low Discrimination
Managers might be unable or unwilling to discriminate between good performers and poor
performers
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Small Increases
When merit increases are simply too small to be effective motivators
Lump sum bonus -merit pay that is awarded in a single payment and built into base pay
visually see the bonus received
When merit pay makes up large apart of compensation package, management must make sure
that merit pay ties with goals benefiting company
Or employees could be motivated to just earn yearly bonuses at expense of long-term
organizational goals
Pay Secrecy
Most companies want extreme secrecy surrounding salaries in most organizations
Salaries are confidential and those who receive merit pay to not discuss w/ co-workers
PROBLEM: even if merit pay is fair, no way to know that w/o any comparison, thus think pay
too lowcompanies fail to inform about average pay
Employees inclined to invent salariesreduces both satisfaction and motivation
Managers tend to overestimate pay of their peer, underestimate pay of their bosses, and
underestimate pay of subordinates
If NO SECRECY (open pay system), managers inclined to evaluate everyone to be good to
avoid scrutiny by subordinates but if its open, unfair evaluation would be noted
Using Pay to Motivate Teamwork
Profit Sharing
Profit Sharing-one of the most commonly used group-oriented incentive systems the
return of some company profit to employees in the form of a cash bonus or a
retirement supplement
Not highly motivationproblem is that too many other factory goes into profit (ie. General
economy) that is not in the control of workforce and performance
Also difficult (especially in large companies) to see the impact of ones own actions on
profits
Profit sharing work best in smaller firms that regularly turn profit
Employee Stock Ownership Plans
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