Motivating & Rewarding

Employees
GCSE Business Studies
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Revision Presentations 2004

Motivation
What is it?
Motivation is will to work
Comes from enjoyment of work itself and/or from desire to achieve
certain goals e.g. earn more money or achieve promotion

Methods available to motivate employees

Financial methods (e.g. salary, bonus)
Non-financial methods (passing on responsibility or praise)

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Advantages of a Well Motivated

Workforce
Better productivity (amount produced per employee)
Better quality
Lower levels of absenteeism
Lower levels of staff turnover (number of employees leaving
business)
Lower training and recruitment costs

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Four Main Motivational Theorists

Taylor
Mayo
Maslow
Herzberg

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Taylors Theory of Motivation

Managers should maintain close control and supervision over
their employees.
Autocratic style of management- managers make all decisions
themselves
Theory X approach to workers- believe workers are lazy and
are only motivated by money
Motivate by pay via piece-rate.

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Mayos Theory of Motivation

Workers are not just motivated by money but by having their
human/social needs met
Concluded that increase motivation by:
Better communication between managers and workers
Greater manager involvement in employees working lives
Working in groups
In practice therefore businesses should introduce team working
and personnel departments to look after employees interests

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Maslows Theory of Motivation

Maslow put forward a
theory that there are five
levels of human needs
which employees need to
have fulfilled at work.
Only once a lower level of
need has been fully met,
would a worker be
motivated by the
opportunity of having the
next need up in the
hierarchy satisfied.
A business should
therefore offer different
incentives to workers in
order to help them fulfill
each need in turn and
progress up the hierarchy
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Herzbergs Theory of
Motivation
Believed in two-factor theory
Motivators
Factors that directly motivate employees to work harder
Giving responsibility, recognition for good work, sense of
achievement, opportunities for promotion

Hygiene factors
Factors that can de-motivate if not present but do not actually
motivate employees to work harder
Pay, working conditions, job security

Motivate by using motivators plus ensuring hygiene factors are

met
Use job enrichment and empowerment (delegating more power
to employees to make their own decisions).
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Autocratic Management Style

Description
Senior managers make all important decisions
Closely supervise and control workers
Managers do not trust workers and simply give orders (one-way
communication)

When suitable
When quick decisions are needed in a company
E.g. in a time of crises
When controlling large numbers of low skilled workers

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Democratic Management Style

Managers trust employees
Encourage employees to make decisions
Delegate authority/power to employees and listen to their
advice

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McGregors - Theory X and Theory Y

McGregor believed that managers have two very different
views of workers in terms of their attitudes to work and
motivation
Theory X view of workers:
Workers dislike work and are lazy
Workers must be controlled and punished were necessary
Workers try to avoid responsibility

Theory Y view of workers:

Workers like to work and enjoy new challenges
Workers like to make decisions and are creative and imaginative
Workers seek responsibility.

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Best Approach/Style for

Management?
Depends on circumstances
Whether workers are skilled or experienced
Level of genuine motivation
Whether quick decisions are needed etc

Best managers are those that are versatile and can call upon
right style at right time

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Reasons Why People Go To Work

To earn money
To feel a sense of achievement or job satisfaction
To feel a sense of belonging to a group
To achieve a sense of security
To obtain a feeling of self-worth

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Main Types of Financial Incentives

Wages Normally paid per hour worked and receive money at end of week
Salaries - Normally an annual salary which is paid at end of each month
Bonus system - Usually only paid when certain targets have been
achieved
Commission - Some workers, often salesmen, are partly paid according to
number of products they sell
Profit sharing - A system whereby employees receive a proportion of
companys profits
Performance related pay - paid to those employees who meet certain
targets
Share options - common incentive for senior managers who are given
shares in company rather than a straightforward bonus or membership of a
profit sharing scheme
Fringe benefits - Often known as perks, these are items an employee
receives in addition to their normal wage or salary e.g. company car,
private health insurance, free meals

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Main Types of Non-Financial Incentives

Empowerment - delegating power to employees so they can make
their own decisions
Praise - recognition for good work
Promotion opportunities - promoting employees to a position of
higher responsibility
Job enrichment - giving employees more challenging and
interesting tasks
Job enlargement - giving employees more tasks of a similar level of
complexity
Better two-way communication - employees have a chance to
give feedback and advice to managers
Better working environment - providing a safe, clean, comfortable
environment to work in
Team working - offers employees an opportunity to meet their social
needs and often accompanied by some form of empowerment for
team
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Fringe Benefits
Known as perks
Items an employee receives in addition to their normal wage or
salary
E.g. company car, private health insurance, free meals
Often increases loyalty to company as these benefits are not
always taxed or are taxed at a reduced rate
More likely to recruit best people to company

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Wages and Salaries

Wages
Paid by hour with pay packet normally received at end of each
week
Often paid to lower skilled workers or to temporary staff
Any additional hours worked normally paid a higher rate on an
overtime basis

Salaries
Often set on an annual basis but payment is made at end of each
month
Normally paid to managers or those higher up in a company
A set number of hours is not normally agreed but employment
contract requires enough hours worked to get job done

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Gross and Net Pay

Gross pay:
Pay each month or week before any deductions have been
removed
E.g. before income tax, national insurance contributions

Net pay:
Pay after deductions have been taken off
Sometimes known as take-home pay

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Overtime and Bonus Pay

Overtime
Additional hours worked over and above normal working hours
E.g. at weekends or on bank holidays
Paid at a higher rate - often 1.5 or 2 times normal hourly wage

Bonus pay
Given out when certain performance targets have been met
Normally applicable at manager level in a company

How bonuses are used:

By motivating employees to work harder in order to meet a realistic
yet challenging target and therefore achieve a bonus payment
Would only be effective if bonus payments were a significant sum

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Profit Sharing
What it is:
A system whereby employees receive a proportion of business
profits

Advantages
Creates a direct link between pay and performance
Creates a sense of team spirit- helps remove them and us barrier
between managers and workers if all employees involved
May improve employees loyalty to company
Employees more likely to accept changes in working practices if
can see that profits will increase overall

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Performance Related Pay

Increasingly popular method of paying people
Paid to those employees who meet certain targets
Advantages
Senior managers can easily monitor and assess individual
employee performance during appraisal process
Setting of targets for employees can ensure they are all closely
focused to company objectives

Disadvantages
Discourages a team based approach- can create unhealthy rivalry
between managers
Can be difficult to accurately measure performance of some
workers e.g. in service sector firms
Incentives may not be larger enough to motivate employees
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Motivational Theorist Views on Pay

Taylor was only theorist to emphasis pay, in particular piecerate, as best way of motivating employees
Mayo, Maslow and Herzberg all felt that non-financial rewards,
such as teamworking, empowerment or job enrichment, acted
as a better incentive for employees to work harder

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Job Enrichment and Job Enlargement

Job enrichment
Giving workers more interesting and challenging tasks
Seen as more motivating as it gives workers chance to further
themselves
Herzberg in particular recommended this approach

Job enlargement
Giving workers more tasks to do of a similar nature or complexity
Job rotation is a part of this

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Reasons for Pay Differentials

Mainly due to supply and demand
People with skills that are in demand, but are in short supply,
get paid more
Cost of living varies between regions
Some jobs require qualifications (e.g. accountants, lawyers)

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Piece Rate Payment

Now a relatively unusual and old-fashioned way of paying
people
Pay per item produced in a certain period of time
Advantages
Requires low levels of manager supervision
Encourages high speed production
Provides good incentive for workers who are mainly motivated by
pay

Disadvantages
Workers are focused on quantity not quality
It is repetitive for workers and can be de-motivating
Workers are only used to one set method of production and may
resistant change
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