Motivation in the Workplace
Motivation in the New Workplace
Integrated Model of Motivation
Pay for Performance
Incentive Compensation Systems
Pay For Knowledge
Bonus Pay
Profit Sharing
Gain Sharing
Employee Stock Ownership
- The changes taking place in organizations have been mentioned several times in management – horizontal structures, primacy of people, importance of team-work, high performance goals, adaptability and speed, worker empowerment, high technology etc.
- These developments and more are creating new work environments in which people search for meaning, rewards, and valuable contributions
- The workforce is changing as well – more work is being done by part timers; there is an increasing divide between low skill, low-pay workers and high-skill, high pay workers
- The number of workers is growing and volunteers are playing increasingly important roles in the non-profit service organizations or communities
- Managers must rise to the challenge of creating motivational environments in these new realities
- The integrated motivation model is a helpful point of reference. It pulls together the best insights from all motivational theories, allowing them to be applied to good advantages in a manager’s unique circumstance
Integrated Model of Motivation
- Motivation leads to effort that, when combined with appropriate individual abilities and organizational support, leads to performance
- The motivational impact of any rewards received for this performance depends on equity and reinforcement considerations
- Ultimately, satisfaction with rewards should lead to increase motivation to work harder in the future
- Among motivational issues that can be addressed within this integrating framework, perhaps none receives as much attention as compensation
- There are many advantages, both individual and organizational, to be gained for a truly motivational compensation scheme
Pay for Performance
- Paying people for their performance is consistent with the equity, expectancy, and reinforcement theories
- Formally defined, merit pay is a compensation system that awards pay increases in proportion to individual performance contributions
- By allocating pay increases, managers are attempting to recognize and positively reinforce high performers and they’re also attempting to remind low performers of their lack of achievement, and send a signal that they must do better in the future
- In principle, it makes sense to reward people in proportion in their work contributions
- A successful merit pay system must have a solid foundation in agreed upon and well defined “performance measures”
- Any weakness in the performance appraisal methods can undermine a merit pay system
- There must also be consistency in applying merit pay at all levels of the organization
Incentive Compensation Systems
- Organizations use a variety of incentive compensation systems
- Examples include, pay for knowledge, bonus pay plans, profit-sharing plans, gain-sharing plans, and employee stock ownership plans
- As you consider the descriptions that follow, remember that any incentive compensation system will only work as well as its implantation
Pay For Knowledge
- Consistent with the emphasis on human capital, some organizations now emphasize paying for knowledge
- A concept called skill based pay pays workers according to the number of job relevant skills they master
Bonus Pay
- Bonus pay plans provide one time or lump sum payments to employees based on the accomplishment of specific performance targets or some other extraordinary contributions such as an idea for a work improvement
- Bonuses have been most common at the executive level, but they are now being used more extensively
Profit Sharing
- Profit sharing plans distribute to some or all employees a proportion of net profits earned by the organization during a stated performance period
- The exact amount typically varies according to the level of profits and each person’s base compensation
Gain Sharing
- Gain sharing plans extend the profit sharing concept by allowing groups of employees to share in any savings or gains realized through their efforts to reduce costs and increase productivity
- Specific formulas are used to calculate both the performance contributions and gain sharing awards
Employee Stock Ownership
- Employee stock ownership plans involve employees in ownership through the purchase of stock in the companies that employee them where as formal “ESOP” plans are often used as financing schemes to save jobs and prevent business closing, stock ownership by employees is an important performance incentive
- it can be motivating to have an ownership share in one’s place of employment
- An approach to employee ownership through stock options gives the option holder the right to buy shares of stock at a future date and at a fixed price
- This links ownership directly with a performance incentive, since employees holding stocks option presumably are motivated to work hard to raise the praise of the firm’s stock
- When the price has risen, they can exercise their options and buy the stock at a discount, thus realizing a financial gain