ACE INTERNATIONAL BUSINESS SCHOOL

MATRICULATION NUMBER: 16010971

Subject: Organizational Behavior

Title: The Impact of Employee Motivation on Organizational Performance

Module Facilitator: Sachin Timalsena

Prepared by: Ronisha Shrestha

8th Semester

Word count:
 Impact of Employee Motivation on Organizational Performance

Abstract

In today’s business environment it's very important for the organization to retain its best and
performing employees in the organization. This can be done by continuously motivating and
inspiring the employees of the firm. The motivated employees will work for the organization
with general interest rather than self-interest which will help the organization to produce
effective and efficient outcomes in the business market. The HR and managers of the
organization are very much responsible and have the role to continually work towards aligning
the employee’s aspirations with the organization’s objectives. This objective can be achieved by
promoting an inspiring environment for employees where they can grow and develop
themselves. Also, HR and managers should study how employees are motivated and use the right
means to motivate them. Once the employee is motivated and satisfied with his or her job you
can see the change in his performance that could directly or indirectly benefit the organizations’
performance. Thus, employee motivation is important as motivated employees produce
innovations, creativity, and productivity that help the organization to build its image and
differentiate in the market in the long run.

Introduction
Employees are considered as the real assets of the organizations and are regarded as the engine
of any company (Mohsan et al., 2004a). Employees are increasingly able to perform their work
properly and the company gets the necessary performance from employees. To meet these
targets, the organization requires workers who have a strong willingness to perform their roles
and have opportunities and rewards to accomplish them. Every business and organization wants
the maximum potential of its human resources to survive and stay in the competition of the
business market. For this reason, employee motivation is one of the most important factors that
the organization and the managers should keep in mind while operating a business. According to
Sinambela (2020), motivation is a decision-making process, and described motivation as an
individual’s desire to perform goal-orientated behavior.

Major businesses build on the intrinsic value of their human capital and their workers’
motivation and commitment (Mohsen et al., 2004b). Effective and efficient encouragement at the
different levels of the company is strongly required to keep employees satisfied and dedicated to
their work (Tella et al., 2007). When an employee is motivated to do his or her job the
productivity will increase rapidly and more efficient outcomes can be seen. Thus, job satisfaction
correlated with organization engagement is highly optimistic.

Organizational Effectiveness

The composition of individuals who formulate independent business identity for some particular
reason is generally known as the organization and is considered as effective in getting desired
outcomes with specified resources. Organizational efficiency is the notion of how successful an
organization is at producing the outcomes which the organization seeks to achieve (Rahim and
Malik, 2010). Organizational effectiveness plays an important part in promoting the development
of companies (Aydin and Ceylan, 2009). It is the net satisfaction of all the stakeholders in the
process of effectively collecting and converting all the inputs into outputs in a very efficient
manner (Roy and Dugal, 2005). Organizational effectiveness is characterized as the degree to
which an organization fulfills its objectives by utilizing such assets without depleting its
resources and without placing excessive stress on its members and society (Roy and Dugal,
2005).

Employee Motivation

In today’s 21st century world, all corporate sectors have started practicing employee motivation
all around the world. Motivation is derived from the Latin word “movere” meaning “to move”
and motivation is what moves the employees from fatigue to attention. According to Bartol and
Martin (1998), motivation is a powerful tool that strengthens action and activates a continuing
tendency. In other words, motivation is an internal drive that satisfies the unsatisfied need of the
employees and helps to achieve a certain objective of the organization. It is also a process that
starts with the physiological or psychological necessity that achieves an objective-set output. To
survive in today’s competitive business market organizations need to apply competitive
employee policies and practices.

Robbins and Judge (2014a) defined motivation as the factors that account for the intensity,
direction, and persistence of an individual’s attempt to attain the objective. There are three main
points mentioned in the definition and they are explained below:

1. Intensity: It is related to the effort of the person or how hard he or she tries. When we
talk about motivation this is one of the elements we primarily focus on.
2. Direction: High intensity, however, is unlikely to result in favorable job performance
outcomes without channeling the effort into a direction that benefits the organization.
3. Persistence: Motivation has one dimension of persistence. This is a measure of how long
a person will continue his or her efforts. (Robbins and Judge 2014b)

Various models of Motivation

Maslow’s Hierarchy of needs

We are human beings and we all have different natures. Thus, due to different natures and
characteristics, our needs are also not the same. Maslow has mentioned about five universal
needs that motivate a person in his theory called Maslow’s Hierarchy of Needs.
The needs are arranged in the following manners:

1. Physiological or basic needs:

According to Anyim (2012) physiological or basic needs are the most basic needs of a human
being like food, shelter, clothes, and sleeping.The physiological requirements are usually
determined through the cravings we have. The basic needs are biological needs which when a
person fulfills moves up to the next level of the hierarchy.

2. Safety needs:

Safety needs may vary from individual to individual as it depends on where he or she is in life
and it is more psychological that requires shelter and protection. For example, employees in the
working environment demand for job security, health security, and promoting safety. The
demand made by the employees is for feeling secure in the workplace.

3. Belonging needs:

Belonging needs are also known as social needs which include love and belongings. Social need
generally comes in priority only after physiological and safety needs have been sufficiently
achieved. In an organization, these needs can be fulfilled by interacting with colleagues. For
example, desire for a romantic partner, having close friends, and getting married.
 4. Esteem needs:

During this stage, a man seeks self-respect and the esteem of others. Maslow’s hierarchy has two
self-esteem and they are higher and lower self esteems. The lower form of self-esteem is directly
related to an individual’s ego where the individual needs to be respected by others. The higher
form of self-esteem is related to the self-respect of an individual that becomes the permanent part
of who the individual is.

5. Self Actualization:

Self-actualization is the highest need of a human being in Maslow’s pyramid. It is the internal
conversation, which everyone creates in their lives at some stage. When all the previous needs
have been met, a person may turn their attention into true calling. Some of the examples of self-
actualization needed are morality, lack of prejudice, creativity, and acceptance of facts.

This is very important for managers to know and understand their employee’s needs. This will
help them to understand which needs best satisfies and motivates the employees and can provide
them with the needs accordingly.

Expectancy Theory

Another model of employee motivation is known as expectancy theory. This theory states that
the individual tends to behave in a certain way when he or she receives positive rewards.
According to Vroom’s theory, the behavior of the individual is the result of conscious choices
among the alternatives whose motive is to maximize delight and to minimize pain. Factors such
as personality, skills, knowledge, experience, and abilities contribute to an employee’s
performance.
Motivation = Expectancy * Instrumentality * Valence

To account for this Vroom has used Expectancy, Instrumentality, and Valence.

1. Expectancy

It is the belief that an individual’s increased effort will lead to increased performance. For
example, if I work hard towards my life goals then I will achieve it one day. But it is affected by
various factors such as:

● Finding the right resources like raw materials and time

● Having the necessary skills to do the job
● Getting the right support to do the job

2. Instrumentality

This is the assumption that if you work well, you would obtain a valued result. The degree to
which an outcome at the first level would contribute to the outcome at the second stage. For
example: If I do a good job then I will get my desired result.

3. Valence

Valence is the value that the person attached to the expected result. In order for the valence to be
positive, the person must prefer to achieve the result rather than not attain it. For example, if
someone is overwhelmingly driven by income, he or she could not consider the incentives of
extra time off.

Herzberg’s two-factor theory

The theory is also known as motivation-hygiene theory and dual-factor theory that has a direct
influence on job satisfaction or dissatisfaction. If the hygiene factors are not fulfilled it leads to
job dissatisfaction, such as offering low salaries and working conditions but does not necessarily
motivate the employees to work harder (Pritchard, 2009a). Whereas, for the higher performance
of the employee, the motivator factor is needed. Performance, opportunities, and responsibility
for self-growth and development and recognition fall under motivation theory which directly
motivates the employees to work harder. Herzberg also found in one of his studies that workers
are less influenced by lower-level needs such as salary level and working environment. Instead,
employees are motivated by high -level needs such as achieving social belonging, job promotion,
meaningful work, and recognizing achievements (Pritchard 2009b). Thus, the theory suggests in
an organization firstly the employee should be motivated using motivator factors and ensure
hygiene factors are met for their job satisfaction.

Why is employee motivation important?

There are many reasons why encouragement for the workers is significant. Mainly, as it helps the
management to meet the aims of the company. Without an empowered workforce, companies
may find themselves in a very risky position. Human capital is considered as one of the most
foundational values that an organization has to maintain to achieve its goals and objectives to
acquire accomplishment of mission (Armstrong, 2007).

Motivated workers will bring in improved efficiency and help an organization to reach higher
production rates. Imagine getting an unmotivated staff. They are likely to use the opportunity and
the working environment to browse the internet at their office for personal fun, or even search
for another job. This is a total waste for the company’s resources and time. Thus, employee
motivation is very essential in every type of working place.

Employee motivation is important as it benefits the company directly or indirectly. The benefits
it contributes are mentioned below:

● Increased employee commitment:

When employees feel inspired to work, they can bring their full energy into the activities that are
assigned to them. When full dedication and energy are put into work by an employee you can see
a direct effective and efficient result or outcome.

● Improved employee satisfaction:

Employee satisfaction is crucial for any company because this will contribute to positive growth
for the business. Businesses should develop and grow now and then in this dynamic business
environment to survive and compete. And, with unsatisfied employees businesses can never
achieve growth and development.

● Ongoing employee development:

Motivation may encourage the accomplishment of a worker’s personal objectives and can
promote an individual’s self-development. If the worker archives any initial targets, they
recognize the clear connection between success and performance, which would inspire them,
even more, to perform at a high level.

● Improved employee efficiency:

The efficiency level for employees is not based solely on their abilities or qualifications. An
employee has to have a strong balance between the capacity to perform the task provided and the
willingness to perform the task to achieve the very best results for the business. This combination
directly leads to increased productivity and improved efficiency.

How to increase employee motivation

Along with the benefits, the managers and HR should know about the factors that help to
increase employee motivation in the workplace. Following are some points on how to increase
employee motivation:

● Improve communication:

One of the most effective and easiest ways to increase employee motivation and productivity is
by having positive communication in the workplace. If possible talking with employees face to
face and not depending on emails. The managers should seek to set out any minutes a day to
speak to the employee. By doing that, the staff feels like you are part of the team; a mentor rather
than just the manager. The experts also suggest that team communication is extremely important
and valuable.

● Value individual contribution:

Management must certify that the workers realize how their individual efforts and achievements
play a significant part in the overall objectives and productivity of the business. Employees may
take pride in their jobs because they understand if their efforts have an impact on the
organization; no matter how big or small their contribution is. Management also does not always
reward its employees when they do a good job at a given task. A quick “Thank you” or “Nice
work” would often be enough. Such meaningful words are recognizing effort, creating trust, and
inspiring employees to work even harder.

● Positive workplace environment:

Often the employees lose interest because they may not have a good working environment in
their office. To address that, managers can put surveys and get feedback from the employees to
solve the challenges they may experience. Management may even add a good quotation or image
which is noticeable and attracts everyone’s attention. Flora and Fauna even enable the employees
to build a serene workplace environment so the managers can add a few plants in the working
place.

Factors affecting employees motivation

Extrinsic Factors

1. Monetary Compensation Salaries:

In today’s world no one provides their skills and works for free, nor should they. It is every
employee who wants to earn a reasonable salary and payment from their work, and on the other
hand, workers expect their employees to know that is what they get (Manzoor, 2011). According
to Rynes (2004) money is one of the basic inducements, no other incentive or motivation strategy
comes near to it in terms of its influence. Monetary value has the power of magnetizing,
maintaining, and inspiring individuals towards improved results. Frederick Taylor has also
mentioned in his scientific management that money is the most fundamental factor for
motivating the industrial workers to achieve higher productivity (Adeyinka et al, 2007).

2. Work environment:

The working environment plays a very important part in influencing an individual’s motivation
while working. For an optimistic level of motivation, employees are very much concerned about
the working environment they are in. For example, if the working place lacks favorable working
conditions, has too much disturbance, and is not clean and well maintained it can affect the
employee’s health both physically and mentally. According to Arnold and Feldman (1996), the
working condition includes factors such as noise, hygiene, lighting, temperature, ventilation,
working hours, and resources. Furthermore, the employees also blame the poor working
conditions when they feel that the management does not appreciate their efforts (Whittaker
2008).

3. Co-worker:

A co-worker is an individual who is in the same position as that of the employee in an

organization. Co-workers are a distinct part of the working environment who are expected to
work with one another harmoniously (Iqbal 2010). If the co-workers cannot build a good
relationship with one another then it might affect the working motivation of an employee. Thus,
it has been that good interaction with colleagues has a beneficial effect on the motivation level of
an individual (Labedo et al 2008).

Intrinsic Factors

1. Fairness of Treatment:

According to Kalpana (2013), in evaluating fairness, individuals first measured the ratio of their
commitment as input to the corresponding economic or social benefit as out and then compared
the ratio with that of other referents. According to the equity theory receiving both
overcompensation and under-compensation is unfair. Still, in the present, there is a lot of unfair
treatment happening to the employees as not recognizing their efforts, exploitation, underpaid,
and discrimination. Thus, these factors affect an employee’s motivation to work and produce
efficient results.

2. Meaningful Work:

In intrinsic employee motivation, meaningful work is considered one of the most important
factors. In today’s world employees value qualitative work where they can grow and develop
themselves. Such meaningful work is viewed as an employee dividend (Pocock, 2006). The
managers are responsible for making the work meaningful to their employees which will lead to
employees being motivated with their job and will show positive results in the organization. If
the work does not value much to the employees then they will automatically lose interest in
working.

3. Recognition:
Recognition describes how to appreciate the level of achievement for the workers and how to
reach the goal of encouragement or influence. This can be basic or legal, and personal or
community. However, employees do need recognition in an organization. The recognition factor
is an excellent motivator as it enhances an employee’s job satisfaction and motivation level.

Thus, these are some of the extrinsic and extrinsic factors that affect an employee’s motivation in
the working place which affects the employee’s performance as well. These factors not only
affect the employee’s performance but also the organization’s level of productivity which could
hamper the organization’s aim of achieving its goal.

The outcome of motivated employees

Motivated employees work with the general interest of the company and produce certain results
and outcomes that are very beneficial to the organization. The results can help the organization to
compete in the business market, increase sales, create customer satisfaction, and create its own
reputed brand image.

Some of the outcomes of motivated employees are mentioned below:

● Motivated employees can be more creative and create new ideas for the organization.
These new ideas can help the organization to create new products and differentiate their
company from their competitors.
● Productivity also increases which leads to the effective and efficient production of goods
and services. This can contribute to increasing sales value.
● These days employee turnover is one of the most common problems in a working place.
But, if the employee is motivated and satisfied with his job, the company will have no
problem in this subject. The company will have loyal employees working for them in the
long run.
● Motivated do their best to satisfy their customers as well which leads to high customer
satisfaction and the company will be able to retain and attract its new loyal customers.

Conclusion

According to the Hay Group’s research on employee motivation, offices with more engaged
employees are 43% productive compared to other offices. Also, according to many researchers,
motivated employees have a positive result on the firm’s productivity and performance. For this
reason, motivation is an important aspect for any organization and creates an environment that
respects and encourages workers for optimum performance. To compete and survive in today’s
competitive and dynamic market organizations need to be more creative and innovative which
cannot happen without a committed and devoted employee base. The managers get things done
in an organization through its employees and therefore, the managers should be responsible to
motivate its employees. Employee motivation strategy may be different according to the
organization and employees. The subject of employee motivation is not well recognized by many
companies and is poorly practiced; as a result, employees are gradually leaving the company in
search of better places to employ.

Employee motivation is a skill that is learned and practiced by any business to survive and
succeed in the market. Furthermore, the fact that employee motivation directly leads to business
profits makes it a more important factor to keep the employees encouraged and in high spirits.
The benefits of inspired workers can not only profit the business but create a positive working
environment. So, managers and HR should be responsible on how to motivate their employees
depending on their personal needs and demands. Thus, human capital is the most valuable asset
for any organization and they could be the contributors to an organization’s success in the long
term.
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