Professional Documents
Culture Documents
Unit 2.4 - Motivation - Business HL
Unit 2.4 - Motivation - Business HL
4 - Motivation
Key Vocabulary:
- Motivation: Giving employees a reason, or incentive, to want to perform well for the
business.
- Financial Motivation: The use of financial incentives to encourage employees to perform
well. Ex: bonus
- Non-Financial Motivation: The use of non-financial incentives to encourage employees to
perform well. Ex: delegation
Financial Motivation:
- Salary: Financial rewards set at a fixed annual rate but paid on a monthly basis.
- Advantages:
- Provides job security: Since their payment is guaranteed.
- Workers know that they will receive a regular income: Which can be
beneficial for financial planning and personal budgeting.
- Disadvantages:
- Employees might not always be maximally motivated as they may not feel
the need to go above and beyond in their performance.
- They know that if they do more or less the same amount of work every
month, they will receive their fixed salary; this can reduce productivity.
- Wages (time based): Staff is paid per hour of work (daily or weekly).
- Advantages:
- In case workers need to stay over hours, they will receive extra payment.
- Workers feel their time and work is being valued.
- Disadvantages:
- The pay workers receive is not linked to the amount of output they produce;
therefore, they might ‘go slow’ in order to make sure they work over hours
to receive more income.
- Wages (piece rate): Staff is paid per unit/batch of output (daily or weekly).
- Advantages:
- Workers know that if they are more productive, they will be rewarded for
that.
- They see that their work has a tangible monetary value.
- Disadvantages:
- Workers might concentrate more on quantity produced and less on quality.
- This might increase costs for the business as quality check/assurance
systems would need to be put in place.
- Commission: Staff is paid with respect to their sales results – an employee gets a percentage
for each unit sold.
- Advantages:
- Employees are driven to achieve higher sales, benefiting both the individual
and the company.
- Workers will try to achieve the best sales results possible, which would
result in a higher financial reward, while the business benefits from higher
sales.
- Disadvantages:
- External factors affecting sales (recession, inflation) affect the income of the
workers, which is demotivating; there’s nothing they can do in case they
can’t sell more goods because of recession or inflation.
- Employees might prioritize personal gains by making arrangements with
customers that put the organization in a disadvantageous position. (a banker
might give out a short-term loan to a business without previously checking
whether the business can pay for it, which is disadvantageous for the bank).
- Profit-related pay: The income of the employee depends on the profitability of the
company.
- Advantages:
- It can be motivating for the workforce as they’re tied to the company’s
profitability.
- If the business shares the profit of the whole organization with the staff, this
gives them a sense of ownership over the business and belonging. The
success of the company = Their success.
- Disadvantage:
- External factors affecting sales (and thus profitability) of the business
automatically affect employees, which can prove to be demotivating as they
have no power over the factor causing decreased sales.
- Performance Related Pay: Payment rewards for employees (in individual, teams or as a
workforce) based on the certain goals met. Such as: pay rise, performance bonus, gratuity (a
monetary gift or reward that an employer gives to an employee as a token of appreciation
for their extended service or exceptional performance, often provided upon retirement or
the conclusion of employment)
- Advantages:
- Establishes incentives for employees to excel and meet specific goals.
- Fair, since their hard work is rewarded.
- Helps to develop a performance culture since it creates an environment
where everyone strives to excel and contribute to the success of the
company.
- Disadvantages:
- Setting unattainable goals can lead to stress and demotivation.
- Inappropriate for jobs where quality overrides quantity (ex: doctors).
- In the pursuit of financial rewards, non-financial motivators like recognition
or personal development may be overlooked, impacting overall job
satisfaction.
- Employee share ownership schemes: Rewards for employees by giving or selling them (at a
discounted rate) shares in the company. This works well because that way, success of the
company has a direct financial benefit to shareholders.
- Advantages:
- Providing employees with shares in the company fosters a sense of
engagement and commitment, as their financial interests are directly tied to
the company's success.
- Employees who own shares are more likely to stay with the company for the
long term, contributing to a stable and experienced workforce.
- Share ownership creates a sense of responsibility among employees, as they
recognize that their decisions and actions can directly impact the value of
their shares.
- Disadvantages:
- While the scheme aligns employees with the company's success, the direct
financial benefits might not be immediately apparent, and employees may
need to wait for a profitable exit to realize gains.
- Fringe payments (perks): Financial benefits to employees in addition to their wage or salary
(ex: free car, health insurance, discounts).
- Advantages:
- Offering additional benefits, such as a free car, health insurance, or
discounts, fosters loyalty among employees who feel appreciated and
valued by the company.
- Fringe payments help meet employees' safety needs, providing them with a
sense of security and contributing to their overall wellbeing.
- Extra benefits contribute to the overall wellbeing of workers, creating a
positive work environment and making them feel valued.
- Disadvantages:
- Providing perks can be costly for the company, impacting its bottom line and
potentially affecting financial resources available for other purposes
(opportunity cost).
- Higher-ranking individuals may receive significantly more expensive
benefits, creating a disparity that could lead to dissatisfaction among lower-
ranking employees.
Non-Financial Motivation:
- Empowerment: Usually takes the form of managers giving their employees more
responsibility and involving them in (or giving them) decision-making (powers).
- Advantages:
- Involves giving employees more responsibility and involving them in
decision-making, making them feel valued and significant in the
organization.
- The opportunity to contribute to decision-making often serves as a
motivational factor, as employees recognize the impact of their
contributions on the business.
- Can be seen as a pathway to promotion, encouraging employees to invest
more in their roles and responsibilities.
- Disadvantages:
- Employees, when given decision-making powers, might make choices that
are not in the best interest of the business, posing a risk.
- Teamwork: Involves putting employees in groups where employees are encouraged to work
collaboratively with each other in order to fulfil a task.
- Advantages:
- Collaborative work in teams can stimulate employees, fostering a sense of
engagement and motivation as they work together towards common goals.
- Teamwork aligns with Maslow's theory, addressing social needs by creating
a sense of belonging and shared effort within the team.
- Disadvantages:
- The failure of a team can have widespread implications for the entire
organization, affecting productivity and outcomes.
- Issues within a team can negatively impact the organization, affecting overall
morale and productivity.
- Job enrichment (type of job enlargement): This is an attempt to give employees greater
responsibility and recognition by expanding their role in the production process; involves
giving an employee more work to do of a similar nature.
- Advantages:
- Expanding an employee's role in the production process provides them with
more recognition for their work, aligning with various motivation theories.
- The acknowledgment of their contributions can be a strong motivator,
enhancing job satisfaction and engagement.
- Disadvantages:
- Not all contexts or roles can accommodate job enrichment, especially for
low-skilled workers in repetitive jobs who may not find expanded roles
motivating.
- Job rotation (type of job enlargement): This involves an employee changing jobs and tasks
they do from time to time, in order to give them a greater sense of the whole production
process.
- Advantages:
- Allows employees to experience different tasks and departments, helping
them understand the significance of their daily tasks in the broader business
context.
- Disadvantages:
- Implementing job rotation might incur costs for the business, particularly in
terms of training employees for different roles and departments.
Motivation Theory:
Taylor:
- Employees are primarily motivated by money.
- Productivity can be improved by aligning output and efficiency targets with remuneration.
- Division of labour (scientific management): breaking down different aspects of a job or task
and assigning different people to each particular part of the work.
- Piece rate system: workers are paid a standard level of output and receive a higher rating
they exceed that level.
- Drawbacks:
- Ignores the non-physical contributions of workers.
- Hard to measure in some professions.
- Ignores non-financial factors that motivate people.
- Fails to acknowledge that workers can be innovative and independent.
- Entails monotonous tasks, leading to employee dissatisfaction.
- Sets clear goals for the workforce and the consequences of their work are
transparent.
- Gives workers a sense of target.
- Does not take into account individual differences.
- Views workers as machines with only financial needs.
- Needs at the bottom of the pyramid are the basic ones as they are concerned with survival.
- Once these are satisfied, the worker moves to the next level, and once a level is ‘passed’, the
needs on that level become less important.
- In practice, very few manage to reach the top of the pyramid, because in order to do so, all
other needs must be fully satisfied.
- Advantages:
- Based on the level an employee is on, business can see what rewards are suitable for
him.
- Workers feel like they are being taken care of, which increases productivity and
motivation.
- Disadvantages:
- Difficult for business to decide on a specific reward.
- Difficult to determine when a particular level of needs has been satisfied.
- Not feasible for all jobs to provide all levels of the hierarchy.
- The levels of the hierarchy are difficult to quantify.
- Freelance workers do not have many of these things, but can still be motivated and
successful.
- The model neglects to suggest what happens to people with all of these things, such
as Bill Gates.
Pink:
- Pink’s motivation theory relies on what psychologists call the ‘third drive’.
- This suggests that businesses need to stimulate the intrinsic motivation which occurs when
someone gets satisfaction from an activity itself, without threats or rewards from the
outside.
- He identified three factors of the self-determination theory that motivate people :
- Autonomy: workers need to be autonomous in order to be more motivated, which
means that businesses need to provide an environment that permits employees to
shape their own professional lives. This is done through flexibility of businesses;
flexibility on when, how, who and what their employees do.
- Mastery: businesses need to provide learning opportunities for their employees,
where they will be able to be innovative. Employees will gain mastery when they are
given tasks that matter to them and are neither too easy nor too difficult.
- Purpose: people are motivated when they are able to see benefits of their work. In
order to achieve this, businesses need to emphasise their purpose, and show the
workers that they contribute to this purpose, which will in turn increase their
motivation.
Selection:
- When selecting the right employee, the business must follow a process that fairly ensures
the correct candidate is recruited.
Training:
- After the candidate has been selected, they need to be trained:
- On-the-job Training:
- Training done while the employee is doing their normal job while at the
workplace.
- Ex: A senior employee helps the junior employee comprehend all the tasks
and acquire new skills needed to carry out the job efficiently.
- Advantages:
- Cost effective: using in-house specialists.
- Training is more relevant as it is specifically for the firm.
- Reduces disruption to daily operations as it is on site.
- Helps establish relationships and promote teamwork.
- The location is convenient for workers and trainers.
- Disadvantages:
- Trainees might learn inefficient or wrong practices if there isn't
consistent guidance and monitoring from the organization.
- Internal trainers may lack up to date training.
- Trainers cannot complete their own work whilst training new
workers.
- May be incomplete as not all necessary aspects or skills required for
the job are covered.
- Productivity may be low until all skills are learnt.
- Induction Training:
- Training provided to a new employee to ensure they are familiar with key
aspects of the business.
- This usually involves health and safety, understanding key policies and
procedures and learning to use basic systems.
- This is a type of on the job training.
- Advantages:
- Establishes expectations and good working habits from the start.
- Helps new workers understand the corporate culture.
- Speeds up settling in process.
- Employees feel confident in their new role, ensuring that they are
able to complete their role effectively from the start.
- Disadvantages:
- Can be time consuming.
- Key staff need to be freed from their duties.
- Information overload for new recruits.
- Induction can be lengthy in large firms.
- Off-the-job Training:
- Training that happens outside working hours, where the employees are
being trained away from the job.
- This could involve workshops, conferences etc.
- Advantages:
- Experts who may not exist internally are able to be used.
- A wider range of training can be provided.
- There are no distractions from colleagues at an offsite venue.
- Networking can take place, so employees can meet new people.
- Disadvantages:
- There is a potential loss of output whilst workers attend the offsite
training course.
- Hiring specialist trainers can be very expensive, and
transport/accommodation costs may add cost.
- It is debatable whether all skills are transferable to the business.
- Finding time for staff to get off work can be difficult.
Labour Turnover:
Labour Turnover:
- Refers to the proportion of employees who leave the business.
- Labour turnover is presented as a %.
- The labour turnover rate per time period is calculated by using the formula:
-
- Example:
- If a restaurant starts the year with 24 employees, and by the end of the year, 4 have
left, the labour turnover can be calculated by: (4/ 24) x 100 = 16.67%
- The remaining employees have been retained.
Practice questions:
1) A school has 90 teachers at the start of the year. 10 leave. What is the labour turnover for
the school?
(10/ 90) x 100 = 11.11%
2) A warehouse has 400 employees in various positions, throughout the year 63 employees
leave the business. What is the labour turnover for the warehouse?
(63/ 400) x 100 = 15.75%
3) Challenge: A company starts the year with 100 employees. Halfway through the year, they
employ another 100. By the end of the year, 20 employees leave. What is the labour
turnover?
(100 + 200) / 2 = 150 (average number of employees)
(20/ 150) x 100 = 13.33%
- Communication is conducted in a two-way manner so that the line manager and employee
are able to discuss performance targets and identify any areas for improvement.
- The appraiser also provides constructive feedback to the appraisee.
- To support the employee in their professional development, the appraisal process is also
used to recognise any training needs.
- It is common to conduct a performance review at least once a year.
- Typically, employees will set SMART targets that intend to accomplish as part of the
appraisal process:
- Specific
- Measurable
- Achievable
- Realistic
- Time bound.
Types of appraisals:
- Formative appraisal:
- Formative appraisals occur regularly, allowing employees to improve performance.
- Line managers provide feedback based on SMART targets, fostering ongoing
development and making adjustments to goals as needed.
- Advantages:
- Enables continuous improvement: As regular feedback allows employees to
make ongoing adjustments.
- Supports employee development: As it provides an opportunity for
managers to support employees with training and development needs
identified during formative appraisals.
- Allows for timely adjustments: As immediate feedback allows for timely
adjustments to goals and tasks.
- Disadvantages:
- May require more time and resources: As conducting regular formative
appraisals may require significant time and resources.
- Constant feedback might be perceived as scrutiny: As constant feedback
might be perceived as scrutiny, potentially affecting employee morale.
- Long-Term Measurement: May cause difficulty in measuring long-term
performance changes due to the ongoing nature of formative feedback.
- Example:
- The line manager providing feedback on an employee's progress in a specific
role or project, making modifications to targets as necessary.
- Summative Appraisal:
- Summative appraisals, in contrast to formative ones, are periodic and often
conducted annually.
- They involve making judgments on whether the employee has met agreed
standards, holding them accountable for their overall performance.
- Advantages:
- Comprehensive Overview: Summative appraisals provide a comprehensive
overview of the employee's performance over a set period.
- Decision-Making: Useful for decision-making processes, such as promotions
and bonuses.
- Clear Endpoint: Sets a clear endpoint for assessment, allowing for reflection
and planning for the future.
- Disadvantages:
- Limited Scope for Immediate Improvement: Since it is conducted
retrospectively, there is limited scope for immediate performance
improvement.
- Potential for Bias: The retrospective nature may introduce bias into the
evaluation process.
- Anxiety and Stress: Employees may experience anxiety and stress leading up
to the evaluation.
- Example:
- An annual performance review assessing whether the employee has met
expected standards and discussing areas for improvement.
- 360-Degree Feedback:
- 360-degree feedback involves gathering input from various sources, such as line
managers, co-workers, subordinates, and even customers.
- Self-ratings can be included, providing a holistic view of the employee's
effectiveness.
- Advantages:
- Diverse Perspectives: Gathers input from various sources, providing a more
well-rounded assessment.
- Collaborative Improvement: Encourages collaborative and team-oriented
improvement.
- Multiple Perspectives: Offers multiple perspectives on the employee’s
effectiveness and performance.
- Disadvantages:
- Complexity: Gathering feedback from multiple sources through
questionnaires, surveys, and interviews can be complex and time-
consuming.
- Potential for Bias: The inclusion of various perspectives may introduce biases
into the feedback.
- Trust Requirement: Requires a high level of trust in the process to ensure
honest and constructive feedback.
- Example:
- A manager receiving feedback from team members, peers, and superiors
through questionnaires, surveys, and interviews.
- Self-Appraisal:
- Self-appraisal involves employees reflecting on and evaluating their own
performance against pre-agreed standards.
- It encourages self-awareness and helps identify training and development needs.
- Advantages:
- Encourages Self-Reflection: Promotes self-reflection and personal
responsibility for performance.
- Alignment with Goals: Allows individuals to align personal goals with
organizational objectives.
- Enhances Self-Awareness: Contributes to improved self-awareness through
self-evaluation.
- Disadvantages:
- Potential for Bias: Self-appraisals may be subject to bias, as individuals may
overestimate or underestimate their performance.
- Lack of Objectivity: Lack of objectivity compared to external assessments.
- Skill Challenges: Employees may struggle with accurately assessing their own
performance due to a lack of self-assessment skills.
- Example:
- Employees rating themselves against key performance indicators, preparing
for discussions with their line manager.