management, organizational policies & practices lecture 12 dr. amna yousaf phd (hrm) university...

Management, Organizational Policies & PracticesManagement, Organizational Policies & Practices

Lecture 12 Dr. Amna YousafPhD (HRM)

University of Twente, the Netherlands

Recap Lecture 11Recap Lecture 11

Reinforcement Theory Equity Theory Justice and Equity Theory Expectancy Theory Job Characteristics Model How can Jobs be Redesigned? Alternative Work Arrangements Conclusions

Motivation: From Concepts to Applications (2)Motivation: From Concepts to Applications (2)

Lecture 12

OutlineOutline

Employee Involvement– Participative Management– Representative Participation– Quality Circles

Linking Employee Involvement programs & Motivation Theories

Using Rewards to Motivate Employees What to Pay: establishing a Pay Structure How to Pay: Rewarding individual Employees

Through Variable-Pay Programs– Piece-Rate Pay– Merit Based Pay

© 2007 Prentice Hall Inc. All rights reserved.

OutlineOutline

– Bonuses– Skill Based Pay– Profit-sharing plans– Gain –sharing– Employee Stock Ownership Plans

Global Implications



What is Employee Involvement?What is Employee Involvement?

Employee Involvement Program

A participative process that uses the entire capacity of employees and is designed to encourage increased commitment to the organization’s success.


Examples of Employee Involvement ProgramsExamples of Employee Involvement Programs

Participative Management

A process in which subordinates share a significant degree of decision-making power with their immediate superiors.

MBO an Example


Examples of Employee Involvement Programs (cont’d)


Representative Participation

Workers participate in organizational decision making through a small group of representative employees.

Works CouncilsGroups of nominated or elected employees who must be consulted when management makes decisions involving personnel.

Board RepresentativeA form of representative participation; employees sit on a company’s board of directors and represent the interests of the firm’s employees.

Representative ParticipationRepresentative Participation

Does not enhance employee involvement– Representative employee’s involvement and

motivation may increase





Quality Circle

A work group of employees who meet regularly to discuss their quality problems, investigate causes, recommend solutions, and take corrective actions.

Mixed results of enhanced productivity

No effects on employee job satisfaction

Being discontinued – band-wagon by management

Limited employee involvement – one or two hours out of 40 hours of work


Linking EI Programs and Motivation TheoriesLinking EI Programs and Motivation Theories

Employee Employee Involvement Involvement

ProgramsPrograms

Employee Employee Involvement Involvement

ProgramsPrograms

Theory YTheory Y(Believing (Believing employees employees want to be want to be involved)involved)

Theory YTheory Y(Believing (Believing employees employees want to be want to be involved)involved)

Two-Factor Two-Factor TheoryTheory

((Intrinsic Intrinsic Motivation)Motivation)

Two-Factor Two-Factor TheoryTheory

((Intrinsic Intrinsic Motivation)Motivation)

ERG TheoryERG Theory((EmployeeEmployee

Needs)Needs)

ERG TheoryERG Theory((EmployeeEmployee

Needs)Needs)


Rewarding Employees: Four Aspects Rewarding Employees: Four Aspects

•What to Pay (Internal vs. external equity)

•How to Pay (e.g Piece rate, merit based, bonuses, profit sharing, gain sharing, ESOPs, skill-based pay)

•What Benefits to Offer (e.g.,Flexible benefits)

•How to Recognize Employees


What to pay: Setting pay structures can be complex to organization

Internal equity: – worth of job to organization usually established

through job evaluation External Equity:

– pay equity with reference to industry competitors

Best pay systems attains strategic balance Pay leaders versus less payers (Wal-Mart –

outsources to China) Pay more, get the best but what are the costs –

small firm case – trade offs© 2007 Prentice Hall Inc. All rights reserved.


How to Pay: Rewarding EmployeesHow to Pay: Rewarding Employees

Variable Pay Programs

A portion of an employee’s pay is based on some individual and/or organization measure of performance.

• Piece rate pay plans

• Profit sharing plans

• Gain sharing plans


Piece-rate Pay Plans– Workers are paid a fixed sum for each unit of

production completed.– No base salary– Not feasible for many jobs – footballer may not

be ready to get piece-rate pay package from his league tied to every win

• Can lead to unethical behaviors such as cheating – Example of Sears



Merit Based Pay– Unlike piece-rate pay plans which are linked to

objective outcomes; these are linked to individual performance – performance ratings

– Can be motivating if designed correctly otherwise can cause unfairness perceptions in employees

– Employers increasing use these systems and keep high differentials between high and low performers

– Can be an important means of goal achievement ; not just a way to change wages

– Accuracy depends on accuracy of performance ratings

– Pay raise pool fluctuates based on economic conditions – can be sometimes demotivating for top performers



Bonuses– For many jobs, bonuses important component of

overall pay– Net increasing to lower ranked jobs– Advantage is bonuses reward employees for

recent performance rather than past performance as in merit based pay

– Downside: employees may start viewing them only as pay; may not remain motivating



Skill-Based Pay PlansSkill-Based Pay Plans

Benefits of Skill-based Pay Plans:

1. Provides staffing flexibility.

2. Facilitates communication across the organization.

3. Lessens “protection of territory” behaviors.

4. Meets the needs of employees for advancement (without promotion).

5. Leads to performance improvements.

Benefits of Skill-based Pay Plans:

1. Provides staffing flexibility.

2. Facilitates communication across the organization.

3. Lessens “protection of territory” behaviors.

4. Meets the needs of employees for advancement (without promotion).

5. Leads to performance improvements.

Pay levels are based on how many skills employees have or how many jobs they can do.


Skill-Based Pay Plans (cont’d)Skill-Based Pay Plans (cont’d)

Drawbacks of Skill-based Pay Plans:

1. Lack of additional learning opportunities that will increase employee pay.

2. Continuing to pay employees for skills that have become obsolete.

3. Paying for skills which are of no immediate use to the organization.

4. Paying for a skill, not for the level of employee performance for the particular skill.

Drawbacks of Skill-based Pay Plans:

1. Lack of additional learning opportunities that will increase employee pay.

2. Continuing to pay employees for skills that have become obsolete.

3. Paying for skills which are of no immediate use to the organization.

4. Paying for a skill, not for the level of employee performance for the particular skill.


Linking Skill-based Plans and Motivation Theories

Linking Skill-based Plans and Motivation Theories

Skill Based Skill Based Pay PlansPay Plans

Skill Based Skill Based Pay PlansPay Plans

Reinforcement Reinforcement TheoryTheory

Reinforcement Reinforcement TheoryTheory

Equity Equity

Theory Theory

Equity Equity

Theory Theory

ERG Theory ERG Theory (Growth)(Growth)

ERG Theory ERG Theory (Growth)(Growth)

McClelland’s McClelland’s Need for Need for

AchievementAchievement

McClelland’s McClelland’s Need for Need for

AchievementAchievement


Profit-Sharing Plans Organization wide programs that distribute

compensation based on some established formula designed around a company’s profitability.– Can be direct case outlays or allocation of stock

options to top managers Gain Sharing An incentive plan in which improvements in

group productivity determine the total amount of money that is allocated.

In gain sharing rewards are tied to productivity unlike profit sharing so employees can receive awards even when company profits are not too high




Employee Stock Ownership Plans (ESOPs)

Company-established benefit plans in which employees acquire stock as part of their benefits at below market price.

Increase employee satisfaction and motivation, however links with performance not clear

Employees need have ownership feelings by keeping them updated on status of business and opportunity to exercise influence

Variable Pay Programs & MotivationVariable Pay Programs & Motivation

Profit-sharing programs and gain sharing programs reported to increased organizational performance, profitability, positive employee attitudes compared to organizations not having them– Claims by sociologists that monetizing

incentives undermines performance seem to be refuted by data

– Caution: Not every one responds alike to variable pay plans such as risk averse persons!



Intrinsic Motivation: Employee Recognition Programs

Intrinsic Motivation: Employee Recognition Programs

Intrinsic rewards: stimulate intrinsic motivation

– Can have long term effects

– Personal attention given to employee

– Approval & appreciation for a job well done

– Growing in popularity and usage

Benefits of programs

– Fulfill employees’ desire for recognition

– Inexpensive to implement – can start with a Thank you note

– Encourages repetition of desired behaviors

Drawbacks of programs

– Susceptible to manipulation by management for political motives especially where performance is not objective


E X H I B I T 7–2E X H I B I T 7–2

From the Wall Street Journal, October 21, 1997. Reprinted by permission of Cartoon Features Syndicate.


Global ImplicationsGlobal Implications

Job Characteristics Model and Job Enrichment– Model more applicable to individualistic culture

as is more individual oriented– Job enrichment strategies may not have same

effect on collectivist cultures– Caution: Conflicting findings – job involvement

seems to work well in Japan and Hungary as well!

Telecommuting– Data on US and Europe available but not with

rest of world: not tested on cultural dimensions

Global ImplicationsGlobal Implications

Variable pay– Do individual pay systems such as pay for

performance work well for individual cultures while gain sharing and profit sharing as group based rewards work well for collectivist cultures? No empirical answer!

Employee involvement Programs– Seem to work well in individualistic cultures

than collectivist cultures such as India where society is high power distance and accepts a high authority from managers!



Implications for ManagersImplications for Managers

In Order to Motivate Employees

– Recognize individual differences.

– Use goals and feedback.

– Allow employees to participate in decisions that affect them.

– Link rewards to performance.

– Check the system for equity.


Flexible benefits are recommended

most strongly by __________

Theory.

Check-Up: Motivation Applications

Expectancy theory suggests that individuals should be rewarded with something they value.


According to Expectancy Theory, a student

will not be motivated to attend class if s/he

doesn’t care about grades. What other kind

of application might be plausible for a

professor to implement as a reward theory in

class? Use models from this chapter to

discuss with a classmate and arrive at a

suggestion.

Check-Up: Motivation Applications

Thank You


management, organizational policies & practices lecture 12 dr. amna yousaf phd (hrm) university...

Documents

prentice hall

rewarding employees

individual employees

elected employees

firms employees

employee job satisfactionbeing

entire capacity of employees

pay structurehow