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Employee Motivation: Theory and practice

The job of a manager in the workplace is to get things done through employees. To do this the manager should be able to motivate employees. But that's easier said than done! Motivation practice and theory are difficult subjects, touching on several disciplines. In spite of enormous research, basic as well as applied, the subject of motivation is not clearly understood and more often than not poorly practiced. To understand motivation one must understand human nature itself. And there lies the problem! Human nature can be very simple, yet very complex too. An understanding and appreciation of this is a prerequisite to effective employee motivation in the workplace and therefore effective management and leadership. These articles on motivation theory and practice concentrate on various theories regarding human nature in general and motivation in particular. Included are articles on the practical aspects of motivation in the workplace and the research that has been undertaken in this field, notably by Douglas McGregor (theory y), Frederick Herzberg (two factor motivation hygiene theory,) Abraham Maslow (theory z, hierarchy of needs), Elton Mayo (Hawthorne Experiments) Chris Argyris Rensis Likert and David McClelland (achievement motivation.) Why study and apply employee motivation principles? Quite apart from the benefit and moral value of an altruistic approach to treating colleagues as human beings and respecting human dignity in all its forms, research and observations show that well motivated employees are more productive and creative. The inverse also holds true. The schematic below indicates the potential contribution the practical application of the principles this paper has on reducing work content in the organization.

Motivation is the key to performance improvement There is an old saying you can take a horse to the water but you cannot force it to drink; it will drink only if it's thirsty - so with people. They will do what they want to do or otherwise motivated to do. Whether it is to excel on the workshop floor or in the 'ivory tower' they must be motivated or driven to it, either by themselves or through external stimulus. Are they born with the self-motivation or drive? Yes and no. If no, they can be motivated, for motivation is a skill which can and must be learnt. This is essential for any business to survive and succeed. Performance is considered to be a function of ability and motivation, thus:

Job performance =f(ability)(motivation)

Ability in turn depends on education, experience and training and its improvement is a slow and long process. On the other hand motivation can be improved quickly. There are many options and an uninitiated manager may not even know where to start. As a guideline, there are broadly seven strategies for motivation.

Positive reinforcement / high expectations Effective discipline and punishment

Treating people fairly Satisfying employees needs Setting work related goals Restructuring jobs Base rewards on job performance

These are the basic strategies, though the mix in the final 'recipe' will vary from workplace situation to situation. Essentially, there is a gap between an individuals actual state and some desired state and the manager tries to reduce this gap. Motivation is, in effect, a means to reduce and manipulate this gap. It is inducing others in a specific way towards goals specifically stated by the motivator. Naturally, these goals as also the motivation system must conform to the corporate policy of the organization. The motivational system must be tailored to the situation and to the organization. In one of the most elaborate studies on employee motivation, involving 31,000 men and 13,000 women, the Minneapolis Gas Company sought to determine what their potential employees desire most from a job. This study was carried out during a 20 year period from 1945 to 1965 and was quite revealing. The ratings for the various factors differed only slightly between men and women, but both groups considered security as the highest rated factor. The next three factors were;

advancement type of work company - proud to work for

Surprisingly, factors such as pay, benefits and working conditions were given a low rating by both groups. So after all, and contrary to common belief, money is not the prime motivator. (Though this should not be regarded as a signal to reward employees poorly or unfairly.)

Motivation theorists and their theories (1 of 2)


Although the process of management is as old as history, scientific management as we know it today is basically a twentieth century phenomenon. Also, as in some other fields, practice has been far ahead of theory. This is still true in the field of management, contrary to the situation in some of the pure sciences. For instance, Albert Einstein, formulates a theory, which is later proved by decades of intensive research and experimentation. Not so in the field of management. In fact this field has been so devoid of real fundamental work so far, that Herbert A. Simon is the first management theoretician to win the Nobel Prize for Economics in 1978. His contribution itself gives a clue to the difficulty, bordering on impossibility, of real fundamental work in this field concerned with people. In order to arrive at a correct decision, the manager must have all the information necessary relevant to the various factors and all the time in the world to analyze the same.

This is seldom, if ever, the case. Both the information available and the time at the managers disposal are limited, but he or she must make a decision. And the decision is, therefore, not the optimum one but a 'satisficing' one - in effect, a satisfactory compromise under the real conditions prevailing in the management 'arena'. Traditional theory 'X' This can best be ascribed to Sigmund Freud who was no lover of people, and was far from being optimistic. Theory X assumes that people are lazy; they hate work to the extent that they avoid it; they have no ambition, take no initiative and avoid taking any responsibility; all they want is security, and to get them to do any work, they must be rewarded, coerced, intimidated and punished. This is the so-called 'stick and carrot' philosophy of management. If this theory were valid, managers will have to constantly police their staff, whom they cannot trust and who will refuse to cooperate. In such an oppressive and frustrating atmosphere, both for the manager and the managed, there is no possibility of any achievement or any creative work. But fortunately, as we know, this is not the case. Theory 'Y' - Douglas McGregor This is in sharp contrast to theory 'X'. McGregor believed that people want to learn and that work is their natural activity to the extent that they develop self-discipline and self-development. They see their reward not so much in cash payments as in the freedom to do difficult and challenging work by themselves. The managers job is to 'dovetail' the human wish for self-development into the organizations need for maximum productive efficiency. The basic objectives of both are therefore met and with imagination and sincerity, the enormous potential can be tapped. Does it sound too good to be true? It could be construed, by some, that Theory 'Y' management is soft and slack. This is not true and the proof is in the 'pudding', for it has already proved its worth in the USA and elsewhere. For best results, the persons must be carefully selected to form a homogeneous group. A good leader of such a group may conveniently 'absent' from group meetings so they can discuss the matters freely and help select and 'groom' a new leader. The leader does no longer hanker after power, lets people develop freely, and may even (it is hoped) enjoy watching the development and actualization of people, as if, by themselves. Everyone, and most of all the organization, gains as a result. Theory 'Z' - Abraham Maslow This is a refreshing change from the theory X of Freud, by a fellow psychologist, Abraham Maslow. Maslow totally rejects the dark and dingy Freudian basement and takes us out into the fresh, open, sunny and cheerful atmosphere. He is the main founder of the humanistic school or the third force which holds that all the good qualities are inherent in people, at least, at birth, although later they are gradually lost. Maslow's central theme revolves around the meaning and significance of human work and seems to epitomize Voltaire's observation in Candide, 'work banishes the three great evils -boredom, vice and poverty'. The great sage Yajnavalkya explains in the Brihadaranyaka Upanishad that by

good works a man becomes holy, by evil works evil. A mans personality is the sum total of his works and that only his works survive a man at death. This is perhaps the essence of Maslow's hierarchy of needs theory, as it is more commonly know. Maslow's major works include the standard textbook (in collaboration with Mittlemann), Principles of Abnormal Psychology (1941), a seminal paper, 'A Theory of Human Motivation' (1943) and the book, Eupsychian Management (pronounced yew-sigh-keyan) published in 1965. Maslow's theory of human motivation is, in fact, the basis of McGregor's theory 'Y' briefly described above. The basic human needs, according to Maslow, are:

physiological needs (Lowest) safety needs; love needs; esteem needs; and self-actualization needs (Highest)

Mans behavior is seen as dominated by his unsatisfied needs and he is a 'perpetually wanting animal', for when one need is satisfied he aspires for the next higher one. This is, therefore, seen as an ongoing activity, in which the man is totally absorbed in order to attain perfection through self-development. The highest state of self-actualization is characterized by integrity, responsibility, magnanimity, simplicity and naturalness. Self-actualizers focus on problems external to themselves. His prescription for human salvation is simple, but not easy: 'Hard work and total commitment to doing well the job that fate or personal destiny calls you to do, or any important job that "calls for" doing'. Maslow has had his share of critics, but he has been able to achieve a refreshing synthesis of divergent and influential philosophies of:

Marx - economic and physical needs; Freud - physical and love needs; Adler - esteem needs; Goldstein - self-actualization.

Frederick Herzberg - Hygiene / Motivation Theory This is based on analysis of the interviews of 200 engineers and accountants in the Pittsburgh area in the USA. According to this theory, people work first and foremost in their own selfenlightened interest, for they are truly happy and mentally healthy through work accomplishment. Peoples needs are of two types:

Animal Needs (hygiene factors)


Supervision Interpersonal relations Working conditions Salary

Human Needs (motivators)


Recognition Work Responsibility Advancement

Unsatisfactory hygiene factors can act as de-motivators, but if satisfactory, their motivational effect is limited. The psychology of motivation is quite complex and Herzberg has exploded several myths about motivators such as:

shorter working week; increasing wages; fringe benefits; sensitivity / human relations training; communication.

As typical examples, saying 'please' to shop-floor workers does not motivate them to work hard, and telling them about the performance of the company may even antagonize them more. Herzberg regards these also as hygiene factors, which, if satisfactory, satisfy animal needs but not human needs. Chris Argyris According to Argyris, organization needs to be redesigned for a fuller utilization of the most precious resource, the workers, in particular their psychological energy. The pyramidal structure will be relegated to the background, and decisions will be taken by small groups rather than by a single boss. Satisfaction in work will be more valued than material rewards. Work should be restructured in order to enable individuals to develop to the fullest extent. At the same time work will become more meaningful and challenging through self-motivation. Rensis Likert Likert identified four different styles of management:

exploitative-authoritative; benevolent-authoritative; consultative; participative.

The participative system was found to be the most effective in that it satisfies the whole range of human needs. Major decisions are taken by groups themselves and this results in achieving high targets and excellent productivity. There is complete trust within the group and the sense of participation leads to a high degree of motivation. Fred Luthans Luthans advocates the so-called 'contingency approach' on the basis that certain practices work better than others for certain people and certain jobs. As an example, rigid, clearly defined jobs, authoritative leadership and tight controls lead in some cases to high productivity and satisfaction among workers. In some other cases just the opposite seems to work. It is necessary, therefore, to adapt the leadership style to the particular group of workers and the specific job in hand. Victor Vroom Vroom's 'expectancy theory' is an extension of the 'contingency approach'. The leadership style should be 'tailored' to the particular situation and to the particular group. In some cases it appears best for the boss to decide and in others the group arrives at a consensus. An individual should also be rewarded with what he or she perceives as important rather than what the manager perceives. For example, one individual may value a salary increase, whereas another may, instead, value promotion. This theory contributes an insight into the study of employee motivation by explaining how individual goals influence individual performance. We have discussed above only a selection of the motivation theories and thoughts of the various proponents of the human behavior school of management. Not included here are, among others, the thoughts of:

Seebohm Rowntree - labor participation in management; Elton Mayo - the Hawthorne Experiments; Kurt Lewin - group dynamics; force field theory; David McClelland - achievement motivation; George Humans - the human group; William Whyte - the organization man.

What does it all add up to? Back to 'square one'? Yes, indeed, the overall picture is certainly confusing. This is not surprising, for the human nature and human mind defy a clear-cut model, mathematical or otherwise. In some of the theories and thoughts presented, however, one can see some 'glimpses' of the person and how, perhaps, he or she could be motivated. This is rewarding in itself. But, as noted earlier, practice has been ahead of theory in this field, so let us now move to the practical side of management of human behavior and motivation in the workplace.

Application of employee motivation theory to the workplace


Management literature is replete with actual case histories of what does and what does not motivate people. Presented here is a tentative initial broad selection of the various practices that have been tried in order to draw lessons for the future.
'Stick' or 'carrot' approach?

The traditional Victorian style of strict discipline and punishment has not only failed to deliver the goods, but it has also left a mood of discontent amongst the "working class". Punishment appears to have produced negative rather than positive results and has increased the hostility between 'them' (the management) and 'us' (the workers). In contrast to this, the 'carrot' approach, involving approval, praise and recognition of effort has markedly improved the work atmosphere, leading to more productive work places and giving workers greater job satisfaction.
Manager's motivation 'toolkit'

The manager's main task is to develop a productive work place, with and through those he or she is in charge of. The manager should motivate his or her team, both individually and collectively so that a productive work place is maintained and developed and at the same time employees derive satisfaction from their jobs. This may appear somewhat contradictory, but it seems to work. The main tools in the manager's kitbag for motivating the team are:

approval, praise and recognition trust, respect and high expectations loyalty, given that it may be received removing organizational barriers that stand in the way of individual and group performance (smooth business processes, systems, methods and resources - see outline team building program) job enrichment good communications financial incentives

These are arranged in order of importance and it is interesting to note that cash is way down the ladder of motivators. Let's look at a couple of examples taken from real life situations. The Swedish shipbuilding company, Kockums, turned a 15 million dollar loss into a 100 million dollar profit in the course of ten years due entirely to a changed perception of the workforce brought about by better motivation. At Western Electric there was a dramatic improvement in output after the supervisors and managers started taking greater interest in their employees.

Don't coerce - persuade!

Persuasion is far more powerful than coercion, just as the pen is mightier than the sword. Managers have a much better chance of success if they use persuasion rather than coercion. The former builds morale, initiative and motivation, whilst the latter quite effectively kills such qualities. The three basic components in persuasion are:

suggest; play on the person's sentiments; and appeal to logic.

Once convinced, the person is so motivated as to deliver the 'goods'. The manager will have achieved the goal quietly, gently and with the minimum of effort. It is, in effect, an effortless achievement. There has been a considerable amount of research into persuasion / motivation in the field of advertising and marketing. The research is entirely of the applied type, which can and has been used to great practical advantage. Some of the findings in this field were first published in the fifties in a book with the title, The Hidden Persuaders, which became a bestseller. More contemporary 'persuaders' used by advertising and marketing people include:

Faster talk is found to be more effective, since it is remembered better. Brain emits fast beta waves when a person is really interested in a particular presentation. These waves can be detected by an instrument. Subliminal approach using short duration presentation, whereby the message is transmitted below the level of awareness.

Can these findings be used in actual work conditions? AT&T (The American Telephone and Telegraph Co.,) recognizing the importance of hidden needs, at one time succeeded in promoting long distance calls by use of the simple phrase: 'Reach out, reach out and touch someone'. Managers will need to adapt this persuasion / motivation technique to their own situation. Job satisfaction - is there a trend? This is the title of a study carried out by the US Department of Labor among 1500 workers, who were asked to rate the job factors, from a list of 23, which they considered important starting from the most important factor. Their findings (Sanzotta (1977)) are contained in the table below.
Job Satisfaction Findings White-collar workers Blue-collar workers

Job Satisfaction Findings A. Interesting work A. Good pay

B. Opportunities for development B. Enough help and resources C. Enough information D. Enough authority E. Enough help and resources F. Friendly, helpful coworkers G. See results of own efforts H. Competent supervision C. Job security D. Enough information E. Interesting work F. Friendly, helpful co-workers G.Clearly defined responsibilities H.See results of own work

I. Clearly defined responsibilities I. Enough Authority J. Good pay J. Competent supervision

It is interesting that out of the 23 job factors listed for the survey, yet with the exception of two items (white-collar workers' choice (B) and blue-collar workers' choice (C)) groups selected the same top ten factors, although with different rankings. It is significant that good pay was considered as the most important factor by the blue-collar workers, but it ranked as the least important for white-collar workers.
Individualize motivation policies

It is well known that individual behavior is intensely personal and unique, yet companies seek to use the same policies to motivate everyone. This is mainly for convenience and ease compared to catering for individual oddities (Lindstone (1978)). 'Tailoring' the policy to the needs of each individual is difficult but is far more effective and can pay handsome dividends. Fairness, decisiveness, giving praise and constructive criticism can be more effective than money in the matter of motivation. Leadership is considered synonymous (Tack (1979)) with motivation, and the best form of leadership is designated as SAL, situation adaptable leadership. In this style of leadership, one is never surprised or shocked, leadership must begin with the chief executive and it is more a matter of adaptation than of imparting knowledge. Ultimately, it is the leadership quality which leads to the success of a company through team building and motivating its people.

'The one-minute manager'

A contemporary bestseller (Blanchard & Johnson (1983)) aimed at managers who seek to make star performers of their subordinates. To start with, the manager sets a goal, e.g. one page read in one minute, and it is seen to be achieved by 'one minute' of praising or reprimand as the case may be. But to be effective, these must be given (a) promptly, (b) in specific terms, and the behavior, rather than the person, should be praised or reprimanded. The concept is basic and it makes sense, although the book seeks to 'dramatize' it. 'One minute' praising is seen to be the motivating force. Everyone is considered a winner, though some people are disguised as losers, and the manager is extolled not to be fooled by such appearances.
'Lessons from America's Best-run Companies'

Another bestseller, In Search of Excellence (Peters & Waterman (1982)). Several criteria, including analysis of annual reports and in-depth interviews, were used to pick 14 'model excellent companies' out of an initial sample of 62 companies. As expected, most of the action in high-performing companies revolved around its people, their success being ascribed to:

productivity through people; extraordinary performance from ordinary employees; treating people decently.

Personnel function and in particular leadership were considered the most critical components. If the leaders in an organization can create and sustain an environment in which all employees are motivated, the overall performance is bound to be good. The three essentials for creating such an environment are:

fairness; job security; and involvement.

Of all the resources available, the human resource is clearly the most significant, but also the most difficult to manage. Excellence can only be achieved through excellent performance of every person, rather than by the high-pitched performance of a few individuals. And motivation is, undoubtedly, the crux. Conclusion There is no simple answer to the question of how to motivate people. Can money motivate? Yes, but money alone is not enough, though it does help. We have discussed some of the pertinent theories bearing on human motivation and this is balanced by some of the practical factors which can lead to excellence. Human resource remains the focal point and leadership the critical component, and motivation has to be 'tailored' to each individual. The next section deals with an important mode of motivation, namely financial aspects of rewarding employees.

Employee Rewards
Introduction The previous section dealt with motivation theory and practice. There is no doubt that motivation is the crux for good performance, but there is no clear cut answer to the question of how to motivate. The previous pages gave a glimpse of the answer through various theories and practices. Money is a factor in motivating people and this section concentrates on this. Employee reward systems are discussed in general and later in specifics in terms of payment by results. Various schemes for financial motivation are also described.
Money is important!

This is, perhaps, saying the obvious. But it still needs to be said, for a perusal of the previous section may give the impression to the contrary, at least judging from Maslow's concept. Refreshing as it is, if the theory was completely valid then, at least in affluent countries, economic incentives should have lost all their force. This we know is not correct. According to Peter Drucker (1974) 'there is not one shred of evidence for the alleged turning away from material rewards... Antimaterialism is a myth, no matter how much it is extolled.' In fact, they are taken so much for granted that their denial may act as a de-motivator. 'Economic incentives are becoming rights rather than rewards.' There is no doubt that we live in a money-motivated world. Any amount of human relations cannot compensate for a lack of monetary reward. If the reward is right, good human relations will give that extra zest to a team, motivating them to give of their best efforts. Insufficient monetary reward cannot be compensated by good human relations. Even dedicated footballers do not think of the honour of playing for England, they merely pay 'lip service' to it; the financial rewards of playing for their clubs far exceed those recieved from playing from their country. Cricketers and rugby players no longer play for their own country but opt for the 'highest bidder'. Professional tennis players have refused to play at Wimbledon, the 'Mecca' of lawn tennis, because the rewards were not attractive. It is no different in the industrial world. Strikes for better salary and rewards do still occur. All this despite the claim of psychologists that security is the prime need of a person, as indicated in the previous section. Has the sense of values changed with time? But we are not concerned here with the philosophical angle, but with hard facts of life in a commercial world. Self-motivation can go only so far and it needs to be constantly reinforced by rewards. In particular, merit must be measured and rewarded regularly, if it is to be encouraged and sustained. The 'gold banana' in Foxboro has its origin in just an ordinary banana which one of the

pioneers could muster on the spur of the moment when he discovered extraordinary performance by one of the employees (see next section.)

Employee rewards
Motivating executives We discuss this subject separately, since there is an indication from various surveys (see previous section) that the blue-collar and white-collar workers do not attach the same importance to financial incentives. This is probably more due to differing value system of the two, rather than the importance each attaches to the money per se. Properly used, money can be a motivating factor, but little money may have no effect (Crystal (1970)). To achieve motivation of executives, therefore:

reward should be meaningful; and reward should vary with performance.

The concept is simple, but its implementation is not easy. However, the job is well worth trying. To be effective, the reward should be 'tailored' to each individual, but only as part of the total compensation concept. It is essential (Moore (1968)) to develop an overall program within which each compensation package must be individualized.
Executive compensation elements

There is also need for constant search of new ideas in this respect. The essentials of an effective company-wide executive compensation scheme are: sound salary-base structure, several fundamental compensation devices and considerable flexibility in its application. The five basic elements (Ellig (1982)) of executive compensation are:

salary, short-term incentives, long-term incentives, employee benefits and perquisites.

Any plan for executives should take into account the following factors:

Executives perceive others as working less and paid more. Appearance of a reward as important a factor as the reward itself. Flexibility, but not at the expense of discretion. Performance rating should support the pay action. Correcting one inequity may lead to yet another. A decision once announced is difficult to modify.

An arithmetic increase in the number of people involved results in a geometric increase in the time required to reach agreement.

Motivating for high performance can cost a lot of money. Not everyone can be motivated by money alone, however much. Incentive pay plans should be designed (Ivancevich (1983)) not only to reward good performance but also to minimize the negative side-effects, such as conflict and grievance. At times it is difficult to develop a valid, equitable and acceptable means of performance. Many pay plans fail because of either not being suited to the particular situation or because of poor implementation. It is essential to consider the following aspects before designing a pay plan to motivate performance:

preference of individual employees; size of pay rewards for high performance; method of motivating individual job performance; subjective

We have pointed out earlier that for effective and sustained motivation, the reward must be prompt and immediate. The example of Foxboro has been quoted. In its early days, the company's very survival depended on technical innovation. Late one evening (Peters & Waterman (1982)) a scientist walked into the president's office with a working prototype. The president was dumbfounded by the elegance of the solution and sought to reward him immediately and on the spot. Rummaging through the drawers of his desk, all he could find was a banana and this had to suffice. This was the forerunner of the 'gold banana' concept, a very apt and fitting reward. Likewise, Thomas Watson Snr. had made a practice of writing out a check on the spot for any unusual achievement that he observed.
Executive pay - a caution

However, we must introduce a note of caution. There is a connection (White (1973)) between executive pay and company size, in terms of turnover or number of employees, but no connection between executive pay and improvement in profitability - the bigger the company, the higher the pay, but efficiency is not necessarily higher. The higher salary is probably because of a larger number of levels in big companies. Of course, with the large number of variables involved, it is difficult to correlate any two isolated factors, such as executive pay and overall company efficiency. There should be a direct correlation, but perhaps the yardsticks available for this purpose are inadequate to establish it. Let us, however, reiterate that individual executives have different senses of values, of which money is one, and an important one at that. No reward other than money is so flexible, so measurable or so controllable. But in using financial motivation, the companies must be clear on what they wish to achieve, then define what managers are expected to contribute towards the objectives and finally ensure that financial reward is linked to managerial performance.

Employee rewards

Performance related pay Reward can act as the 'catalyst' for improved performance and better productivity. But reward, as such, is not enough and in any case it is not a substitute for good management. Rather, it is a part of management. Certain basic criteria are essential for rewards to be effective. These include:

Reward should be quick. Reward should be significant. The goals and rewards must be; known, understandable, and attainable. Reward must be distinctly and directly related to performance. Reward should be irrevocable. Reward should be compatible with job measurement.

If the reward plan is seen to be unfair and unrealistic, for example promotion on the basis of seniority or favoritism, it may have a definitely negative effect as a motivator. For rewards to be effective, they have to be generous and significant as noted above, hence they must be structured to attain a proper balance of motivating people to purpose and at optimum effort. Rewards are generally reckoned to improve productivity by somewhere of the order of 20 to 30 per cent. This is nearly twice as much as that attained by goal-setting or job-redesign. But each incentive or reward system is likely to have value under certain conditions only. Hence to be effective, the rewards must be 'tailored' and changed to suit the specific conditions. There is no magic formula for all situations and at all times. Productivity is usually but erroneously associated only with the workshop floor. But total productivity which ultimately determines the profitability of the entire organization is the sum total of the productivity at various levels right up to the CEO. For if the workers are not given the right materials at the right place and at the right time, their productivity will suffer due to no fault of theirs. The manager, therefore, plays a vital role in the productivity of the workers and team. One can even go as far to say that productivity is the only reason for the existence of the manager. Individually the manager may be considered nonproductive, in that he or she does not contribute directly to the production, but is responsible for integrating the work of his or her team into a total productivity effort, Thus, a manager can increase productivity indirectly by aiding to produce more, and here too, financial motivation plays a major role.
Reward systems

The financial rewards are basically of three types:


profit sharing; job evaluation; and merit rating.

Profit sharing Profit sharing could be on a macro basis or on a micro basis. The former relates to the entire company as a whole and the latter to a particular section or group dealing with a particular activity and/or product. On a macro level, it would be difficult to identify and reward outstanding performance. This is possible on a micro level by treating the particular activity as a cost and profit center by itself. This is easier said than done, since overheads and other common services have to be charged and this cannot be done completely objectively. The cost allocation in such cases is somewhat arbitrary and the profit will therefore not be a true reflection of the performance of that particular group or activity. Job evaluation In case of job evaluation, the various component factors have to be isolated and evaluated for purposes of inter-job comparison. Each factor is assigned a rating on the basis of a scale agreed beforehand by the union and the management joint committee. The total rating for each job then forms the basis of wage structure. However, there must be a base level, representing, in effect, the 'minimum wage', depending on the nature of work and the geographical area. In some cases and in some countries these are stipulated by law. A typical, though somewhat broad, list of job factors is as follows:

working environment; physical characteristics; mental characteristics; extent of responsibility; training and experience.

In case of managers, the factors are:


responsibility; expertise; human relations.

Merit rating Merit rating has been used as an indicator of performance. Each employee is rated, typically as excellent, good, average or poor, in respect of the following abilities:

communication; human relations, including leadership and motivation; intelligence; judgment; knowledge.

The rating, unfortunately, tends to be carried out purely mechanically and it carries a heavy bias of the rater who may be too lenient, may not be objective and may also have favorites or otherwise in the group being rated.

Employee rewards
The Glacier Project This relates to a major scientific investigation in a real life situation. The Glacier Metal Company (UK) was the largest manufacturer of plain bearings in Europe employing some 4500 persons in six factories. This was a unique experiment, commercially successful and probably without a parallel.
Task Approach Concept

The project began in 1948 with the assistance of the Tavistock Institute of Human Relations and it sought to provide novel answers to baffling problems in industrial organizations. Simply stated, once people get a job, they begin to lose interest in the work, hate their firm and soon organize themselves in order to pressurize the firm for higher wages. The Glacier project used the task approach concept, under which the task is carefully analyzed and roles clearly defined in order to provide scope for peoples effective participation in the fulfilment of companies objective. Work is seen to have two components:

prescribed; and discretionary.

The latter is more difficult of the two. A supervisor, for example, has the discretion in matters of priorities, allotment of work and development of his or her department. These elements determine the extent of responsibility and are the basis of the theory of equitable payment developed by the renowned psychoanalyst, Elliott Jaques. According to this, wages should be related to the responsibility involved and this in turn depends on the discretionary elements. Jaques developed a technique for measuring the time-span for discretion for different types of work and formulated a scale of equitable earnings for a laborer, machine operator, supervisor and engineer. The Glacier model is far more comprehensive, but for our present purpose the quantification of wage differential serves as a motivator for better performance.

Employee rewards
Payment by results One of the earliest and best examples of this is the Rucker and Scanlon plans introduced in the USA in the depression of the 1930s. Joseph Scanlon was a union officer in the Penn Steel Mill which, as a result of the depression, was on the brink of extinction.

The aim of the plan was to reduce waste and increase efficiency with consequent increase of productivity and profits. The savings and surplus resulting from implementation of the suggestions of the group are shared. For equitable distribution, a committee has to administer the plan and the company has to disclose (McBeath (1974)) a considerable amount of financial data and be also prepared to share profits.
Development of the concept of payment by results

As a result the plan has not always been successful. In a survey (Gruneberg & Oborne (1982)) of 44 cases, 30 were reported to be successful. Thus success has been achieved in some companies and in some situations. But the concept is sound. The plan gives the participants a real sense of participation and self-esteem, and the group cohesion and motivation are increased in anticipation of the reward. Other methods of payment by results include:

time saved; piecework; daily work measurement; productivity index; added value.

In each case, the savings or increased production are quantified in monetary terms and sought to be shared amongst the concerned people. Earlier schemes were based on individual effort which could be appropriately rewarded. However, modern technology and production methods are quite often based on a team approach, hence new schemes for payment by results have to be tried and implemented, if found effective. In this case individuals do not get rewarded as a result of their own effort and it is the group performance which counts. This requires a change of attitude of the workers, as also of the management. Like the Scanlon plan, the management needs to be prepared to discuss openly with the workers / unions the real change / improvement in the relevant indices and this requires disclosure of otherwise confidential financial and production data. In the long run, such an open attitude will benefit both.
Which scheme is best?

There is no such scheme! Each situation must be studied in depth and a suitable scheme 'tailored' for the specific situation. Also important is the history and culture of the organisation concerned. Anything radically different and without active participation of all concerned is bound to fail. It is advisable also not to introduce drastic changes suddenly. The system must be properly formulated and after full and frank discussion with the concerned people tried out on a 'mini' scale and refined in the light of the experience gained.

The main factors involved in selection of a suitable scheme are:


micro versus macro level; problems of implementation; and maintenance over a sustained period.

The micro versus macro aspect has been briefly touched on earlier in this section. Both have their pros and cons and an ideal system may well be a combination of the two. It is good to reward individual performance since it could act as an instant motivator. On the other hand certain benefits result only from a group action and therefore must be shared among the entire group or even across the entire company. Implementation of any scheme is the most important phase and it should not be rushed through. Sufficient time should be allowed for discussion and suggestions from the concerned group. At this stage all problems that may arise during implementation stage cannot be foreseen, but some of the obvious ones certainly can be anticipated. Once implemented, both sides should be willing to modify the scheme in the light of the experience gained. There should be no hesitation to refine the scheme until found completely satisfactory. It will require full cooperation and complete honesty.
Conclusions

Money is certainly a motivator and a major one at that. Success of companies such as of Microsoft, IBM and other such tech companies is certainly, at least to some extent, a result of such motivation. There are, of course, other factors particularly job satisfaction as shown in the previous section. Rewarding employees financially does improve levels of employee motivation and thus improves productivity, which ultimately shows up in the 'bottom line', and part of the increased profits must be circulated back to the workforce responsible for it. Some of the schemes for reward systems and payment by results have are briefly discussed. The novel Glacier project and the Scanlon plan are briefly described. There is no such thing as the 'best scheme'. It must be formulated and 'tailored' to each specific case.

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