C H A P T E R: S I X

Applied Performance Practices

6
McGraw-Hill Ryerson
2006 The McGraw-Hill Companies, Inc. All rights reserved.

MONEY
McShane/ Canadian OB 6e

2006 The McGraw-Hill Companies, Inc. All rights reserved.

1 Timothy 6:10

Money is a good servant but a bad master. Money is the root of all evil

McShane/ Canadian OB 6e

2006 The McGraw-Hill Companies, Inc. All rights reserved.

Start Up Questions
What would you feel in the following situations?

1. You dont have money to buy your dream gadget this Christmas.
2. Your family is suffering from financial difficulty and you are force to make both ends meet.

McShane/ Canadian OB 6e

2006 The McGraw-Hill Companies, Inc. All rights reserved.

Start up Question
What would you feel in the following situations? 3. How would you react if your salary has been delayed for several days? 4. What do you feel about your 13th month pay, bonuses, and other cash incentives?

McShane/ Canadian OB 6e

2006 The McGraw-Hill Companies, Inc. All rights reserved.

The given situations lead us to a truthful conclusion.

MONEY IS IMPORTANT TO ALL OF US!

McShane/ Canadian OB 6e

2006 The McGraw-Hill Companies, Inc. All rights reserved.

The Meaning of Money in the Workplace

Money and other financial rewards are a fundamental part of the employment relationship. Organizations distribute money and other benefits in order to align individual goals more closely with corporate objectives. Employees are compensated for their competencies, behaviors and performance.

McShane/ Canadian OB 6e

2006 The McGraw-Hill Companies, Inc. All rights reserved.

The Meaning of Money in the Workplace

Money affects our needs, our emotions, and our self-perception. Money is probably the most emotionally meaningful object in contemporary life: only food and sex are its close competitors as common carriers of such strong and diverse feelings, significance and strivings.

McShane/ Canadian OB 6e

2006 The McGraw-Hill Companies, Inc. All rights reserved.

Money and Employee Needs

Money is an important factors in satisfying individual needs.

Money is also a symbol of status.

Financial gain also symbolizes personal accomplishments Money is a way of keeping score of success. Compensation is one of the top three factors attracting individuals to work for an organization.
McShane/ Canadian OB 6e

2006 The McGraw-Hill Companies, Inc. All rights reserved.

Money Attitudes and Values

Money creates strong emotions and attitudes. Money generates a variety of emotions; most of it was negative such as anxiety, depression, anger, and helplessness. Money is associated with greed, avarice, and generosity. Money ethics. People with strong money ethics believe that money is not evil: that it is a symbol of achievement, respect and power; and that it should be budgeted carefully. Cultural values seem to influence attitudes toward money and a money ethics.
McShane/ Canadian OB 6e

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2006 The McGraw-Hill Companies, Inc. All rights reserved.

Money and Social Identity

People tend to define themselves in terms of their ownership and management of money. Some individuals see themselves as hoarders or worriers of money. Men are more likely than women to emphasize money in their self-concept.

McShane/ Canadian OB 6e

11

2006 The McGraw-Hill Companies, Inc. All rights reserved.

Types of Rewards in the Workplace

Money as the major type of workplace reward is equal to: 1. Seniority 2. Job status 3. Competencies 4. Performance
Corel Corp. With permission.

McShane/ Canadian OB 6e

12

2006 The McGraw-Hill Companies, Inc. All rights reserved.

Membership/Seniority Based Rewards

Fixed wages, seniority increases

Advantages

Guaranteed wages may attract job applicants Seniority-based rewards reduce turnover Doesnt motivate job performance Discourages poor performers from leaving May act as golden handcuffs

Disadvantages

McShane/ Canadian OB 6e

13

2006 The McGraw-Hill Companies, Inc. All rights reserved.

Job Status-Based Rewards

Includes job evaluation and status of employees Advantages:

Job evaluation tries to maintain pay equity Motivates competition for promotions
Disadvantages:

Employees exaggerate duties, hoard resources Focuses employees on own jobs, not customers Inconsistent with workplace flexibility
McShane/ Canadian OB 6e

14

2006 The McGraw-Hill Companies, Inc. All rights reserved.

Competency-Based Rewards
Pay increases with competencies acquired and demonstrated Skill-based pay

Pay increases with skill modules learned

Advantages

More flexible work force, better quality,

consistent with employability

Disadvantages

Potentially subjective, higher training costs

McShane/ Canadian OB 6e

15

2006 The McGraw-Hill Companies, Inc. All rights reserved.

Performance-Based Rewards
Organizational rewards Profit sharing Stock ownership Stock options Balanced scorecard

Team Bonuses rewards Gainsharing

Open-book

Individual Commissions rewards Piece rate

Bonuses

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2006 The McGraw-Hill Companies, Inc. All rights reserved.

Individual Reward
Individual Bonuses or Awards for accomplishing a specific task or performance goal. Commission Pierce Rate system reward employees based on number of units produced.

McShane/ Canadian OB 6e

17

2006 The McGraw-Hill Companies, Inc. All rights reserved.

Team Reward
Gainsharing Plan a reward system in which team members earn bonuses for reducing costs and increasing labor efficiency in their work process.

Open-book Management involves sharing financial information with employees and encouraging them to recommend ideas that improve those financial results.

McShane/ Canadian OB 6e

18

2006 The McGraw-Hill Companies, Inc. All rights reserved.

Organizational Reward
Profit Sharing a reward system that pays bonuses to employees based on the previous years level of corporate profits. Employee stock ownership plans a reward system that encourages employees to buy stock in the company.

Stock Options a reward system that gives employees the right to purchase company stock at a future date at a predetermined price. Balanced Scoreboard a reward system that pays bonuses for improved results on a composite of financial, customer, internal process and employee factors.
McShane/ Canadian OB 6e

19

2006 The McGraw-Hill Companies, Inc. All rights reserved.

Improving Reward Effectiveness

Link rewards to performance

Ensure rewards are relevant

Team rewards for interdependent jobs Ensure rewards are valued Watch out for unintended consequences
Corel Corp. With permission.

McShane/ Canadian OB 6e

20

2006 The McGraw-Hill Companies, Inc. All rights reserved.

Job Characteristics Model

Core Job Characteristics Critical Psychological States Outcomes

Skill variety Task identity Task significance Autonomy Feedback from job

Meaningfulness

Work motivation

Growth satisfaction
Responsibility Knowledge of results Individual differences General satisfaction Work effectiveness

McShane/ Canadian OB 6e

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2006 The McGraw-Hill Companies, Inc. All rights reserved.

job characteristics model a job design model that relates the motivational properties of jobs to specific personal and organizational consequences of those properties.
McShane/ Canadian OB 6e

22

2006 The McGraw-Hill Companies, Inc. All rights reserved.

Core Job Characteristics

Employees are more motivated and satisfied when jobs have higher levels of these characteristics. Skill Variety refers to the use of different skills and talents to complete a variety of work activities. Task Identity is the degree to which a job requires completion if a whole or identifiable piece of work, such as doing something from beginning to end, or where the way ones work fits into the whole product or service is easy to see. Task Significance is the degree to which the job has substantial impact on the organization and/or larger society. Autonomy jobs with high levels of autonomy provide freedom, independence and discretion in scheduling the work and determining the procedures to be used to complete the work. Job Feedback is the degree to which employees can tell how well they are doing based on direct sensory information from the job itself.
McShane/ Canadian OB 6e

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2006 The McGraw-Hill Companies, Inc. All rights reserved.

Critical Psychological States

The five core job characteristics affect employee motivation and satisfaction through three critical psychological states. Experienced meaningfulness the belief that ones work is worthwhile or important. Skill variety, task identity and task significance directly contribute to the jobs meaningfulness. Experienced responsibility work motivation and performance increase when employees feel personally accountable for the outcomes of their effort. Autonomy directly contributes to this feeling of experienced responsibility. Employees must be assigned control of their work environment to feel responsible for their successes and failures. Knowledge of results employees wants information about the consequences of their work effort. Knowledge of results can originate from co-workers, supervisors or clients.
McShane/ Canadian OB 6e

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2006 The McGraw-Hill Companies, Inc. All rights reserved.

Individual Differences
First Condition - Job design doesnt increase work motivation for everyone in every situation. Employees must have the required skills and knowledge to master the more challenging work. Otherwise, job design tends to increase stress and reduce job performance. Second condition - is that employees must be reasonably satisfied with their work environment (e.g., working conditions, job security, salaries) before job design affects work motivation. Third condition is that employees must have a strong growth needs, since improving the core job characteristics will have little motivational effect on people who are primarily focused on existence or relatedness needs.
McShane/ Canadian OB 6e

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2006 The McGraw-Hill Companies, Inc. All rights reserved.

-end-

Thanks for listening!

McShane/ Canadian OB 6e

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2006 The McGraw-Hill Companies, Inc. All rights reserved.

C H A P T E R: S I X

Applied Performance Practices

6
McGraw-Hill Ryerson
2006 The McGraw-Hill Companies, Inc. All rights reserved.