Chapter 10

Managing
Employee
Motivation and
Performance
 Learning Objectives
After studying this chapter, you should be able to:
1. Characterize the nature of motivation.
2. Identify and describe the major content perspectives
on motivation.
3. Identify and describe the major process perspectives
on motivation.
4. Describe reinforcement perspectives on motivation.
5. Identify and describe popular motivational strategies.
6. Describe the role of organizational reward systems in
motivation.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 2

 Chapter Outline
• The Nature of Motivation
• Content Perspectives on Motivation
– The Need Hierarchy Approach
– The Two-Factor Theory
– Individual Human Needs
• Process Perspectives on Motivation
– Expectancy Theory
– Equity Theory
– Goal-Setting Theory

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 3

 Chapter Outline (cont’d)
• Reinforcement Perspectives on Motivation
– Kinds of Reinforcement in Organizations
– Providing Reinforcement in Organizations
• Popular Motivational Strategies
– Empowerment and Participation
– Alternative Forms of Work Arrangements
• Using Reward Systems to Motivate Performance
– Merit Reward Systems
– Incentive Reward Systems
– Team and Group Incentive Reward Systems
– Executive Compensation
– New Approaches to Performance-based Rewards
Copyright © Houghton Mifflin Company. All rights reserved. 10 | 4
 The Nature of Motivation
• Motivation
– The set of forces that cause people to behave in
certain ways.
• The goal of managers is to maximize desired
behaviors and minimize undesirable behaviors.
• Determinants of Individual Performance
– Motivation
• The desire to do the job.
– Ability
• The capability to do the job.
– Work environment
• The resources needed to do the job.
Copyright © Houghton Mifflin Company. All rights reserved. 10 | 5
 Figure 10.1 The Motivation Framework

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 6

 Content Perspectives on Motivation
• Content Perspectives
– Focus on needs and deficiencies of individuals
– Are approaches to motivation that try to answer the
question, “What factors in the workplace motivate
people?”
• Content Perspectives of Motivation
– Maslow’s Hierarchy of Needs
– Herzberg’s Two-Factor Theory
– McClelland’s Achievement, Power, and Affiliation
Needs

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 7

 The Need Hierarchy
Approach (Maslow)
• People must, in a hierarchical order, satisfy five
needs:
– Physiological needs for basic survival and biological
function.
– Security needs for a safe physical and emotional
environment.
– Belongingness needs for love and affection.
– Esteem needs for positive self-image/self-respect
and recognition and respect from others.
– Self-actualization needs for realizing one’s potential
for personal growth and development.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 8

 Figure 10.2 Maslow’s
Hierarchy of Needs

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 9

 The Need Hierarchy Approach
• Weaknesses of Maslow’s Theory
– Five levels of need are not always present.
– Ordering or importance of needs is not always the
same.
– Cultural differences produce differences in need
categories and hierarchical orderings.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 10

 The Two-Factor Theory (Herzberg)
• An individual’s satisfaction and dissatisfaction is
influenced by two independent sets of factors—
motivation factors and hygiene factors.
• Theory assumes that job satisfaction and job
dissatisfaction are on two distinct continuums:
– Motivational factors (work content) are on a
continuum that ranges from satisfaction to no
satisfaction.
– Hygiene factors (work environment) are on a
separate continuum that ranges from dissatisfaction
to no dissatisfaction.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 11

 Figure 10.3 The Two-Factor
Theory of Motivation

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 12

 The Two-Factor
Theory (Herzberg) (cont’d)
• Motivation becomes a two-stage process:
– Ensuring that the hygiene factors are not deficient
and not blocking motivation.
– Providing employees the opportunity to experience
increase motivational factors through the use of job
enrichment and the redesign of jobs.
• Criticisms of the Two-Factor Theory
– Interview findings are subject to different
explanations.
– Sample population was not representative.
– Subsequent research has not upheld theory.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 13

 Process Perspectives on Motivation
• Process Perspectives
– Focus on why people choose certain behavioral
options to satisfy their needs and how they evaluate
their satisfaction after they have attained their goals.
• Process Perspectives of Motivation
– Expectancy Theory
– Porter-Lawler Extension of Expectancy Theory
– Equity Theory
– Goal-Setting Theory

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 14

 Expectancy Theory
• Motivation depends on how much we want
something and how likely we are to get it.
• Theory assumes that:
– Behavior is determined by a combination of personal
and environmental forces.
– People make decisions about their own behavior in
organizations.
– Different people have different types of needs,
desires, and goals.
– People choose among alternatives of behaviors in
selecting one that that leads to a desired outcome.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 15

 Expectancy Theory (cont’d)
• Model of Motivation
– Suggests that motivation leads to effort when
combined with ability and environmental factors;
effort results in performance; performance, in turn,
leads to various outcomes that have value (valence)
to employees.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 16

 Figure 10.4 The Expectancy
Model of Motivation

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 17

 Elements of Expectancy Theory

• Effort-to-Performance Expectancy
– The individual’s perception of the probability that
effort will lead to a high level of performance.
• Performance-to-Outcome Expectancy
– The individual’s perception of the probability that
performance will lead to a specific outcome or
consequence or reward in an organizational setting.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 18

 Elements of Expectancy Theory (cont’d)

• Outcomes (Consequences) and Valences

– Valence is an index of how much an individual values
a particular outcome. It is also the attractiveness of
the outcome to the individual.
– Attractive outcomes have positive valences and
unattractive outcomes have negative valences.
– Outcomes to which an individual is indifferent have
zero valences.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 19

 Elements of Expectancy Theory (cont’d)

• For individual motivated behavior (effort) to

occur:
– Effort-to-performance expectancy (the belief that
effort will lead to high performance) must be greater
than zero.
– Performance-to-outcome expectancy (performance
will result in certain outcomes) must be greater than
zero.
– The sum of the valences must be greater than zero
—the outcome/reward must have value to the
individual.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 20

 Porter-Lawler Extension
of Expectancy Theory
• Assumptions:
– If performance in an organization results in equitable
and fair rewards, people will be more satisfied.
– High performance can lead to rewards and high
satisfaction.
• Types of Rewards:
– Extrinsic rewards
• Outcomes set and awarded by external parties
(e.g., pay and promotions).
– Intrinsic rewards
• Outcomes that are internal to the individual (e.g.,
self-esteem and feelings of accomplishment).

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 21

 Figure 10.5 Porter-Lawler
Extension of Expectancy Theory

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 22

 Equity Theory
• Assumptions:
– People are motivated to seek social equity in the
rewards they receive for performance.
– Equity is an individual’s belief that the treatment he or
she receives should be fair relative to the treatment
received by others.
– Individuals view the value of rewards (outcomes) and
inputs of effort as ratios and make subjective
comparisons of themselves to other people:

Outcomes (self) Outcomes (other)

=
Inputs (self) Inputs (other)

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 23

 Equity Theory (cont’d)
• Conditions of and reactions to equity
comparisons:
– Feeling equitably rewarded.
• Maintain performance and accept comparison as
fair estimate.
– Feeling under-rewarded—try to reduce inequity.
• Change inputs by trying harder or slacking off.
• Change outcomes by demanding a raise.
• Distort the ratios by altering perceptions of self or
of others.
• Leave situation by quitting the job.
• Change comparisons by choosing another object
person.
Copyright © Houghton Mifflin Company. All rights reserved. 10 | 24
 Goal-Setting Theory
• Assumptions
– Behavior is a result of conscious
goals and intentions.
– Setting goals influences the
behavior of people in
organizations.
• Characteristics of Goals
– Goal difficulty
• Extent to which a goal is challenging
and requires effort.
• People work harder to achieve more
difficult goals.
• Goals should be difficult but
attainable.
Copyright © Houghton Mifflin Company. All rights reserved. 10 | 25
 Figure 10.6 The Expanded
Goal-Setting Theory of Motivation

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 26

 Reinforcement Perspectives
on Motivation
• Reinforcement Theory
– Focuses on the role of rewards as they cause
behavior to change or remain the same over time.
– Assumes that:
• Behavior that results in rewarding consequences
is likely to be repeated, whereas behavior that
results in punishing consequences is less likely to
be repeated.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 27

 Kinds of Reinforcement
in Organizations
• Positive Reinforcement
– Strengthens behavior with rewards or positive outcomes after a
desired behavior is performed.
• Avoidance
– Strengthens behavior by avoiding unpleasant consequences that
would result if the behavior is not performed.
• Punishment
– Weakens undesired behavior by using negative outcomes or
unpleasant consequences when the behavior is performed.
• Extinction
– Weakens undesired behavior by simply ignoring or not reinforcing
that behavior.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 28

 Providing Reinforcement
in Organizations

Schedules for Applying Reinforcement

Fixed interval Reinforcement applied at fixed time
intervals, regardless of behavior.

Variable interval Reinforcement applied at variable time

intervals.

Fixed ratio Reinforcement applied after a fixed

number of behaviors, regardless of time.

Variable ratio Reinforcement applied after a variable

number of behaviors, regardless of time.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 29

 Providing Reinforcement
in Organizations (cont’d)
• Behavior Modification (OB Mod)
– A method for applying the basic elements of
reinforcement theory in an organizational setting.
– Specific behaviors are tied to specific forms of
reinforcement.

Specific Specific
Behavior Reinforcement

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 30

 Popular Motivational Strategies
• Empowerment and Participation
– Empowerment
• The process of enabling workers to set their own
work goals, make decisions, and solve problems
within their sphere of influence.
– Participation
• The process of giving employees a voice in
making decisions about their work.
– Areas of Participation for Employees
• Making decisions about their jobs.
• Making decisions about administrative matters.
• Participating in decision making about broader
issues of product quality.
Copyright © Houghton Mifflin Company. All rights reserved. 10 | 31
 New Forms of Working Arrangements

Variable Work Schedules

Compressed work Working a full forty-hour week in less
schedule than the traditional five days.

“Nine-eighty” schedule Working one full week (five days)

and one compressed week (four
days), yielding one off-work day
every other week.

Flexible work schedules Allowing employees to select, within

(flextime) broad parameters, the hours they will
work.

Job sharing When two part-time employees

share one full-time job.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 32

 Using Reward Systems
to Motivate Performance
• Organizational Reward System
– The formal and informal mechanisms by which
employee performance is defined, evaluated, and
rewarded.
• Performance-based rewards have the greatest
impact on motivation and higher-levels of
performance.
• Rewards align employee self-interests with the
organization’s interests.
• Rewards foster behaviors desired by
organizations.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 33

 Effects of Organizational
Rewards on Employees
Attitudes Behaviors Motivation
• Satisfaction is influenced • Extrinsic rewards affect • Employees will work
by how much is received employee satisfaction and harder when performance
and how much the person reduce turnover. will be measured.
thinks should have been
• Rewards influence • Employees will work
received.
patterns of attendance harder if performance is
• Satisfaction is affected by and absenteeism. closely followed by
comparison with others. rewards.
• Employees tend to work
• The rewards of others are harder for rewards based
often misperceived. on performance.
• Overall job satisfaction is
affected by employee
satisfaction with intrinsic
and extrinsic rewards.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 34

 Designing Effective Reward Systems

• Reward system must meet an individual’s

needs.
• Rewards should compare favorably with other
organizations.
• Distribution of rewards must be perceived to be
equitable.
• Reward system must recognize different needs.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 35

 Merit Reward Systems
• Merit Pay Concept
– Pay is awarded to employees on the basis of the
relative value of their contributions to the
organization.
• Merit Pay Plans
– Compensation plans that formally base at least some
portion of compensation on merit.
– Provide employees with annual salary increases
depending on their overall job performance.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 36

 Incentive Reward Systems
• Monetary Incentives
– Piece-rate incentive plan
• A reward system wherein the organization pays
an employee a certain amount of money for every
unit she or he produces.
– Sales commissions plan
• The percentage of an employee’s sales to
customers that is paid to an employee as a
reward for selling the firm’s products or services.
• Nonmonetary Incentives
– Immediate and one-time rewards
• Days off, additional paid vacation time, and
special perks.
Copyright © Houghton Mifflin Company. All rights reserved. 10 | 37
 Team and Group
Incentive Reward Systems
• Gainsharing
– Sharing the cost savings that result from productivity
improvements.
• Scanlon Plan
– Similar to gainsharing, but the distribution of gains is
tilted toward the employees and is spread across the
organization.
• Profit Sharing Plans
– Provide an organization-wide incentive in the form of
an annual bonus to all employees based on
corporate profits.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 38

 Executive Compensation
• Standard Forms of Executive Compensation
– Base salary is the guaranteed portion of an
executive’s compensation.
– Bonuses paid for performance of the organization.
• Special Forms of Executive Compensation
– Stock options allow executives to purchase company
stock at a predetermined price.
• If the current stock price is above the
predetermined price, the executive profits from
exercising the option.
• If the current stock price is below the
predetermined price, the option has no value.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 39

 Criticisms of Executive Compensation

• Levels of executive compensation are perceived

as inordinately large.
• Compensation levels for executives do not
reflect the performance of their firms.
• The earnings gap between the typical employee
and the CEO is enormous.
• Executive stock options represent potentially
huge liabilities for companies, yet do not appear
on their financial statements as such.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 40

 New Approaches to
Performance-Based Rewards
• Employee Participation
– Allowing employee participation in the deciding of
distribution of rewards.
• Innovation in Incentive Programs
– Offering stock options to all employees.
– Individualizing reward systems such that different
employees can be offered different incentives.
• More Effective Communication
– Sharing information about how awards are earned
and distributed.

Copyright © Houghton Mifflin Company. All rights reserved. 10 | 41