Chapter 6 – Motivation

Why do people work?

1. Financial gains (Money) to meet their daily expenses
2. Security – Having a job that will be there for many
years.
3. Job Satisfaction – Building up a career that suits their
interest and education
4. Social needs – building up relationships and meeting
new people
5. Self-esteem: feel important as they have something
to contribute to the society
MOTIVATION: is the factors that stimulate people to
worker harder to achieve certain goal.

Motivation is important for a business due to many

benefits:
1. Lower Labour turnover  Due to higher employee
loyalty
2. Higher levels of productivity (Output per worker)
3. Better to quality of products provided to customers
4. Lower absenteeism rate so no decrease in production
5. Increase the chance of achieving business objectives
6. High efficiency and low wastes and errors
7. High levels of customer services  Good Customer
Relationship Management (CRM)
 **This will help the business achieve:
1. Higher potential sales due to higher output. This will
raise the market share
2. More efficient production that reducers wastes which
increases profit thus better chances for expansion
3. Lower average cost per unit and this will increase
profit margin (Gross profit margin / net profit margin)

Motivation Theories:
1. Taylor – Scientific management theory / Theory of Economic Man
a. Taylor assumed that money is the main motivator for working
b. The pay should be based on the number of units produced –
Piece Rate system
c. Workers are mainly motivated by gifts and financial gains.
BUT

a. His idea was so simple  many workers are motivated by

many things and not just money
b. Money might not motivate people who are satisfied by
what they earn.
c. Money might not meet some human needs such as social
and esteem needs
d. Money might not motivate people who seek more status
and power within the business.
2. Maslow’s Hierarchy of needs

His Theory was based on the idea that everyone is

motivated by same things

1. Physical needs: The payment of wage or salary that

allow employees to buy the essentials of life
2. Safety: Job security through a contract of employment,
follow health and safety guidelines for a safe work
environment
3. Social: Encourage teamwork, social activities and
communication between all level of employees
 4. Esteem: Have recognition and appreciation for good
work
5. Self-actualization: Have achievements and challenging
tasks

3. Herzberg: Two-factor theory of motivation

a. Hygiene factors (Exist don’t motivate, absent

demotivate)
i. Are the aspects of work that do not motivate
but, if NOT present, they cause dissatisfaction.
Example: Working condition, Clean
environment, salary, peer relationships
b. Motivators (Exist they motivate, absent demotivate)
i. Are the factors that might stimulate people to
work harder and achieve the goals of the
business. Ex. Recognition, growth opportunities,
Responsibility….
Motivation in Practice:
 Financial Rewards: are monetary incentives that motivate
people to work hard
 Non-financial rewards: are non-monetary rewards that
motivate people to work hard

Financial Rewards

1. Wages: These are payments paid to workers usually every

week. They are basically 2 types:
 Time Rate: when workers are paid based on the
number of hours the work
 It is easy to calculate (thus fast preparation of
the payroll)
 Encourages workers to stay for longer hours
 Good and Bad workers are paid the same
amount of money which is unfair. Thus it
ignores the productivity of the workers
 Supervisors are needed to monitor the worker
performance to ensure quality production
 Clocking-in system is needed to determine the
number of hours worked (Costly)
  Piece rate: when workers are paid based on the
number of units produced.
 Encourages greater productivity which leads to
higher output and thus more sales and higher
profit
 Workers will focus on the quantity rather than
quality which affects customer satisfaction
 Unfair to workers who care about quality
 Workers will be in rush to produce more which
might encourage inefficiencies and wastage of
resources leading to greater costs

2. Salaries: lump sum amount that is paid annually but

spread over 12 months
 It helps in cash flow forecasting and budgeting
 Workers will feel greater job security
 Easy to calculate

 Income is not related to productivity so affects

workers motivation
 Regular employee appraisal may be needed to
assess whether the worker achieved what is
required to decide whether to increase salary or
no.
3. Bonus: Payment to employees in addition ton their
normal pay. It is paid at the end of the year or at intervals
during the year.
4. Commission: is a payment to salesman as a percentage of
the sales achieved during a period of time.
 Encourages high levels of sales
 Very stressful to the salesmen
 Sometimes salesmen might be overly persuasive and
give false information about the products to sell and
have the commission thus affecting the reputation of
the business.
5. Performance-related pay: is a payment based in targets
being met or exceeded, so this might encourage workers
to work harder and more efficient
 Staff will be motivated to improve performance
 Target setting can help to give purpose and direction
 PRP has a competitive nature that could damage
team spirit
 Not suitable for workers who are not financially
driven
6. Profit-sharing or share ownership: Employees are
rewarded by receiving a percentage of the profit made by
the business, or by receiving some shared that makes
workers feel of being an owner.
Non-Financial Rewards:
Fringe Benefits (Perks): These are non-monetary incentives
given to increase labor’s motivation
1. Company Vehicle
2. Discount on the firm’s products
3. Free Health Insurance
4. Children’s education fees
5. Gym membership
6. Housing
Ways to increase job satisfaction (Motivation):
Job Satisfaction: is the enjoyment derived from work
1. Payment
2. Opportunities for promotion
3. Working Conditions
4. Fringe Benefits
5. Working hours
6. Training
7. Job Rotation
8. Job Enlargement
9. Job Enrichment
10. Team Working
JOB ROTATION: increasing the flexibility of the employees and
the variety of work they do by switching from a job to another
 Reduces Boredom due to the variety of tasks
 Creates a flexible workforce and they can cover other jobs
 Develops worker’s skills.
 The range of tasks can be similar, so boredom can return
back
 Some workers might be better at certain tasks than
others. Thus, quality might affected.

JOB ENLARGEMENT: an attempt to increase the scope of a job

by broadening or deepening the tasks undertaken.
 Reduces boredom as there is more task variety
 Develops worker’s skills
 Workers might feel that they are overworked.

JOB ENRICHMENT: increasing the number of tasks undertaken

but at a higher business level.
 Less supervision is needed (due to high skills)
 Makes the job more challenging (Self-actualization)
 Allows for promotion on the long run
 Workers might need some training (increases costs)
 Workers may demand a pay rise.
TEAM WORKING: groups of employees working together
towards a shared goal.
 Helps in building relationships with other (Social Needs)
 Quicker production as tasks are divided.
 Reduce management costs as less middles managers
will be needed.
 Conflicts and jealousy may arise with regards to task
distribution and bonus payment
 Not everyone is a team player

Factors affecting the choice of motivation methods:

1. Costs: the business needs to be able to afford to give
bonuses or pay rises.
2. Type of business: piece rate might not be suitable for all
business (Manufacturing business – labor intensive)
3. Employees: everyone is an individual. What works for one
person may not work for all.
4. Manager: their skills and choices will affect the success of
any method.