Chapter # 2 - 1Copyright © 2013 Pearson Canada Inc. Chapter # 5 - 1Copyright © 2013 Pearson Canada Inc. 5

Chapter #

2 - 1Copyright © 2013 Pearson Canada Inc.

Chapter #

5 - 1Copyright © 2013 Pearson Canada Inc.

5

Copyright © 2013 Pearson Canada Inc. 5 - 2

Chapter Outline• From Theory to Practice: The Role of Money• Creating Effective Reward Systems– What to Pay: Establishing a Pay Structure– How to Pay: Rewarding Individuals through

Variable-Pay Programs– Flexible Benefits: Developing a Benefits Package– Intrinsic Rewards: Employee Recognition

Programs– Beware the Signals that are Sent by Rewards– Can we Eliminate Rewards?


Chapter Outline• Motivating by Job Redesign– The Job Characteristics Model– Job Redesign in the Canadian Context: The Role of Unions– How can jobs be redesigned?– Alternative Work Arrangements– The Social and Physical Context of Work

• Employee Involvement– Examples of Employee Involvement Programs– Linking Employee Involvement Programs and Motivation

Theories• Motivation: Putting It All Together


1. Is money an important motivator?2. What does an effective reward system look like?3. How can jobs be designed to increase motivation?4. How do employees become more involved in the

workplace?5. Can we simplify how we think about motivation?

Learning Outcomes


From Theory to Practice: The Role of Money• Money is the most commonly used reward in organizations.

– Money certainly helps needs get met.

• 2010 survey of Canadian Employees found that 46% believed they were underpaid

• But, money is not the top priority for many employees– Many emphasize relationships in the workplace.

• Developing rewards programs is a complex process– Consider the value individuals place on specific rewards


Figure 5.1 What Baby Boomers and Generation Y Value as much as Compensation


Creating Effective Reward Systems – Employee Recognition

• Employee recognition programs use multiple sources and recognize both individual and group accomplishments.


What to Pay: Establishing a Pay Structure

• Setting pay levels requires a balance between external and internal equity– Internal Equity- the worth of the job to the

organization (job evaluation)– External Equity- the competitiveness of an

organization’s pay relative to industry standards

• Setting pay levels (above, at, or below market rates) is a key strategic decision with important trade-offs


How to Pay: Rewarding Individuals Through Variable Pay Programs

• Many firms are moving towards Variable-Pay Programs– A portion of an employee’s pay is based on some individual and/or organizational

measure of performance.• Individual-based

• Piece-rate wages• Merit-based pay• Bonuses• Skill-based pay

• Group-based• Gainsharing

• Organizational-based• Profit sharing• Employee stock ownership plans (ESOPs) and stock options


Variable-Pay ProgramsIndividual-Based Incentives• Piece-rate pay plans

– Pay a fixed sum for each unit of production completed.

• Merit Based– Pay is based on performance

appraisal ratings• Bonuses

– One-time rewards for defined work rather than ongoing entitlements.

• Skill-based pay– Pay based on how many skills

employees have or how many jobs they can do.

Group-Based Incentives

• Gainsharing– Focus on productivity gains – Improvements in group

productivity determine the rewards to be shared.


Skill-Based Pay: An Alternative to Job Based Pay

• Pay levels are set based on how many skills employees have or how many jobs they can do– Also known as competency-based or knowledge-based pay

• Skill-based pay helps to increase workforce flexibility– Filling staffing needs is easier when employee skills are

interchangeable– Communication can also be improved

• On the other hand skill-based pay can lead to problems– Does not address the level of performance– Employees may acquire skills for which there is no immediate need.


Variable Pay Programs: Organizational-Based Incentives

• Profit-Sharing Plans– Organization wide programs that distribute compensation based

on some established formula designed around a company’s profitability.

• Employee Stock Ownership Plans (ESOPs) and Stock Options– Company-established benefit plans in which employees acquire

stock as part of their benefits.– Stock options give employees the right to buy stocks in the

company at a later date for a guaranteed price.


Challenges to Pay-for-Performance Programs

• The challenges for pay-for-performance programs can be affected by how and where they are implemented.– Teamwork– Unions– Public Sector Employees

• Ethical Considerations


Flexible Benefits: Developing a Benefits Package

• A Flexible Benefits plan permits each employee to create a package to suit their individual needs– Replaces the “one-benefit-plan-fits-all” approach– Selections based on marital status, age, spouses’ benefits

status, number of dependents, etc.

• Three most popular benefit plans:– Modular Plans – Core-Plus Plans– Flexible Spending Plans


Intrinsic Rewards: Employee Recognition Programs

• Employee recognition programs– from private “thank you” to high profile

recognition• According to Expectancy Theory, the key

component of motivation is the link between:– Performance and Reward

• Using Reinforcement Theory, providing recognition immediately following positive behaviour leads to repetition.


Beware the Signals That Are Sent By Rewards

• Often reward systems do not reflect organizational goals:

1. Individuals are stuck in old patterns of rewards and recognition.• Stick to rewarding things that can be easily measured.

2. Organizations don’t look at the big picture.• Subunits compete with each other.

3. Management and shareholders focus on short-term results.


Figure 5.2 Management Reward Follies


Can We Just Eliminate Rewards?

• Alfie Kohn suggests that organizations should focus less on rewards, more on creating motivating environments:– Abolish Incentive Pay– Re-evaluate Evaluation– Create Conditions for Authentic Motivation– Encourage Collaboration– Enhance Content– Provide Choice


Motivating by Job Redesign

• Job Design– The way the elements in a job are organized can

act to increase or decrease effort


The Job Characteristic Model

• The Job Characteristic Model (JCM) can describe any job in terms of five core job dimensions– Skill variety– Task identity– Task significance– Autonomy– Feedback


Figure 5.3 Examples of High and Low Job Characteristics


Exhibit 5-4 The Job Characteristic Model


Motivating Potential Score

• Can combine the core dimensions into a single predictive index, called the motivating potential score (MPS), which is calculated as follows:

Motivating Potential Score (MPS) = Skill variety + Task identity + Task significance X Autonomy X

Feedback3


The Job Characteristic Model

• Job Rotation– Periodic shifting of workers from one task to another.– Reduces boredom, increases motivation, and helps employees

understand how their work contributes to the organization.

• Job Enrichment– The vertical expansion of jobs

• Employee completes a full activity

– Expands the employee’s freedom and independence– Increases responsibility, and provides feedback so individuals can

assess and correct their own performance.


Alternative Work Arrangements• Flextime– Employees work a set amount of hours but have some

flexibility– Core period for all + flexible set of hours determined

by workers• Job Sharing– Two or more people splitting a 40 hour a week job

• Telework– Employees complete their work at home– Employees have access to smartphones, tablets, and

other mobile computing devices.


Figure 5.5 Examples of Flextime Schedules


The Social and Physical Context of Work

• Policies such as job rotation, employee empowerment, and employee participation have positive effects on productivity, at least partially because they encourage more communication and a positive social environment.


Employee Involvement

• Employee Involvement– Participative process that uses employees’ input

to increase their commitment to the organization’s success

• Examples of Employee Involvement Programs– Participative management– Representative participation


Motivation: Putting it All Together

1. What motivates people?2. How can we use this information to make sure that the

organizational processes motivate our employees?

• Four basic emotional drives (needs) guide people:– Drive to Acquire

• Met through organizational rewards– Drive to Bond

• Promoted through commitment to teamwork, friendship & openness– Drive to Comprehend

• Based on effective job design– Drive to Defend

• Based on performance management & resource allocation process


Exhibit 5-6 How To Fulfill the Drives that Motivate Employees


Exhibit 5-7 Reward Preferences in Different Countries


Summary and Implications

1. Is money an important motivator?– Money is the most commonly used reward. However, there

is varying opinion as to how large a role it plays in motivating different employees.

2. What does an effective reward system look like?– An effective reward system links pay to performance,

which is consistent with expectancy theory predictions.3. How can jobs be designed to increase motivation?– Employers can use work design to motivate employees.

Jobs that have variety, autonomy, feedback, and similar complex task characteristics tend to be more motivating for employees.

– and can achieve quite high levels of performance.


4. How do employees become more involved in the workplace?– The major forms of employee involvement are:

• participative management – subordinates share a degree of decision-making power with their immediate superiors

• representative participation – employees participate in organizational decision making through a small group of representative employees

5. Can we simplify how we think about motivation?– Recent research suggests that we should match organizational

processes to four basic individual drives: acquire, bond, comprehend, and defend.

6. How do motivational approaches work in different cultures?– Cross-cultural differences exist in variable pay, flexible benefits, job

characteristics and job enrichment, telework, and employee involvement.

Summary and Implications


OB at Work: For Review

1. What role, if any, does money play in employee recognition and job redesign?

2. What are the pros and cons of variable-pay programs from an employee’s viewpoint? From management’s viewpoint?

3. What is the difference between gainsharing and profit sharing?

4. What is an ESOP? How might it positively influence employee motivation?


OB at Work: For Review

5. Why is employee recognition an important reward6. What can firms do to create more motivating

environments for their employees? 7. Describe three jobs that score high on the JCM.

Describes three jobs that score low. 8. What are the advantages of flextime from an

employee’s perspective? From management’s perspective?

9. What are the advantages of job sharing from an employee’s perspective? From management’s perspective?

10. From an employee’s perspective, what are the pros and cons of telework?


OB at Work: For Critical Thinking

1. “Employee recognition may be motivational for the moment, but it doesn’t have any staying power. Why? Because employees can’t take recognition to Roots or the Bay!” Do you agree or disagree? Discuss.

2. “Performance can’t be measured, so any effort to link pay with performance is a fantasy. Differences in performance are often caused by the system, which means the organization ends up rewarding the circumstances. It’s the same thing as rewarding the weather forecaster for a pleasant day.” Do you agree or disagree with this statement? Support your position.


OB at Work: For Critical Thinking

4. “Job redesign is a way of exploiting employees by increasing their responsibilities.” Comment on this statement, and explain whether you agree with it or not.

5. What can management do to improve employees’ perceptions that their jobs are interesting and challenging?

6. Individuals vary in their emotional drives (or needs). How can we use that information to motivate employees?


Breakout Group Exercises

• Form small groups to discuss the following:– How might the job of student be redesigned to

make it more motivating?– What is your ideal job? To what extent does it

match up with the elements of the job characteristics model (JCM)?

– Would you prefer working from home or working at the office? Why?


Exhibit 5-8 2009 Compensation of Canada’s “Most Overpaid” CEO’s


From Concepts to Skills: Designing Enriched Jobs

• Combine tasks.• This increases skill variety and task identity.

• Create natural work units.• This increases employee “ownership” of the work and

improves the likelihood that employees will view their work as meaningful and important.

• Establish client relationships.• This increases skill variety, autonomy, and feedback for the

employee.• Expand jobs vertically.

• This seeks to partially close the gap between the “doing” and the “controlling” aspects of the job.

• Open feedback channels.

Documents

Chapter # 2 - 1Copyright © 2013 Pearson Canada Inc. Chapter # 5 - 1Copyright © 2013 Pearson Canada Inc. 5