077 Motivation and Financial Incentives

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MOTIVATION &FINANCIAL INCENTIVES

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BASIC MODEL OF MOTIVATION (NEEDS AND EXPECTATION)

Need orDis-equilibrium Drive Action or

BehaviourGoal state

Satisfactionof

Needor

return toequilibrium

Adopted from Cowling et al (1993)

BASIC MODEL OF MOTIVATION (NEEDS AND EXPECTATION)

Need orExpectation

Driving Force(Behaviour or

Action)

DesiredGoal

Fulfillment

Result Achieve

Which provides

Adopted from Mullins(1996)

MOTIVATIONAL THEORIESNeeds

e.g food

Values Goals

Action

e.g moneycan buy

e.g get paidregularly

e.g go towork

MOTIVATION & FINANCIAL INCENTIVESIn the past, threat has been used as a

motivating device in our society.Threat is used in authoritarian societies

today to achieve objectives. Is threat working in the workplace, in order

to increase productivity or reduce absenteeism?

MOTIVATION & FINANCIAL INCENTIVESManagement today, for many reasons,

gives rewards in order to motivate workers and increase productivity.

By the 70TH incentives had become an inherent part of the operating system of the construction industry.

Trades unions recognized the importance of incentives as a means of enhancing their members.

MOTIVATION & FINANCIAL INCENTIVESThey used it as a general expectation of

regular incentive bonus payments,As an essential part of an operative’s

earning. Financial incentives stimulate workers to

put more effort into their work. There are five theories of the role of

money in affecting the job behaviour of employees.

MOTIVATION & FINANCIAL INCENTIVES

These are:1. Money as a generalized conditioned re-

enforcer2. Money as a conditioned incentive3. Money as anxiety reducer4. Money as a “hygiene factor”5. Money as instrument for gaining desired

outcome


Theorists on motivation have generallyassumed that:intrinsic motivations such as:achievement, responsibility, competence, are independent of extrinsic

motivation.

MOTIVATION & FINANCIAL INCENTIVESExtrinsic motivation such as: high pay, promotion,good working relations. The cognitive evaluation theory suggests that: when extrinsic reward is used, such as one used

by organizations (bonus pay for performance improvement), the intrinsic rewards of the individual are reduced.

MOTIVATION & FINANCIAL INCENTIVESPay or other extrinsic rewards can be effective

motivators.However, they should be made contingent as an

individual’s performance.Another definition for the term incentive is

“something that inspires action”. In the construction industry it means the

attempts to increase production,Have better performance, To receive increased psychological or material

rewards.


In order to benefit most from an incentive scheme;

Managers need to define workers needs, develop the goals of an incentive

programme.If the incentives are offered in anunstructured manner the result will be:the opposite of what was intended.

MOTIVATION & FINANCIAL INCENTIVESThose firms who use financial and non-

financial incentives side by side are those that produce the best results.

Motivation with pay increases, and promotion can often back fire,and decrease workers motivation.

MOTIVATION & FINANCIAL INCENTIVESManagers can motivate workers without a pay

increase,by using a simple model based on co-workers

traits and orientation. Pay increases, or bonus payments for better

performance are an acceptable practice by managers.

People are motivated if they are enjoying doing what they like to do.


During the recession of the 1990s Lincoln Electric Co. lost money in its foreign operation.

Managed not to lay off any workers,and the company even managed to

reward workers 75% of their salary in bonus pay.

MOTIVATION & FINANCIAL INCENTIVESThe production of Lincoln Electric Co. is

twice that of its rival manufacturers, which is due to incentive plans, which give bonuses for the company’s

additional production. Lincoln uses a multi-faceted incentivesystem comprising of:Piecework pay.Shared profits.

MOTIVATION & FINANCIAL INCENTIVESYear-end bonuses.Stock ownership opportunities.Job Security.This incentive policy improved the

performance of the company, which gained them a competitive

advantage within the industry.

MOTIVATION & FINANCIAL INCENTIVES The company rewards the workers for:1. turning out high-quality products2. high efficiently3. while controlling cost. Piecework system rewards high

productivity in Lincoln Electric Co. Each job is carefully rated according to

skill, effort required, and responsibility.


Some controversy regarding the use of money as a motivator.

Some researchers have chosen not to link money to workers performance,

Others have reached the conclusion that money is a way to motivate workers.


The reason for uncertainty amongstresearchers is that:financial incentive in itself can be

satisfying depending on worker’s deferring levels of needs.

The motivational value of money can change according to the economic situation of the nation.


During a recession, when incomes are falling,

it will remain static,while other expenses increase the

importance of money as a motivator increases.

MOTIVATION & FINANCIAL INCENTIVESThere are certain ways that people can be

motivated to give better performance. It is a manager’s task to find the best way to

improve performance. In the UK the methods in general are that:Manual workers are motivated with financial

incentive.Non-manual workers, especially managers, are

given none or semi-financial incentives,or with promotion,Or a big financial incentives such ads banks.


There are four determinants of labourproductivity:1. The duration of worker effort.2. The intensity of worker effort.3. The effectiveness of worker effort

combined with the technology used.4. Efficiency of worker effort.

MOTIVATION & FINANCIAL INCENTIVESIndividuals seek a job, which will satisfy

their needs. Some such as nurses or teachers seek

jobs with high intrinsic satisfaction. So what determines motivation in the job? Is it mainly to do with individual needs? Or is motivation more strongly influenced

by incentives given on the job itself?

MOTIVATION & FINANCIAL INCENTIVESThe job people hold is a key variable for

their motivation. Understanding what a job requires is a

complex,A vital requirement in trying to find ways to

improve employee performance is the key. There are constant changes within most

work environments,As well as peoples performance

expectations.

MOTIVATION & FINANCIAL INCENTIVESThe implication of such changes may not

be so clear to the employer and employee. The company reward system,the environment,culture of the organization,Personal condition,They can greatly influence the individual’s

performance.


FinancialRewards(High pay)

Conditionedre-in forcer

Anxietyreducer

Hygienefactor

An instrumentfor gaininga desired outcome

2Intrinsic

motivations

Motivationamong

workers

AchievementResponsibilityCompetence

1Extrinsic

motivation

promotiongood

workingrelations

when extrinsic reward isused, such as one used by

organizations (bonus pay forperformance improvement),the intrinsic rewards of the

individual are reduced.

Money Money

MOTIVATION & FINANCIAL INCENTIVESExamine the factors,Find which motivate your workers at work, The style of management has an

important role to play. In the last 2 years insecurity has become

an important and significant factor.

MOTIVATION & FINANCIAL INCENTIVESIn part, this has been due to a significant

change in employment patterns,short term contracts, rationalization,Agency work,the elimination of millions of permanent

jobs being replaced increasingly by temporary work.

MOTIVATION & FINANCIAL INCENTIVESThere are two reasons why a worker is motivatedto work and perform well:1. the nature of work, 2. the actual content of the tasks assigned to the

worker, The most challenging and demanding task willhave less effect on motivation if: the content of work is congruent to the needs

and expectations of the workers involved.

MOTIVATION & FINANCIAL INCENTIVESThe other reason for motivation to work

well is the work content. This includes aspects of the work such as: supervision, material resources,work environment etc.

Engineering

077 Motivation and Financial Incentives