Motivation Strategies (VCE SSCE Business Management): Revision Notes

Motivation strategies

Introduction to motivation strategies

Businesses must ensure that knowledge gained from motivation theories translates into practical applications. Without motivated employees, business performance and productivity will remain mediocre at best. Managers play a crucial role in implementing strategies that foster workforce motivation.

Each of these strategies has distinct advantages and disadvantages, and their effectiveness varies depending on whether they are used for short-term or long-term motivation. Understanding when and how to apply each strategy is essential for effective human resource management.

Performance-related pay

Types of performance-related pay

There are several monetary forms that performance-related pay can take:

Sales commission is an amount paid to a salesperson for a particular sale, calculated as a percentage of the sale price. This directly links an employee's earnings to their sales performance, providing immediate financial incentive for increased sales activity.

Bonuses are one-off payments made to an employee or team as a reward for meeting or exceeding pre-set targets. Unlike ongoing pay increases, bonuses provide flexibility for businesses as they are only paid when specific objectives are achieved.

Profit sharing involves employees receiving a percentage of the profit made by the business. This strategy aligns employee interests with overall business success, encouraging workers to think about how their actions contribute to profitability.

Share allocation (in companies) gives employees the opportunity to purchase shares at a discounted price, or they may be granted shares in recognition of increased productivity and profits. This creates long-term alignment between employees and the business, as employees become part-owners with a vested interest in the company's success.

How performance-related pay works

Performance-related pay schemes typically include several common features that ensure fair and transparent implementation:

A performance appraisal is undertaken, usually on an annual basis, where an individual employee's performance is reviewed against agreed objectives or performance standards. This systematic evaluation provides the foundation for determining rewards.

The method of reward varies between organisations; however, it usually involves the employee receiving a cash bonus, an increase in their wage or salary, or some other form of financial reward.

When performance-related pay is effective

Performance-related pay can act as both a reward and motivator in specific circumstances. For employees who have exceeded their job-related objectives but are at the top level of the pay scale in their job ranking, a cash bonus or profit share recognises their efforts during the past year without requiring a promotion.

This strategy is particularly effective for employees whose work directly relates to measurable output. If their output has exceeded predetermined standards in both quantity and quality, they receive additional pay for the extra production. This clear link between effort and reward can be highly motivating.

Potential problems with performance-related pay

Despite its benefits, performance-related pay can create several challenges. In the quest for additional pay, safe work practices may be sacrificed. For instance, production lines may be set to run at unsafe speeds, and protective safety equipment may not be used, creating serious health and safety risks.

Advantages and disadvantages of performance-related pay

Advantages:

• Provides a direct financial reward to an employee, creating clear incentive
• Offers a tangible way of recognising achievement, which can boost morale
• Can improve productivity levels as employees work harder to earn rewards
• Rewards best performance with no need to pay underperforming employees
• Encourages realistic goal setting as employees understand what is achievable
• Financial rewards only need to be paid when the business is profitable, managing costs

Disadvantages:

• Reduces equality in employees' pay, which can create tension
• Generates a 'performer' culture, which can lead to jealousy and lower morale levels
• Difficult to measure productivity levels in some types of jobs, particularly service-based roles
• Danger of sacrificing safety and quality just to increase quantity
• Creates a short-term focus on quantifiable goals rather than long-term business success

Effects on employee motivation

Positive effects: The incentive of financial reward can increase productivity levels as employees work harder to achieve bonuses and commissions.

Negative effects: Performance-related pay does not guarantee continued productivity gains. It can become demotivating if bonuses or rewards do not continuously increase, as employees come to expect escalating rewards. Additionally, it acts to demotivate if goals set are too challenging and appear unattainable, leading to employee disengagement.

Career advancement

Promoting employees to positions with more responsibility or authority addresses several important motivational needs. Career advancement recognises employee contributions while providing opportunities for personal and professional growth.

What career advancement offers employees

Increased remuneration is often a key motivator. Remuneration refers to the amount a person is paid for performing work tasks, which can take the form of cash and fringe benefits such as a company car or expense account.

Challenging job experiences motivate employees who seek personal development. Career advancement provides opportunities to take on new responsibilities and develop new skills, preventing stagnation and boredom.

Authority and status combined with additional management skills and competencies attract ambitious employees who want independence and recognition. These employees are motivated by the opportunity to influence decisions and lead others.

Creating opportunities for advancement

For employees to feel confident that they are working for a business that will support their career progression, the business must have clear policies and procedures to administer promotions and manage job advancement. The promotion policy should be openly and transparently based on the reward and recognition of individual merit and performance.

Effective career advancement programs include opportunities for staff development through:

Advantages and disadvantages of career advancement

Advantages:

• Acts as a reward to employees for their past performance, recognising their contributions
• Has potential to act as a long-term motivator by retaining talented employees who see a future with the business
• Retains intellectual property and continuity of knowledge within the organisation
• Provides opportunity to increase an employee's contribution to the business through expanded responsibilities

Disadvantages:

• Can be a potential demotivator for employees overlooked for promotion, creating resentment
• Risk of promoting an employee beyond their capability level (the "Peter Principle")
• Creates feelings of unrest if the promotion was not warranted or not carried out in a fair and equitable manner
• Employee's level of productivity may decrease as they now have broader responsibilities due to their job being enlarged

Effects on employee motivation

Positive effects: Career advancement motivates employees to quickly take on more responsibility in their workplace. When employees can see a clear career path for themselves, they are more likely to invest effort in developing their skills and capabilities.

Negative effects: Career advancement may cause dissatisfaction among employees who are overlooked for promotion. If employees feel they deserved the promotion more than the person selected, it can damage morale and motivation.

Investment in training

Employees gain skills and job knowledge through training and job experience. Training employees in the skills they need to perform their job tasks properly is essential for both individual performance and business success.

The importance of training for motivation

Training and coaching provide ideal opportunities for employees to feel that they are contributing to business outcomes. When employees develop new skills, they gain confidence and competence, which enhances their sense of value to the organisation.

By creating an environment that encourages learning and sharing knowledge, training positively assists in team building and the overall health of the business. A culture of continuous learning demonstrates that the business values employee development and is willing to invest in its people. Creating this positive culture aids in motivating employees both immediately and over the long term.

When training fails to motivate

Advantages and disadvantages of training

Advantages:

• Indicates the business values its employees and the contribution they make, boosting morale
• Demonstrates that the business wants to advance the careers of its employees, fostering loyalty
• Creates a sense of loyalty and attachment to the business as employees appreciate the investment
• Creates a positive corporate culture where learning and development are valued

Disadvantages:

• Represents an expensive investment if the business has inefficient systems or non-performing equipment
• Will not motivate employees if they are in the wrong jobs for their skills and interests
• Can lead to disenchantment if upskilled employees are not given opportunities to use their new skills
• May highlight areas in which the business is lacking, exposing weaknesses in operations or management

Effects on employee motivation

Positive effects: Employees experience immediate increased motivation when given the opportunity to upskill. Learning new capabilities provides a sense of progress and development. Over time, employees become better skilled to complete their job tasks and duties, leading to greater job satisfaction and confidence.

Negative effects: Employees can become demotivated if the training program inconveniences their work-life balance. Training that requires significant time commitments outside regular hours or that disrupts family responsibilities may create resentment rather than motivation.

Support strategies

For employees of any business, an important motivating factor is the feeling that they are supported, encouraged, and acknowledged for their work performance, while also having job security. These elements create a foundation of psychological safety that enables employees to perform at their best.

How support strategies work

Employees who feel supported are more motivated to work diligently and identify with the mission (purpose) of the business. When employees feel proud of the business they work for and are committed to its values and beliefs, they naturally invest more effort in their work. This positive atmosphere and corporate culture has the added benefit of motivating employees to continue working at that business, reducing turnover and retaining valuable talent.

Support strategies can act as both short-term and long-term motivators. In the short term, immediate support when facing challenges helps employees overcome obstacles. In the long term, a consistently supportive environment builds loyalty and commitment.

Forms of support

Advantages and disadvantages of support strategies

Advantages:

• Employees who feel supported by their manager or a mentor within the business are likely to work more diligently
• Providing support can act as both a short-term and a long-term motivator, offering sustained benefits
• Support in the form of Employee Assistance Programs (EAP) can provide confidential assistance to employees experiencing problems affecting performance
• Support does not have to be costly, making it accessible for businesses of various sizes

Disadvantages:

• Support needs a positive corporate culture at the business to be effective; it cannot function in isolation
• Support relies on managers exercising good communication skills, which may require training and development
• The confidential nature of an EAP can mean that a manager may not be aware of the problems being experienced by the employee, making it difficult to adjust workloads or expectations appropriately

Effects on employee motivation

Positive effects: Employees feel supported and valued when they have an issue that needs addressing and is affecting their level of performance. Knowing that help is available creates confidence and reduces stress.

Negative effects: Some employees may feel resentment if they prefer to be left alone and perceive support as interference. Not all employees respond positively to close supervision or frequent check-ins, and managers must be sensitive to individual preferences.

Sanctions strategies

Sanctions have been a traditional way of motivating employees to increase their performance. While financial bonuses (rewards) recognise good performance, penalties (sanctions) can be specified as conditions in contracts of employment relating to work performance.

When sanctions are used

Not all employees are motivated by the content and challenge of their job or the prospect of career advancement. Some employees actually respond to discipline as a motivator. Often these employees will not take their work tasks seriously until they are threatened with some form of sanction for their unacceptable or below par (inadequate) performance.

Sanctions can take various forms, escalating in severity depending on the situation. A reprimand is a formal warning about performance or behaviour. Disciplinary counselling involves more structured intervention to address ongoing issues. As a last resort, dismissal terminates the employment relationship entirely.

Limitations of sanctions

Advantages and disadvantages of sanctions

Advantages:

• Sanctions can act as a short-term motivator for some employees who need clear boundaries
• The fear created by sanctions may bring some other underperforming employees into line, creating a demonstration effect

Disadvantages:

• Imposing sanctions acts only as a potential short-term motivator and does not create lasting change
• Sanctions can cause resentment and loss of productivity, damaging the employment relationship
• There is a possibility of dispute or legal action following imposition of sanctions, creating additional costs and complications
• Sanctions may lead to employee resignation, resulting in turnover and recruitment costs

Comparing motivation strategies

When selecting which motivation strategy to use, managers must consider several factors:

Effective human resource management typically involves using a combination of strategies tailored to different employees and situations, rather than relying on a single approach.