1.4.4 Motivation in Theory & Practice

Taylor's Theory of Scientific Management

• Designed to reduce the inefficiency of workers and managers
• Believed workers were solely motivated by financial incentives
• Piece rate system to ensure workers who were productive and achieved targets were rewarded, whilst those who fell short experienced a loss of earnings

Method of identifying the best way to carry out a task

• Observe a set of skilled workers, noting down the time they take to carry out tasks and the sequence of tasks in the process
• Find the quickest worker and sequence of tasks, then teach workers this sequence
• Supervise workers to ensure these methods are carried out, including time for rest

Pros and cons of Taylor's theory

• Workers incentivised to be productive and motivated to meet targets via piece rate system -> Know higher productivity will be rewarding -> Higher productivity -> More cost competitive
• Supervision of workers ensures workers are focused and understand their role -> Reduced human error and wastage of materials -> Increased efficiency and lower total cost per unit -> More cost competitive -> Able to reduce prices whilst maintaining profit margins -> Higher sales and market share
• The best method of carrying out tasks may not suit all workers -> Some workers are more efficient than others -> Workers feel demotivated as they fall behind and subsequently lose income -> Lower productivity -> Inconsistency and higher cost per unit -> Less cost-competitive
• Autocratic style of leadership -> Workers don't feel valued and treated like machines -> Workers may be motivated by social factors not just money -> Lack of motivation in workforce -> Lower productivity and increased mistakes -> Less cost competitive -> Fall in market share from lower sales

Mayo's theory of Human relations

• Hawthorne studies found worker productivity and motivation increased due to greater cohesion and communication between workers
• Found financial rewards and changes in conditions did not affect productivity
• Focus of Mayo's theory: Fulfilling personal satisfaction of workers
• Emphasis on teamwork, better communication and managers playing more active roles in worker lives

Pros and cons of Mayo's Theory

• Workers feel valued by the business viewing them as an asset rather than a cost -> Increased motivation from consideration of social needs -> Higher productivity and better morale -> Increased cost competitiveness from fixed costs spread across greater output
• Improved corporate culture -> Better communication and synergy with workers due to teamwork and emphasis on relations -> Higher productivity with improved efficiency -> Economies of scale -> Increased cost competitiveness. Also reduced absenteeism and improved staff retention, lowering costs of finding new worker
• Emphasis on social factors may neglect financial incentives -> Workers feel they are being manipulated so they don't demand higher wages -> Loss of motivation and potential resistance -> Strikes and industrial action result in disruption to production -> Costs incurred without any output -> Increased total cost per unit -> Less cost competitive
• Teams may argue and disagree -> Fall in motivation -> Disrupts production -> Loss of efficiency and higher costs -> Less cost-competitive

Maslow's Hierarchy of Needs

• Theory suggests needs are classified and represented by a pyramid hierarchy
• Basic needs at the bottom need to be satisfied to move to the next level of the hierarchy
• Self-actualisation – Promotion, being given more responsibility, fulfilling potential
• Esteem – Getting recognition for doing a job well, respect from others, level of status
• Love/belonging – Teamwork, communication. Sense of inclusiveness
• Safety – Job security, and safe working conditions. Assurances
• Physiological – Sufficient wages, good working conditions. Essentials

Pros and cons of Maslow's Theory

• Motivates workers to work up the pyramid and achieve promotion -> Incentivises higher productivity -> Increased cost competitiveness from lower total cost per unit
• Takes into account social and financial factors -> Workers feel valued and considered assets by the business -> Increased motivation and ensures all workers are treated fairly -> Increased staff retention and lower total cost per unit
• Difficult for employees in reality to reach the top of the hierarchy -> Most employees' basic needs will be fulfilled -> No additional benefits or motivation -> Productivity stagnates -> Loss of competitiveness in dynamic markets
• Some levels do not exist for individuals -> E.G Money can be used as a symbol of status alongside a physiological need -> Different workers have different needs -> Some may lack motivation with hierarchy theory -> Lack of synergy with the rest of the workforce -> Fall in overall output and cost of recruiting a new employee

Herzberg's Two Factor Theory

• Categorisation of factors that satisfy and do not satisfy workers
• Motivators: Factors that give workers job satisfaction and motivate them (E.G Praising effort, financial rewards for productivity, responsibility at work)
• Hygiene factors: Factors that prevent workers from being dissatisfied and demotivated (E.G Safe working conditions, minimum wage, adequate supervision)

Pros and cons of Herzberg's theory

• Allows businesses to identify methods to both motivate and prevent demotivation of workers -> Increases staff retention (hygiene factors present) and improves productivity (motivators present) -> Increased cost competitiveness and improved sales from lower prices
• Job enrichment element of theory makes workers feel valued and like assets rather than costs to the business -> Incentivises higher productivity/better quality job of task -> More cost competitive and improved product quality -> Competitive advantage improving market share with lower prices and brand loyalty with higher quality
• Motivators and hygiene factors are subjective and vary for each worker -> Implementation of a motivator (E.G Job enrichment) may lead to demotivation of workers who are Theory X -> Cost outweighs benefit -> Fall in productivity of worker and synergy of workforce -> Less cost competitive and worse corporate culture
• Cost of implementing hygiene factors outweighs benefits -> Maintain minimum motivation rather than improve it -> Some workers may not require any hygiene factors -> Financial cost outweighs productivity gains -> Opportunity cost

Incentives to improve employee performance

Reasons why businesses require motivated staff

• Efficiency 🔗 More work done over less time, to a higher standard alongside reduced wastage.

• Positive customer service.

• Reliability/loyalty (less likely to resign and move to competitors).

Financial methods of motivation

Piecework/piece rate

🔗 For every unit made, the workers get paid a certain amount of money.

• Employees motivated to produce more knowing it will benefit them financially -> Higher productivity -> More units produced within a given period of time -> Lower total cost per unit -> More cost competitive (able to lower prices whilst maintaining profit margins)
• Workers become more experienced and efficient per unit produced -> HR economies of scale -> Lower cost per unit -> More cost competitive
• May be detrimental to product quality -> Workers focus on quantity and sacrifice quality of products -> Lower customer satisfaction -> Fall in brand strength and customer loyalty -> Lower market share -> Opportunity cost
• Pressure on workers to be productive may result in demotivation -> More wastage and human error -> Diseconomies of scale -> Less cost competitive -> Lower profit margins

Commission

🔗 A percentage paid from a sale to an employee.

• Incentivises employees to actively try to make sales to maximise their own welfare -> Higher sales -> Increased exposure for the business -> Increase in brand loyalty if product/service is good -> Higher retention sales and market share
• Commission jobs attract highly skilled workers and salespeople -> Specialists able to maximise sales -> Able to achieve breakeven point faster and improve market share to strengthen brand
• Employees may get paid a base salary regardless of commission -> May be satisfied with base salary and not attempt to maximise sales -> Missed opportunities for gaining market share -> Brand strength not improved -> Opportunity cost
• Employees earning commission may force sales and potentially intimidate customers -> Customers may go to competitors as they don't feel valued by the business -> Loss of market share

Bonus

🔗 Where a business rewards staff based on either the business performance or their individual performance. Also depends on if the business has made a profit.

• Incentivises workers to work harder knowing they will benefit financially if they meet/exceed targets -> Higher productivity/better quality customer service -> Competitive advantage either via cost competitiveness or added value to products -> Increased market share and brand strength
• Loyalty bonuses help increase staff retention -> Staff are incentivised to remain with the business if they're being treated like an asset rather than a cost to production -> Money saved on employing new workers can be spent elsewhere (E.G Financial incentives or worker training to increase productivity)
• A business may give an employee a bonus due to the corporation's success rather than the employee's individual success -> Entitlement may disincentivise higher productivity as the worker knows they will be rewarded regardless of their individual performance -> Costs outweigh benefits -> Opportunity cost
• Employees may expect higher bonuses every year -> Financial strain on the business to maintain employee satisfaction and loyalty -> Costs of bonus outweigh output of employees -> Opportunity cost and wasted resources

Profit share

🔗 Where a proportion of the profits made by a business are distributed to the workforce

• Incentivises employees to be more productive and exceed targets -> Higher profits for the business will benefit individuals financially -> More cost competitive from economies of scale -> Higher profit margins -> Achieves breakeven point faster -> Higher profits to reinvest and improve business further
• Motivates employees to be more responsible and improve product quality as they feel valued by the business as an asset -> Higher product quality develops competitive advantage -> Increases brand loyalty and customer retention -> Able to raise prices due to price inelastic demand
• Profit share is contractual and will be given to employee regardless of productivity and individual performance -> Sense of entitlement for employee may reduce productivity and commitment further -> Financial cost outweighs benefits and output of worker -> Opportunity cost

Performance related pay

🔗 Increased pay for above-average performance.

• Incentivises employees to be more productive and achieve targets -> Achieving targets benefits them financially and improves individual welfare -> Human resource economies of scale for business -> More cost competitive -> Increased sales from reducing prices whilst maintaining profit margins -> Higher profits to reinvest
• Workers know consistently achieving targets set by management may enable them to achieve a promotion and earn a higher salary -> Incentivised to be more productive and perform exceptionally -> Business benefits from improved product quality to strength brand loyalty and customer retention
• Target personalised for each worker -> May be easier to attain for some than others -> Demotivates workers due to issues of fairness and favouritism -> Loss of synergy in the workforce with more arguments disrupting production -> Detrimental to business operations
• Bonus from achieving targets may be too low for employees -> Extra work for an individual may outweigh their personal benefit -> Disincentive to meet or exceed targets -> Lower productivity reduces cost competitiveness -> Lower profit margins -> Lower profit to reinvest

Non-financial methods of motivation

Delegation

🔗 Giving other workers more responsibility or decision-making power in their role

• Workers feel valued by the business -> More motivated with more responsibility -> Improved productivity
• Distributes workload to lower levels -> Allows senior management to focus on other objectives/plans -> Efficient use of time
• Workers may not feel motivated with more responsibility -> Stagnation due to lack of motivation
• Workers may lack confidence and skills to make critical decisions -> Detrimental to operations with waste time or poor decisions

Team-working

🔗 Where workers work in collaboration with other workers to fulfil a common goal

• Workers work with each other and specialise in different roles in the process -> Synergy increases productivity and quality of tasks carried out -> Competitive advantage
• Workload distributed among team members -> Motivation -> Increased productivity and improved quality of work
• Workers may argue and slow down the process -> Fall in productivity and worker motivation -> Higher total cost per unit (D.O.S) -> Less cost-competitive
• Uneven distribution of workload -> Some workers become passengers and reap the rewards of others' hard work -> Cost of paying individuals outweighs their individual benefit to production -> Opportunity cost

Consultation

🔗 Asking for the views of the staff and taking them into account when making decisions.

• Makes staff feel valued with their perspective -> Motivated and increases productivity/customer service quality
• More perspectives on decisions -> Effective decisions more likely to be made
• Time-consuming
• Arguments over decisions may occur

Job enlargement

🔗 Expanding the number of tasks that an employee carries out, usually similar to the task they already do.

• Makes employees feel more valued.
• More work could increase productivity, as the workers know they have more tasks to complete before their deadline.
• Too many jobs may lead to fatigue for the employee and therefore worsen the quality of the final few jobs.
• More work may not motivate the employees and perhaps de-motivate them as they may stress about the high workload.

Job rotation

🔗 Increasing a worker's activities by switching between tasks of a similar level of difficulty.

• Improves worker skillset -> More versatility makes business more responsive to changes in demand and able to employ fewer workers dedicated to a specific role -> Increases cost competitiveness and customer satisfaction -> Strengthens brand loyalty and market share from retention sales
• Ensures employee is always engaged in work -> Not bored from monotonous and repetitive tasks everyday -> Increased motivation increases productivity/quality of customer service
• Takes time to learn new skills for different activities -> Fall in productivity in the short term -> Less responsive to changes in demand -> Loss of customer satisfaction and market share in the short term -> Opportunity cost
• Workers may lack skills to do certain activities -> Quantity over quality results in an opportunity cost -> Loss of productivity/quality of customer service -> Reduced brand strength and lack of competitive advantage

Job enrichment

🔗 Increasing the level of responsibility within a job to make work more challenging and rewarding.

• Workers feel more valued as they have a bigger part to play in the business -> More of an asset than a cost -> Incentivised to be more productive to repay faith -> Higher productivity/quality of customer service -> Increased customer satisfaction/cost competitiveness for business
• An incentive of final reward for the challenge being better -> Self-actualisation or financial -> Increased productivity -> More cost-competitive
• Workers may have a lack of experience in their new task which could hinder the business and its quality -> Employee lacks the skill to deal with new challenges -> Disruption to production and fall in cost competitiveness -> Reduced profit margins
• The challenge may be too much to deal with which may de-motivate staff and slow down the completion of tasks as the responsibility has to be delegated to someone else -> Fall in productivity of staff members and difficulty in dealing with 'demotion' -> Lower staff retention -> Increased costs of employing new worker via recruitment process