Motivating employees (AQA GCSE Business): Revision Notes
Motivating employees
Understanding motivation
When a business has successfully recruited the right people, the next crucial step is ensuring they continue performing at their best for as long as possible. This is where employee motivation becomes essential.
Motivation refers to a person's commitment to doing something. In the workplace, this translates to having "the will to work." However, motivation goes beyond simply working hard or completing tasks - it comes from various sources that drive people to perform well.
Employees can find motivation through:
- Enjoying the work itself
- Wanting to achieve specific goals (such as earning more money or gaining promotion)
- Feeling satisfied when solving problems or completing challenging projects
- Having a sense of purpose and achievement
Understanding what motivates people is vital because motivation directly influences behaviour and performance. A talented employee who lacks motivation is unlikely to perform well, whilst a motivated employee often exceeds expectations and delivers outstanding results.
Benefits of having motivated employees
A well-motivated workforce brings numerous advantages to any business:
Higher productivity occurs when employees produce more per person, leading to lower average production costs. This enables businesses to either sell products at competitive prices or enjoy higher profit margins.
Reduced absenteeism happens because motivated employees are satisfied with their work environment and want to attend work regularly, even when facing minor personal challenges.
Better staff retention and lower turnover results when employees feel valued and motivated to stay. This significantly reduces the costs associated with recruiting and training new staff members - a key function in maintaining business efficiency.
Stronger relationships with trade unions develop when employees feel well-treated and motivated, creating a positive atmosphere between management and staff representatives.
Enhanced company reputation emerges when satisfied employees speak positively about their employer, making it easier to attract high-quality candidates in the future.
Improved quality occurs because motivated employees genuinely care about their work and want to deliver the best possible results for customers.
Financial methods of motivation
Money plays a significant role in motivating people at work, though it's not the only factor. Businesses can use various financial approaches to motivate their workforce.
Salaries and wages
Salaries represent fixed annual amounts paid monthly, based on working a certain number of hours per week. This payment method provides employees with predictable income regardless of the exact hours worked each week.
Wages are typically hourly payments made weekly or monthly, calculated according to the actual hours worked. The employment contract specifies the expected number of hours.
Overtime refers to work performed beyond standard hours, often paid at higher rates to compensate employees for giving up their personal time. However, many salaried employees, particularly in management positions, don't receive overtime pay as they're expected to work whatever hours are necessary to fulfil their responsibilities.
Advantages of salaries and wages:
- Simple for businesses to calculate and manage
- Suitable for roles where measuring individual productivity is difficult
- Easy for employees to understand and budget around
- Provides employers with predictable labour costs
Main disadvantage:
- Offers little incentive for increased productivity or efficiency since pay remains the same regardless of output
Commission
Commission involves paying employees based on the value of sales they achieve. This creates a direct link between effort and reward, as higher sales result in higher pay.
Commission rates vary depending on the product and effort required. Simple products sold door-to-door might attract 5% commission, whilst complex products requiring substantial effort could offer 30% or more.
Worked Example: Commission Calculation
A salesperson sells a product worth £1,000 with a 15% commission rate:
- Commission earned = £1,000 × 15% = £150
- If they sell 10 units in a month = £150 × 10 = £1,500 commission
Advantages for employees:
- High-performing salespeople can earn substantial amounts
- Direct correlation between effort and reward
Advantages for employers:
- Labour costs relate directly to business performance
- Encourages staff to work harder, potentially increasing overall sales
Disadvantages:
- May encourage shortcuts or misleading sales practices
- Can create resentment if some team members earn significantly more than others
- Difficult to modify commission structures once established
- Commission reflects product price rather than sales effort
- May foster unhealthy competition between staff members
Many businesses use commission as part of a broader package, offering basic pay plus commission to balance security with performance incentives.
Profit sharing
Profit sharing systems give employees a portion of business profits, often through dividends or employee share schemes. This approach motivates employees to work for the company's overall success.
Key advantages:
- Creates direct links between individual effort and company performance
- Builds team spirit by removing barriers between management and workers
- Increases employee loyalty to the organisation
- Makes employees more likely to accept changes that benefit overall profitability
The role of money in motivation
Most people are motivated, at least partially, by financial rewards from their work. Getting the "remuneration package" right is therefore crucial for any business.
However, research suggests that whilst poor pay acts as a strong de-motivator, simply paying people more doesn't necessarily result in better motivation. For most people, true motivation comes from within. Money helps people feel valued and satisfied, but it's unlikely to make them work significantly harder or to higher standards.
Why pay matters
Pay is important for several reasons:
- It represents a major cost for businesses, sometimes exceeding 50% of total costs in labour-intensive industries
- People have strong feelings about their earnings and compare them with others
- Pay is subject to important legislation, including minimum wage laws and equal pay requirements
- Competitive pay helps attract skilled employees
- Fair pay helps retain good employees rather than losing them to competitors
Businesses determine pay levels by considering factors such as:
- Minimum wage requirements
- Job complexity and responsibility levels
- Fairness compared to similar roles
- Market rates for comparable positions
- Individual performance and contribution
Non-financial methods of motivation
Small business owners often have advantages in motivating staff because they know each employee personally and understand their individual skills and attitudes. Larger businesses can achieve similar results through well-designed organisational structures that support non-financial motivation.
Job enlargement
This involves giving employees a wider variety of tasks to make work more interesting. Rather than focusing on one repetitive task, employees might rotate between different activities throughout the day. This approach helps prevent boredom and keeps employees engaged with their work.
Job enrichment
Job enrichment provides employees with greater responsibility and more complex, challenging tasks. This gives workers an increased sense of achievement and makes them feel more valued within the organisation.
Management style
The way managers lead their teams significantly affects motivation. Autocratic management styles give employees less freedom and can reduce motivation, though some employees may work harder under strict supervision. Democratic or laissez-faire management styles typically provide more freedom and involve employees in decision-making, which often proves more motivational.
Communication
Regular, honest communication about business developments plays a crucial role in keeping employees motivated. When people understand what's happening in their workplace, they feel more connected and valued.
Training
Providing training opportunities motivates employees by helping them perform their current jobs better and preparing them for future advancement. Training demonstrates that the business values its workers and wants to invest in their development, making employees feel more loyal and motivated.
Essential for motivation: Training not only improves current performance but also shows employees that the company is willing to invest in their future, creating a sense of value and belonging.
Key Points to Remember:
- Motivation is about commitment and "the will to work" - it comes from various sources, not just money
- Well-motivated employees bring multiple benefits: higher productivity, lower absenteeism, better retention, and improved quality
- Financial methods include salaries, wages, commission, and profit sharing - each has specific advantages and disadvantages
- Money is important but isn't the only motivator - poor pay de-motivates, but higher pay doesn't automatically improve motivation
- Non-financial methods like job enlargement, enrichment, good management, communication, and training can be equally effective in motivating employees