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Chapter 13 Motivation at Work Learning Objectives After studying this chapter, the student should be able to: 1. Describe the basic model of performance. 2. Discuss motivation and human needs. 3. Identify the basic process models of motivation and describe an integrative model of motivation. 4. Describe other related theories and perspectives on motivation. Chapter Outline Opening Case: Motivation through Empowerment Reviewing a concert by the Orpheus Chamber Orchestra, New York Times music critic Vivien Schweitzer once wrote that the orchestra played Robert Schumann’s Symphony No. 2 “with remarkable coordination”; the “balance among strings, wings, and brass,” she added “was impressively well proportioned.” Orpheus holds to the principle that its product—the music performed for audiences—is of the highest quality when its workers—the musicians—are highly satisfied and motivated by their jobs. But when it came to general satisfaction with their jobs, orchestra players ranked seventh (just below federal prison guards and slightly above beer sales and delivery teams). On the question of satisfaction with growth opportunities, they ranked ninth (again, below prison guards, though a little higher than OR nurses and hockey players). It’s this disconnect between motivation and satisfaction—and between motivation and product quality—that Orpheus was conceived to rectify, and the first principle in what’s now known as the “Orpheus Process” is this: Put power in the hands of the people doing the work. In most orchestras, the conductor makes more or less autocratic decisions about what will be played and how. The input of the musicians is neither sought nor welcomed, and unsolicited advice may actually be sharply rebuffed—and may, in fact serve as grounds for dismissal. To assist in meeting the inevitable challenges posed by its democratic structure, Orpheus recruited Harvard’s Hackman to its board of trustees in 2007. Hackman immediately helped the orchestra organize itself around two leadership groups. One, the artistic planning group, consists of two staff members and three “artistic directors.” The three artistic directors, who are members of the orchestra, work with other members to find out what they’re interested in working on and to convey their ideas to the planning group. They also serve on the senior leadership team with the executive director, the general manager, and the directors of finance, marketing, and operations. This team determines the best ways to operate given the organization’s commitment to democratic structure, leadership, and roles—the best way to develop artistic agendas; to choose players, soloists, and composers; and to make the team accountable for its own artistic decisions. Introduction Motivation determines how a person will exert his or her effort. More specifically, it represents the forces operating on the person to exert effort, as well as the direction in which that effort will be exerted. An effective manager not only must motivate employees to exert some effort but also must make sure the effort is exerted in a way that it produces organizationally valued outcomes. I. A Basic Model of Performance Any level of performance on any task is not solely a function of motivation—it is a joint function of ability, motivation, and context. The HR manager must play a critical role in determining two of these critical elements: the ability and the motivation sides of performance. The third element, context refers to such things as equipment and materials. Context, however, is usually not the purview of human resources. If the HR manager collected the right information about the job requirements, recruited qualified people, selected the best among these recruits, and then trained them on exactly what they were required to do, it is quite likely that all the employees in the firm would be capable of performing their jobs at a reasonably high level of proficiency. For some of these employees, though, they may still be able to reach desired performance levels by exerting an extraordinary level of effort. In other words, high levels of motivation can compensate for lower levels of ability. Similarly, if an employee was extremely talented (or able), then she or he might be able to perform at a desired level while exerting little effort. So, either ability or motivation can compensate for the other up to a point. II. Motivation and Needs Everyone has needs they attempt to satisfy. For many people on a day-to-day basis, these needs are pretty simple and relatively easy to satisfy. All of their behavior would be aimed at satisfying basic needs in life, and only after these were satisfied they would begin thinking about other, less critical needs. This view includes several need-based theories of motivation. This is similar to Abraham Maslow’s hierarchy of needs. The basic hierarchy is presented in Figure 13.1 and illustrates the five categories of needs arranged from the most basic needs at the bottom to the more complex needs at the top. The lowest level of needs, labeled physiological needs, includes such things as the need for food or water. The next level of needs, security needs, includes anything involving a safe and secure environment. This is followed by social needs, which include the need to have meaningful interactions and relationships with others. Next come esteem needs, which include the need to have a positive view of oneself, and finally self-actualization needs, or the need to reach one’s personal potential. According to the model, only one level of need is capable of motivating behavior at any given time. This level of need is said to be prepotent. Considerable research has been done on Maslow’s theory, and the results of that research suggest that people are motivated by more than one need at any point in time and do not always march neatly up the hierarchy—sometimes they move down as well. In fact, some years later, Clayton Alderfer proposed a variation on Maslow’s theory that he called ERG Theory. Alderfer’s theory substituted three levels of needs for Maslow’s five (and he labeled them existence needs, relatedness needs, and growth needs). These three levels simply collapse Maslow’s five categories into three, but the more important aspect of Alderfer’s theory is that he suggested that people move either up or down the hierarchy, and he allowed for multiple levels of needs being proponent.
HR in the 21st Century: Striving for Balance The good news is that 60 percent of HR executives are satisfied with the work–life services that their companies offer employees. That bad news is that 16 percent of their employees agree with them. According to a study conducted by the Corporate Executive Board, a global network of business professionals, the disconnect results from the fact that HR managers tend to value different services than employees do. More than 60 percent of the 50,000 workers polled in the CEB study specified flextime, schedules as the single most important work–life benefit that an employer can offer. One company that’s happy with its experiments in flexible-work programs in KPMG, an Atlanta-based tax and adult consultancy. KPMG is in an industry in which turnover is traditionally higher for women than for men, but the numbers in the financial industry also reflect broader trends in the U.S. work force. Because of data like these, KPMG launched a campaign a few years ago to transform itself into an “employer of choice” by offering employees a range of options for balancing work and home life. Family-friendly policies fall into such categories as flexibility (flextime/telecommuting, job sharing) and family resources (backup child- and eldercare, discounts at childcare centers). In one recent year, KPMG managed to improve retention of female employees by 10 percent and to increase the total number of women in its workforce by 15 percent. KPMG also says that if it hadn’t offered flexible scheduling to female employees with young children, it would have lost about two-thirds of them.
There are other need-based theories of motivation as well. The best known is probably Frederick Herzberg’s dual factor theory, which identifies motivators and hygiene factors as two sets of conditions at work that can satisfy needs. The research on this theory provides little empirical support for the model. III. Process Theories of Motivation Process theories of motivation are concerned with how a person becomes motivated to perform in a certain way. A. Reinforcement Theory Reinforcement theory is probably the most basic process theory. Stated quite simply, reinforcement theory, usually associated with B. F. Skinner, proposes that all behavior is a function of its consequences. Figure 13.2 presents the model of behavior that underlies reinforcement theory. The model has three components only: stimulus, response, and outcomes. The stimulus is something in the environment that cues one about a behavior. The response is behavior that one exhibits in reaction to the stimulus. The outcomes refer to the consequences that follow the response. Reinforcement theory suggests that the response a person makes to the stimulus is a function of what he or she expects will happen. This means that reinforcement theory is really about learning behaviors through some type of experience. The key here is that individuals learn what consequences to expect over time, and those expectations guide their behavior. If applied to a work context, one can think about a supervisor asking an employee to stay late to work on a special project. On the other hand, the supervisor might say and do nothing after the employee’s late-night assignment. If this were the case, the employees might or might not be willing to stay late again but, eventually, if the supervisor continued to ignore the employee’s staying late, he or she would no longer be willing to remain and work. Finally, the supervisor could respond by suggesting that, because the employee obviously has nothing else to do, she or he should stay late tomorrow night as well. This would represent a negative outcome for the employee, and he or she would not be likely to stay late ever again. A simple set of rules are illustrated in Figure 13.3. The first scenario in Figure 13.3 is known as positive reinforcement and represents a very positive situation from the organization’s perspective. The rewards are likely to lead the employee volunteering more frequently, which is what the organization desires. The second scenario pictured is known as extinction; in this case, extinction is not what the organization wants because it will eventually result in the employee not volunteering to stay late. The third scenario is known as punishment, which, in this case, is disastrous for the organization because it almost guarantees that the employee (as well as any other employee who sees what is going on) will never volunteer to stay late again. Figure 13.3 also presents three scenarios in which the behavior involved is undesirable (poor quality of work). Scenarios 4, 5, and 6 are also referred to as positive reinforcement, extinction, and punishment, respectively, but now the consequences for the organization are quite different. In scenario 4, the situation will be disastrous because it will almost ensure that poor quality work continues. The extinction scenario (5) is reasonably good for the organization. The punishment scenario (6) is actually the best for the organization following incidence of undesirable behavior. When a supervisor works to simultaneously eliminate undesired behavior (through punishment or extinction) and reward desired behavior, it is known as behavior modification. In the preceding example, a supervisor would probably not actually praise an employee for poor quality, but the supervisor could reward that behavior in other ways. Perhaps the supervisor would respond to poor-quality work by losing faith in the employee’s ability to perform good-quality work and ask someone else (presumably more trustworthy) to redo the work. Alternatively, the supervisor may simply assign his job to someone else in the future, and if the job is one that is not really desirable, this would be a reward to the employee who performs poorly. Punishment is quite effective because, when done properly, it establishes a strong link between a behavior and a negative outcome. But one does not always need to punish someone in order to get a behavior to disappear. Punishment (and positive reinforcement) work best when there is a strong link between behavior and consequences. Every time the undesired behavior is exhibited, it is punished. Finally, although rewards and punishment are most effective when they are administered following every behavior (also referred to as continuous reinforcement), they can still work if they are administered some times but not others—that is, by partial reinforcement (it can be applied to punishment as well, but the reward case is simpler). These schedules can vary on two dimensions, so that there are four different schedules of reinforcement that can be illustrated in Table 13.1. First, there are interval schedules versus radio schedules. Interval schedules reinforce behavior as a function of the passage of time. A radio schedule reinforces behavior as a function of how many times it occur. With a fixed interval schedule, employees are paid once every 2 weeks as long as they continue to do their jobs. With a variable interval schedule, employees are promoted as a function of time with the firm, but the amount of time between promotions can vary substantially. With a fixed ratio schedule, an employee is paid on a piece rate such as one dollar for every ten units produced. With a variable ratio schedule, a bonus system is based on performance, with the number of units that must be produced to obtain a bonus varying over time. B. Expectancy Theory Expectancy theory, sometimes referred to as VIE theory, is a fairly complex theory from a cognitive perspective, because it casts the employee in the role of decision maker. Expectancy theory is concerned with three components and the links among them. The components are termed effort, performance, and outcomes and are used in unusual ways. The first link is between effort and performance, and it is sometimes referred to as the expectancy term. Specifically, the effort-to-performance expectancy is a person’s perception of the probability that an increase in effort will result in an increase in performance. The second link is between performance and outcomes and is sometimes referred to as the instrumentality term. Specifically, the performance-to-outcomes expectancy (instrumentality) is the person’s perception of the probability that improved performance will lead to certain outcomes. The final piece of the model is not really a link between two other components but an extra component. Valence refers to how attractive or unattractive an outcome looks to a person. Figure 13.4 illustrates the way the model works and indicates that the model is used to estimate the “force” operating on the employer to increase her or his effort. C. Equity Theory J. Stacey Adams developed another somewhat narrow but useful process theory called equity theory. This theory is most concerned with a person’s perceived inputs to a (work) setting and the outcomes he or she receives from that setting. Figure 13.5 illustrates the comparison process and also shows the three potential results of the comparison process. The theory suggests that everyone calculates the ratio of inputs, almost the way one would consider a return on investment. But once individuals calculate this ratio for themselves, they must determine this by comparing their ratio to the perceived ratio of some other comparison person. The employee then compares his or her input–outcome ratio to the ratio of this other person to determine whether the employee’s ratio is fair. D. An Integrative Model of Motivation Although there are few more models of motivation, need-based models, reinforcement theory, expectancy theory, and equity theory collectively deal with most of the issues facing a human resource manager. But one can integrate the useful information provided by each theory to develop a single, integrative model that will make it easier to discuss what the HR manager should understand about motivation. First, one should note that few of these theories actually conflict with each other. Next, one should note that the five categories of needs from Maslow can be easily mapped onto the three categories of needs used in the ERG theory, so the only issue is how many categories of needs one wishes to consider. Finally, although expectancy theory is much more complex than reinforcement theory, both theories would lead one to make the same basic recommendations: that one should strengthen the links between performance and gaining valued outcomes. With these comments in mind, Figure 13.6 presents a possible integration of the various motivational theories. IV. Related Theories and Perspectives on Motivation A. Goal Theory One of the theories of motivation is goal theory, first proposed by Ed Locke. Goal theory is fairly simple because it is based on the premise that people with goals work harder than people without goals. Difficult goals are also preferable to easy goals because an employee does not need to exert much effort to meet an easy goals. The empirical evidence is rather supportive of goal theory across a wide variety of settings. Goal theory has been used as the basis for some performance-appraisal systems, and is very useful as part of a performance management system. B. Agency Theory Another interesting model of motivation is based almost entirely in economics and is known as agency theory. Agency theory addresses potential conflicts of interests among different groups of stakeholders in the organization. The name of the theory, and some of its basic principles, is derived from the fact that the fact that the individuals who own most modern organizations do not actually run them on a day-to-day basis. Thus, one can think about the owners (including the stockholders) as being the principals for a firm and the management as being their agents. The theory is concerned with the conflicts that arise from this division, and the fact that what is in the best interests of the principals is not always in the best interests of the managers. In fact, principals and agents differ on several important issues. Agents are less likely than principals to take risks when they make decisions because their livelihood tends to depend on the business being successful; agents are also more likely than principals to focus on a short time horizon because it is usually easier to affect firm performance in the short run, and the agents may or may not be working for the firm in the long run. Yet it is not easy for the principals to monitor all the decisions made by the agents, and the agents often have more information about the day-to-day business than do the principals. Agency theory can provide guidance on how to change some parameters of any such situation so that one can align the interest of the groups involved. C. Intrinsic Motivation Most models and theories of motivation are concerned primarily with extrinsic motivation, which requires an external agent to administer a reward that is separate from the actual task or job being performed. This is in contrast to intrinsic motivation. As others have stated it, “Intrinsic motivation is the motivation to do work because it is interesting, engaging, or possibly challenging.” The factors usually associated with high levels of intrinsic motivation at work include a sense of self-determination at work (i.e., “I am doing the work because I want to rather than because someone else is rewarding me”), feelings that one’s skills are being utilized and generally positive feelings about the work. D. Creativity The most commonly used definition of creative behavior at work involves doing things that are innovative and provide some value for the organization. In general, experts characterize creativity as the process of generating new and useful ideas concerning new products, services, manufacturing methods, and administrative processes. Given this broad definition, almost any employee at almost any job could be creative at work. In line with this broader view, a great deal of attention has been focused on how to motivate employees to be more creative at work. As noted above, one factor that has been linked to creativity at work is intrinsic motivation; that is if one can design jobs to be more challenging and interesting, it is more likely that employees will engage in creative behaviors at work. Chapter 14 Managing and Enhancing Performance: The Big Picture Learning Objectives After studying this chapter, the student should be able to: 1. Describe the relationships among performance measured at different levels within an organization and discuss how training, development, and job redesign can help improve performance. 2. Discuss the role of alternate work arrangements in motivating and enhancing performance. 3. Describe the role of incentive pay and identify different programs for individual-based and team-based incentive plans. 4. Discuss the best ways to deliver performance feedback and the issues involved with feedback and describe the basic operation of the ProMES system. 5. Discuss how organizations evaluate performance-enhancement programs. 6. Discuss how recent world events have affected the role of HR. Chapter Outline Opening Case: Building a Great Place to Work NetApp, a computer-storage and data-management company headquartered in Sunnyvale, California, is no stranger to best-places-to-work lists. Since 2005, it has consistently been ranked among the best multinational work places in the world. NetApp likes to cite employee-survey scores as a key reason for its regular appearance on the annual list compiled by Fortune and the Great Place to Work Institute. High on the list of things that keep workers satisfied and motivated is a culture that encourages employee input and sharing of ideas. Most of all, NetApp employees seem happy with the level of freedom that they’re given in the pursuit of both organizational and personal goals. The principle of trust at NetApp extends beyond management’s confidence in the ability of informed employees to make good operational decisions. When things get done—when individuals and teams perform and achieve goals—NetApp has a number of programs in place to recognize them. In order to recruit and retain top talent, it regularly monitors the competitiveness of its pay rates among high-tech companies, and in one recent year, 98 percent of all employees received incentive bonuses totaling $47 million. Introduction The responsible and professional HR manager does all this in an ethical way and does not violate the law or anyone’s rights, but the ultimate goal of the HR activities and programs is to enhance organizational performance. Many of the techniques available for performance enhancement focus on improving performance of the individual or group; the assumption here is that if the performance of all the individuals working in a firm improves, then so will firm’s performance. I. Enhancing Performance at Different Levels It is critical that any performance-enhancement intervention must ultimately improve firm-level performance. This is the level that determines the long-term survival of the firm, generates profits for potential profit sharing, and determines the company’s stock price. A. Training and Development Training and development activities within an organization are a very basic form of performance-enhancement intervention. The training process begins with some type of needs assessment. The outcome of this assessment provides information about gaps between present and desired levels of performance and therefore provides a roadmap of what needs to change in order to improve performance. It is possible to adapt training models to individuals, or groups and teams. It is even possible to adapt training methods to ensure that all team members share mental models of how the team should perform, which is essential for effective teamwork. Training and development activities are a very flexible, and often easy, way to begin the performance improvement process. B. Job Redesign A much different approach to enhancing organizational performance is through the redesign of jobs. Specifically, this technique involves changing—redesigning—jobs so that the work itself will motivate employees to exert greater effort. This motivation is stimulated by making the job more interesting or more challenging. Job rotation involves systematically moving employees from one job to another. The jobs do not change, but instead, the employee moves from job to job. For this very reason, however, job rotation has not been very successful in enhancing employee motivation or satisfaction. Jobs that are amenable to rotation tend to be relatively standard and routine. Based on the assumption that doing the same basic task over and over is the primary cause of worker dissatisfaction, job enlargement was developed to increase the total number of tasks that workers perform. As a result, all workers perform a wide variety of tasks, presumably reducing the level of job dissatisfaction. Although, job enlargement does have some positive consequences, they are often offset by several disadvantages: Training costs usually rise Unions argue that pay should increase because the worker is doing more tasks The work often remains boring and routine even after job enlargement A more comprehensive approach, job enrichment, assumes that increasing the range and variety of tasks alone is not sufficient to improve employee motivation. Thus, job enrichment attempts to increase both the number of tasks a worker does and the control the worker has over the job. To accomplish this objective, managers remove some controls from the job, delegate more authority to employees, and structure the work in complete, natural units. These changes increase the subordinate’s sense of responsibility. Another part of job enrichment is to assign new and challenging tasks continually, thereby increasing the employees’ opportunity for growth and advancement. The job characteristics approach is an alternative to job specialization in that it does take into account the work system and employee preferences. As illustrated in Figure 14.1, the job characteristics approach suggests that jobs should be examined and improved along the following five core dimensions. Skill variety is the number of tasks a person does in a job. Task identity is the extent to which the worker does a complete or identifiable portion of the total job. Task significance is the perceived importance of the task. Autonomy is the degree of control the worker has over how the work is performed. Feedback is the extent to which the worker knows how well the job is being performed. The higher a job rates on these five dimensions, the more employees will experience various psychological states. Experiencing these states, in turn, presumably leads to high motivation, high-quality performance, and low absenteeism and turnover. Finally, a variable called growth-need strength is presumed to affect how the model works for different people. People with a strong desire to grow, develop, and expand their capabilities (indicative of high growth-need strength) are expected to respond strongly to the presence or absence of the basic job characteristics; individuals with low growth-need strength are expected not to respond as strongly or consistently. Work teams represent a much different way of approaching job design. Under this arrangement, a group is given responsibility for designing the work system to be used in performing an interrelated set of jobs. These groups are sometimes referred to as self-directed work teams or autonomous work teams, and they are permanent parts of the organizational architecture. The original impetus for the reliance on work teams comes from a famous series of studies conducted in England by the Tavistock Institute and dealing with the coal-mining industry. The researchers determined that it was important for miners to have social interaction, and so they suggested that the miners work in teams. The researchers also identified and suggested several changes in the actual coal-mining jobs themselves. As it turned out, the job changes were also conducive to team settings in that they increased the need for coordination. But work teams are not without problems, and they certainly are not the answer in all cases. II. Alternative Work Arrangements A. Alternate Work Schedules The two most common alternatives to the traditional work-week are programs known as flexible work hours and compressed workweeks. Employees working under flexible work hour plans usually must still work a full 40 hours per week and, typically, 5 days a week. The employees have control, however, over the starting and ending times for work on each day. In almost every case, there is a core time each day when every employee must be at work. The remaining hours (flextime) can be made up in any way that the employee prefers. Figure 14.2 illustrates how an organization might function with one type of flexible work schedule. These plans are believed to reduce stress because the employee does not have to travel during peak commuting times and can have more control over commute. They are also believed to increase job satisfaction because the employee is given more control over the work environment and a stronger feeling that he or she is trusted by the organization. They are not as feasible in organizations that place a strong emphasis on teams; otherwise, no serious problems associated with their use are reported.
HR in the 21st Century: Work Is Where You Do It Once upon a time “going to work” meant getting dressed in appropriate attire at a predetermined time, driving or using public transportation to get to an office or other work site, and staying there for a predetermined period of time before returning home. But for some people today, “going to work” may mean slipping into shorts and t-shirt and walking down the hall to their home office. More and more organizations are allowing employees to work from home on at least an occasional basis. This general term for this practice is telecommuting. On the plus side, many employees like telecommuting because it gives them added flexibility. Organizations may benefit for several reasons as well: (1) they can reduce absenteeism and turnover since employees will need to take less “formal” time off, and (2) they can save on facilities such as parking spaces because fewer people will be at work on any given day. On the other hand, although many employees thrive under this arrangement, others do not. Some feel isolated and miss the social interaction of the workplace. Others simply lack the self-control and discipline to walk away from the breakfast table to the desk and start working. Regardless of the downside, the costs seem to be outweighed by the benefits and the percentage of the workforce that telecommutes is on the upswing. Some companies are also using work at home time as a reward for top performers. And government organizations—federal, state, and local—have also embraced the concept of telecommuting and are increasingly encouraging their employees to work from home on a regular basis.
Compressed workweeks are arrangements in which the employee works the required number of hours (typically 40) but does so in fewer than 5 days. The employee gains the flexibility of 3 days off a week, presumably making it less likely that he or she will lose work time to deal with personal business. These schedules are also well suited for employees who work at sites that are difficult to get to such as offshore drilling rigs. These schedules are not for everyone, however, and longer workdays are related to increased accidents in some settings. Nonetheless, compressed workweeks are extremely popular with some employees. Even when they are not a problem, flexible schedules reduce the amount of time that employees interact with their co-workers, which makes it more difficult to develop a strong culture or even a strong esprit de corps. The HR manager must try to find ways to replace socializing activities with other experiences so that employees, especially new employees, can learn more about their co-workers and become more fully socialized into the organization. B. Alternate Work Sites Table 14.1shows the number and distribution of people currently working under an alternative work arrangement. Home work programs include arrangements that are often referred to as cottage industries. It is more common, however, to operate in what can be called an electric cottage. Employees take office work home with them and complete it on home computers. They can then return to the office to collect more work. They are connected to that office via a modem, fax machine, wi-fi, and e-mail. Telecommuting is simply the logical extension of the electronic cottage. Under this arrangement, employees may do almost all of their work at home and may even receive assignments electronically. This arrangement provides employees with the ultimate in flexibility because they can choose the hours they work and even the location. A growing body of evidence suggests that this arrangement increases job satisfaction and even productivity, and it also allows organizations to use the services of individuals who may not be able to work at a given site. Finally, larger organizations can save considerable amounts of money if they do not need large (or any) real office space. Cisco Systems, a pioneer in telecommuting, estimates that, by allowing employees to work at home, it has boosted productivity by 25 percent, lowered its own overhead by $1 million, and retained key knowledge workers who might have left for other jobs without the flexibility provided by the firm’s telecommuting options. Alternative work sites present a more serious challenge to the HR manager. In the past, the AFL-CIO has complained that home work arrangements allow management to impose unfair working conditions on employees, and it also makes it more difficult for unions to organize workers. As with alternative work schedules, communication among employees is difficult under these arrangements, and it is extremely difficult for a new employee to become socialized. In addition, some individuals may simply lack the self-discipline to get the work done in a completely unconstrained environment, although the available evidence suggests that this outcome is not much of a problem. What does seem to be a problem is that these alternative work sites are likely to increase employees’ sense of alienation at work. They have no social connections and no support from co-workers, and so loyalty and commitment to the organization is unlikely to develop. III. Incentives and Performance-Based Rewards The most basic form of incentive compensation is merit pay, which generally refers to pay awarded to employees on the basis of the relative value of their contributions to the organization. Merit-pay plans, then, are formal compensation plans that base at least some meaningful portion of compensation on merit. The most general form of merit-pay plans is to provide annual salary increases to individuals in the organization based on their relative merit. Merit, in turn, is usually determined or defined based on the individual’s performance and overall contributions to the organization. However, it is important for the organization to have valid and reliable measures for merit. Merit generally refers to performance, but for the plan to have motivation and performance effects, people throughout the organization must clearly understand what the firm means by the term merit. Another basic approach is based on systems of skill- and knowledge-based pay. Under these systems, instead of rewarding employees for increased performance they are rewarded for acquiring more skills or knowledge. But these skills or this knowledge is related to what the organization believes it will need in the future. Although problems are associated with these systems and their administration, they offer an alternative to more traditional merit-pay systems and provide a more strategic long-term focus for the organization. In addition, they allow the organization to move employees toward focusing on more than just basic productivity. Incentive compensation systems are among the oldest forms of performance-based rewards. Under a piece-rate incentive plan, the organization pays an employee certain amount of money for every unit she or he produces. But such simplistic systems fails to account for factors such as minimum-wage levels, and they rely heavily on the assumptions that performance is under an individual’s complete control and that the individual employee does a single task continuously throughout his or her work time. Thus, most organizations that try to use incentive compensation systems today use more sophisticated methods. A. Individual Incentive Pay Plans Individual incentive plans reward individual performance on a real-time basis. Rather than increasing a person’s base salary at the end of the year, an individual instead receives some level of salary increase or financial reward in conjunction with demonstrated outstanding performance in close proximity to when that performance occurred. Individual incentive systems are most likely to be used in cases where performance can be objectively assessed in terms of number of units of output or similar measures rather than on a subjective assessment of performance by a superior. Some variations on a piece-rate system are still fairly popular. Although many of these systems still resemble the early plans in most ways, a well-known piece-rate at Lincoln Electric illustrates how an organization can adapt the traditional model to achieve better results. For years, Lincoln’s employees were paid individual incentive payments based on their performance. Perhaps the most common form of individual incentive is the sales commission that is paid to salespeople. For example, sales representatives for consumer products firms and retail sales agents may be compensated under this type of commission system. In general, the person might receive might receive a percentage of the total volume of attained sales as her or his commission for a period of time. Some sales jobs are based entirely on commission, while others use a combination of base minimum salary with additional commission as an incentive. Finally, organizations occasionally may use other forms of incentives to motivate employees. For example, a nonmonetary incentive such as additional time off or a special perk might be useful incentive. As with merit systems, incentive compensation systems have some shortcomings and weaknesses. One major shortcoming is that they are practical only when performance can be measured easily and objectively. Most managerial work does not fit this pattern and, in fact, is often characterized by ambiguous performance indicators that are difficult to assess. Thus, it may be much more difficult to provide valid and appropriate incentives for these individuals. Individual incentives are also likely to focus attention on only a narrow range of behaviors, perhaps at the expense of other behaviors. B. Team and Group Incentive Plans In addition to incentive plans designed to improve individual performance, there are plans that focus on group or team performance. These programs are particularly important for managers to understand today because they focus attention on higher levels of performance, and because of the widespread trends toward team- and group-based methods of work and organization. A fairly common type of group incentive system is an approach called gainsharing. Gainsharing programs are designed to share the cost savings from productivity improvements with employees. The underlying assumption of gainsharing is that employees and the employer have the same goals and thus should share in incremental economic gains. In general, organizations that use gainsharing start by measuring team- or group-level productivity. The team or work group itself is charged with attempting to lower costs and otherwise improve productivity through any measures that its members develop and that its manager approves. Resulting cost savings or productivity gains that the team or group is able to achieve are then quantified and translated into dollar values. A predetermined formula is used to allocate these dollar savings between the employer and the employees themselves. One specific type of gainsharing plan is an approach called the Scanlon plan. The Scanlon plan has the same basic strategy as gainsharing plans because teams or groups of employees are encouraged to suggest strategies for reducing cost. However, the distribution of these gains is usually tilted much more heavily toward employees, with employees usually receiving between two-thirds and three-fourths of the total cost savings that the plan achieves. The cost savings resulting from the plan are not given just to the team or group that suggested and developed the ideas but are instead distributed to the entire organization. In addition to gainsharing and Scanlon plans, other systems are also used by some organizations. Some companies, for example, have begun to use true incentives at the team or group level. As with individual incentives, team or group incentives tie rewards directly to performance. The incentives are distributed at the team or group level, however, rather than at the individual level. Some companies also use nonmonetary rewards at the team or group level. These rewards come most commonly in the form of prizes and awards. Other kinds of team- or group-level incentives go beyond the contributions of a specific work group. These incentives are generally organization wide. One longstanding method for this approach is profit sharing, in which some portion of the company’s profits is paid at the end of the year into a shared pool that is distributed to all employees. Various types of stock-based incentives are also ways to tie incentives to the performance of the firm, although these are more typically used with executive employees rather than hourly employees. For example, in many companies, executives may be given a certain number of stock options, which enable them to purchase shares of the company’s stock at a fixed price. Thus, under a stock-option plan an executive may be given 1,000 options to purchase the firm’s stock at $5 per share (the current trading price) for as long as 1 year. If the stock price rises to $6 a share (presumably because of something the executive did), the employee can exercise his or her option: buy the shares at $5, sell them at $6, and make a $1,000 profit. Alternatively, some firms offer stock-purchase plans, which are typically offered to all the employees of a firm rather than just the executives. Under these plans, employees are entitled to the stock only if they remain with the company for a specified period of time. If they leave before that time, they have no rights to the shares of stock. Employee stock ownership plans (ESOPs) represent another group-level reward system that some companies use. Under the ESOP, employees are gradually given a major stake in the ownership of a corporation. Although group reward systems can be effective in some situations, they are also subject to difficulties. For example, not every member of a group may contribute equally to the group’s performance. Also, for incentive plans based on firm profitability, employees may not see how their efforts lead to increased profits (often referred to as a line-of-sight problem). Employees may come to view the group-level incentive as a normal part of their compensation and consequently be unhappy or dissatisfied if that reward is withheld 1 year. IV. Performance Management and Feedback A. Performance-Management Techniques The basic notion underlying this theory is that all behavior is a function of its consequences—whether actual or anticipated—and so one can shape behavior by arranging for the “right” set of consequences. Behavior Modification is the systematic and simultaneous application of positive reinforcement and either punishment or extinction (or both). Goal theory suggests that employees will exert the greatest effort when they have specific, difficult goals to work toward. Thus, from a performance-management perspective, managers should provide employees with difficult, specific goals and then reward them when these goals are achieved. Performance feedback plays an important role in both behavior modification and goal setting, and it is also seen as a useful tool in its own right for performance management. Instead of providing feedback annually, in tandem with the annual performance-appraisal interview, it might be more appropriate for managers to provide feedback on an ongoing basis. Feedback might be provided on a daily or weekly basis, depending on the nature of the job, and it should focus on various characteristics of performance, including both effective and ineffective performance. Another useful method for improving performance feedback is to have the individual appraise his or her own performance in advance of an appraisal interview. This method involves having employees think about their own performance over the rating period, which helps sensitize them to areas where they have done good and ineffective jobs. This method also lends efficiency to the process because the manager and the subordinate may be able to focus most of their time and effort in a performance assessment where they disagree. It is also important during a performance feedback interview to encourage participation and two-way communication. Participation and two way dialogue, however, allow the individual to express his or her own feelings and opinions about job performance and to provide other kinds of feedback as appropriate. It is also important for the manager to try to balance positive and negative feedback. Many managers tend to focus on the negative. Also, throughout the interview and the performance-management process, it is essential that the manager take a developmental and problem-solving orientation to the process. In other words, it is important not to focus on the individual as a person by saying things such as “You are a bad employee.” The performance-appraisal interview should conclude with a future-oriented discussion of what will happen next. This discussion often includes topics such as setting goals for correcting performance deficiencies and discussing the possibility of pay raises, promotion prospects, and similar kinds of awards. Of course, if performance is judged to be deficient, the feedback interview may focus on topics such as the establishment of a probationary period (after which employment may be terminated), the development of a training strategy for improving performance, and so forth. Several years ago, however, a study reviewed the research on the effectiveness of feedback interventions, beginning with early studies from the nineteenth century. This study found out that, although feedback was effective in almost two-thirds of the cases, it was not effective in the rest. In fact, in a large number of cases, providing feedback to employees actually lowered subsequent performance. B. ProMES The productivity measurement and evaluation system (ProMES) incorporates ideas from goal setting to feedback, and it includes incentives for improvement. More important, it includes a method for tying performance at the individual and group levels to organizational productivity. The other important part of the ProMES process involves the various “connections” among the components. The procedure is based on a model of motivation that is similar to the expectancy model. Thus, these connections are concerned with the relationship between effort and performance and between performance and attaining outcomes, as well as the link between obtaining outcomes and satisfying needs. V. Evaluating Performance-Enhancement Programs First, any true measures of organizational success must tie back the organization’s strategic goals. In addition, several more general indexes of firm-level performance could be used to help evaluate the effectiveness of this intervention. The first set of indexes can be considered human resource indicator. These would include measures such as turnover rates, absenteeism, accident rates, and even general labor costs. In addition, there are measures of profitability, productivity, and controllable costs. These measures actually are related, with specific measures making more sense in some businesses than in others. VI. HR in the Headlines A. HRM and the Arab Spring During 2011-2012, an amazing chain of events took place in the Arab world. Tunisia, Egypt, and Libya all saw an over-throw of deeply entrenched governments, dominated (in the last two cases) by strong leaders. These governments were replaced through democratic elections. Although most discussions center on world politics, there is also concern over implications for the management of multinationals that operate in these countries, and with the ways in which these developments might influence the HRM process. Today, there are more than 1.6 billion Muslims in the world, living in more than 200 countries. The first problem that is encountered when one discusses HRM in Muslim areas is that cultural differences in various parts of the world affect HRM practices. In general, though, HR systems in Muslim countries tend to be value-based and draw heavily upon the Holy Qur’an (or Koran). In addition, HR systems in Muslim countries rely (to a greater or lesser extent) upon Sharia, which is the entire body of Muslim law. But values based on the Qur’an itself are the most important part of Muslim human resource management systems. In fact, Ali et al. identified several implications of the Ten Islamic Commandments for human resource management. Concerns for both distributive and procedural justice are clearly important in Muslim societies, but these concerns and the practices would also be quite welcome in most U.S. and Western-based companies. B. Privacy and Cybersecurity in the 21st Century Privacy and cybersecurity have become much more complex and critical in today’s workplace. As a result, HR managers must be more conscientious about protecting the privacy of both business and employee information. In today’s workplace, every desktop computer, laptop, or hand-held device is vulnerable to attack. Intruders hacking into a computer system, malware, lost laptops, and insider threats all combine to present serious challenges to companies. These concerns have led to the proposal of the National Cybersecurity and Critical Infrastructure Protection Act (H.R. 3696), which will probably be passed late in 2014. This act would provide for the Secretary of Homeland Security to coordinate with government and business leaders to facilitate national efforts to protect sensitive information from cyberthreats. In addition to these internal and external threats to security and privacy, it is also increasingly clear that the government itself poses a threat, especially in view of its relationship with many top social media companies. In 2013, everyone learned about PRISM (Planning Tool for Resource Integration, Synchronization and Management), a program used by the NSA. PRISM has been described as a data tool designed to collect and process foreign intelligence that passes through American servers. Perhaps the most frightening aspect of the PRISM program is that it has been carried out with the apparent cooperation of Microsoft, Yahoo, Google, Facebook, PalTalk, AOL, Skype, YouTube, and Apple (but not Twitter), and it allows the NSA to collect information from e-mails, video chats, photographs, documents, and collection logs that helps the agency track foreign assets. These companies have denied giving the NSA direct access to their servers, and this appears to be the case. Furthermore, requested information was sent to a special, secure server to which the NSA has access and so can obtain that information. C. Toward a Two-Class Benefits System? For decades, sociologists have often characterized U.S. society as having three “classes” based on income: upper-, middle-, and lower-class. In recent years, though, concerns have been raised about the fact that the middle-class (however defined) has been shrinking, leading America toward a two-class system. In blunt terms, some people talk about U.S. becoming a society of “haves” and “have-nots.” In some ways, this same trend may be emerging in the workplace in terms of employee benefits. D. HR in Faith-Based Businesses Managing so-called faith-based businesses provides some interesting perspectives on how to run a business. A faith-based business is one that is founded and managed in ways that explicitly acknowledge religious beliefs. In the United States, most faith-based businesses incorporate Christian beliefs into their day-to-day management practices. Sometimes faith-based businesses may also encounter issues they may not have foreseen. For instance, a t-shirt printer in Kentucky is being boycotted because he refused to print shirts promoting an upcoming gay rights parade. Instructor Manual for Human Resources Angelo Denisi, Ricky Griffin 9781285867571
