STUDENT NUMBER: 20024044

University of Reading Business School

Managing People and Organisations Coursework Essay 1

Topic: Employees are only motivated by financial rewards or penalties. Discuss.

To: Dr John Latsis Student Number: 20024044 Submitted: Friday 18th Nov 2011

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Abstract Motivating the workforce of an organisation to work more effectively towards the organisations goals is perhaps the most fundamental task of management. Usually, organisations motivate their employees to perform effectively by offering rewards for satisfactory performance and perhaps punishing them for unsatisfactory performance. Over the past hundred years (post Industrial revolution) there has been an evolution in the view of what the term rewards actually means in an organisational context. In this essay we will explore the importance of employee motivation in an organisation; literature of employee motivation; different arguments about role played by financial rewards and penalties in the process of motivating employees (and its implications) and contemporary view; motivation of employees in 21st century; conclusion. Introduction The core of any organisation is its employees. Organisational theorists have always suggested that Employees are the most vital assets of any organisation and success of an organisation in realising its goal is highly depends on the performance of its employees. Thus, it is important to concentrate on the factors affecting the performance of the employees in an organisation. All organisations need motivated employees who are highly productive and efficient in their working environment. Employees who are motivated and willing to exert efforts toward the accomplishment of organisational goals are the most important resources towards organisational success. Thus for any organisation, the challenge is to ensure the motivation of its employees. Generally employees are motivated by intrinsic or extrinsic factors. In intrinsic motivation, there are no rewards except work itself. Employees are satisfied by the sense of achievement and motivated by self-actualisation. However, financial reward comes in picture in extrinsically motivation (Deci, 1971). Most of the organisations consider financial rewards as a key motivator for an employee which encourages its employees to do better, harder and be more productive. Though financial rewards can stimulate productivity in short term, but is not sustainable in longer run. It can be argued that financial rewards can only avoid dissatisfaction rather that motivation. Similarly fear of penalties can cause specific behaviour (increase in productivity) which might reflect as motivation however this behaviour short lived as employee resentment can be counterproductive in longer run.
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The effectiveness of any organisation to maintain quality employees is linked to the ability to align individual goals with the company goals. When goals are aligned, morale is high for all the motivated employees and organisation is better capable to compete in industry. Motivation Performance of the employees in an organisation is related with the ability, opportunity and motivation (Ivancevich & Matteson, 1988). Ability or qualities are a function of skills, education, relevant experience and trainings. Opportunity is related to the framework or infrastructure required to perform a task. Finally, motivation is the desire to achieve organisation goal or goals and willingness to exert effort for it. In other words, motivation is alignment of organisation goals and values between employees, management and leadership. Motivation leads to performance and productivity when other conditions are met (ability and opportunity). But, motivation has an advantage over others as opportunity and ability tend to be stable, specific and difficult to change for a person whereas motivation has flexibility and can be manipulated by some means. Moreover, it is apparent that in the absence of willingness to perform or lack of motivation to perform; ability and opportunity will not generate the productive results. Literature of Motivation In Principles of Scientific Management, Taylor (1911) considered employees as just another input to the production of goods in an organisation and studied time & motion of steel worker. Taylor suggested that workers are more productive if pay is related to performance. Taylors Theory of materialistic motivation was criticized by later theorists. In 1924 to 1932, Elton Mayo conducted Hawthorne Studies. This study found employees are not just motivated by financial rewards and employee behaviour is linked to the very human nature. Hawthorne Studies began human relations approach of employee motivation. Later in 1942, Maslow derived hierarchy of needs of human and arranged these needs in series of levels. He proposed that, as soon as needs on lower level is met, higher level needs demand satisfaction. Maslow kept Physiological needs on bottom, which needs to be fulfil first before satisfying needs on higher lever such as safety, Love, Esteem and Self-actualisation. In 1957, Herzberg derived the relation between motivation and satisfaction and how they are related. Traditionally, satisfaction and dissatisfaction were considered as opposite to each other. However, Herzberg motivation-hygiene
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theory proposed that satisfaction is caused by fulfilment of higher order needs (in Maslows hierarchy of needs) and dissatisfaction is caused by failing the lower order needs. In year 1960, McGregor introduced X and Y theory. Theory X is based on assumption that manager has authority to take decisions, have thorough knowledge and excludes workers from decision making process. Theory Y emphasise on importance of self-motivation and accomplishment in achieving organisation objective of employees. In 1970s, Victor Vrooms proposed expectancy theory, that human is motivated by pursuit of pleasure and avoidance of pain. Also, people make decisions on basis of their beliefs and motivated to do things to achieve specific goal. Argument 1: Importance of financial rewards and penalties Organisations often give financial rewards (such as high salary, bonus, other financial incentives) to attract potential employee, retain the existing employees and management. Taylor theory of scientific management support organisation action and suggest that the financial rewards increase productivity. Another theory which support reward based productivity is Reinforcement theory. It proposes that productivity is not based on need but on the relationship between behaviour (e.g. work performance) and its consequences (e.g. pay). It means if the results (financial rewards, bonus, etc) are considered positive by an individual, then the behaviour is positively reinforced. When behaviour is positively reinforced, the individual is more likely to repeat the behaviour (Skinner, 1969). However, it can be argued that financial reward does not motivate people. Herzberg motivation-hygiene theory suggests that satisfaction and dissatisfaction influence the motivation of employee. Dissatisfaction is caused by failing the lower order needs (in Maslows hierarchy of needs) and satisfaction is caused by fulfilment of higher order needs and leads to employee motivation. Thus mere financial reward does not motivate the employees. BACIE (British Association for Industrial and Commercial Education) drafted below graph on the basis of Herzberg motivation-hygiene theory. It shows frequency of satisfaction and dissatisfaction with various aspects of need. Company policy, supervision, work condition and salary are four major cause of which can lead to dissatisfaction. Achievement, recognition, work and responsibility are four major cause of which can lead to satisfaction. This scenario makes it evident that financial rewards merely lessens the dissatisfaction and does not affect satisfaction.

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* Source: 1978, Herzberg's work by BACIE

Argument 2: White collar employee and Blue collar worker A blue-collar worker is a member of the working class who typically performs manual labour and earns an hourly wage and usually do not have long term commitment. (Wikipedia). Blue collar worker usually dont have any long term commitment and the relationship between worker and company is just work and salary basis. Thus blue-collar worker is more likely to motivate by financial rewards (higher pay per day, bonus) and show increase in productivity when financial rewards are given. Taylors theory support that the financial rewards induce increase in performance. However, blue-collar workers are different from white-collar workers. White-collar workers are salaried professional and an educated workers that performs semi-professional office, administrative, and sales coordination tasks (Wikipedia). White collar employees have more commitment towards the job (or can say career) and mostly have long term relationship with the organisation as compared to blue collar job employees. White collar employee is less likely to be motivated by the financial rewards. Assuming the physiological needs of white collar employee is already satisfied, the employees are more likely to be motivated by other human needs such as pride, esteem, self-actualisation, etc (Maslows hierarchy of needs theory).
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Difference in the source of motivation of blue collar and white collar workers can be explained by another theory by Sam Glucksberg. Glucksberg conducted experiment the candle problem on cognitive performance test and concluded that the sensitivity for extrinsic motivation varies depending on the complexity of tasks person performed (graphically shown in below figure). This theory justify that blue collar worker who perform less complex tasks are inclined towards extrinsic motivation thus more likely to be motivated by financial rewards, whereas on other hand white collar employees who perform more complex tasks inclined towards intrinsic motivation thus are less likely to be financially motivated.

Argument 3: Contemporary View Capitalist system focuses on maximizing profit and minimizing cost (Wallerstein, 1980). In capitalism, the relationship between workers (labour) and the owner (entrepreneur) is on just the basis of exploitation where the owner can pressure the workers to work longer hours with minimal wages for higher profits of the organisation. Some organisations encourage the hard working to achieve organizational goals. More often than not, posters and slogans showing 'working hard for your organization' are used freely to remind the need to consistently work hard. To support the work hard policy, rewards are often used to ensure that the employees stay loyal and do not complain. Some companies even deliberately set their goals very high for attain high performance from employees. One top management, quote: My philosophy is always, give a man more than he can finish. That way you can be sure you are getting the most out of him. (Sayles & Strauss,
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1968). This implies that the management use whatever opportunity to squeeze employees to the limit to achieve goals set by them. Then why organisations give financial rewards? One thought is if the organisation share profits with the employees than organisation has less tax to pay. Employee motivation in 21st Century The main objective of employee motivation is to keep employees working at full potential. Financial rewards are effective for short term, where people motivated by extra money to work extra. However if looking from organisation point of view, it is not always possible to promote or offer exciting opportunities to everyone in the organization to keep them motivated, thus financial rewards are simplest way to keep employees satisfied. Organisations generally use performance based pay which can be beneficial for employees as well as organizations. It has been observed that performance based pay increases the retention of efficient employees and increase employees productivity which leads to better performance for the organization. (Wendy Ginsberg, 2008). Also employees must believe that pay system is fair and transparent. With pay for performance, one can re-evaluate employee motivation, employee retention and individual as well as group productivity. Also, make sure rewards are aligned with desired performance. (Cynthia Fisher, Lyle Schoenfeldt and James Shaw) In some scenario, financial rewards are merely effective then other. Financial motivation is may not be sufficient for highly paid employees. These employees might be motivated by other benefits, such as awards ceremonies, executive club membership or a window office. There have been changes in both individual and organisational working practices. 21st Century employees focus on work-life balance, virtual working, home workers and formal performance management processes. Many times salary is not enough to keep employees working for an organisation and employees must be constantly motivated to work for organisation.

Other factors effecting employee motivation

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There are a variety of factors which can influence employee motivation. They may be the level of pay and benefits, fairness of the promotion system, quality of working conditions, relationships with co-worker or job itself. Below are few major factors which can effect employee motivation:
Age: Worker in high age group is more satisfied than younger workers. Because they have

now stagnant live, their personal life was well settled and they get approximately all what they want as compared to younger workers.
Social responsibility: In the 1970s, researchers conducted a study comparing moral

incentive and financial incentive for motivation of blood donation. Their discovery: when people are given a small stipend for donating blood rather than simply being praised for their selflessness, they tend to donate less blood. (William E. Upton, 1973).
Time: People tend to motivate by diverse factors in different times. For example, during the

current economic downturn (which can be compared to 1929 Great Depression) employees inclined towards job security as an important aspect of job satisfaction.
Length of service: This is also a determinant factor which influences the individual

satisfaction level. Workers at preliminary stage have experienced more job satisfaction but when they reaches the age of 45 to 55 than job satisfaction level will go down and it will again high after this stage.
Personality: The worker who are cope with their superior, colleagues, family and also with

employer or management experienced more satisfied as compared to individual who are not like this.

Conclusion It is evident that one cannot generalize motivation theory for entire world and for every time. Human behaviour is a complex and can be affected by numerous reasons. It is even more difficult to understand motivation for every individual. Generally motivation can be intrinsic or extrinsic. Type of motivation depends upon the type of needs. Intrinsic motivation consists of recognition, responsibility and challenging job.
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However, extrinsic motivation includes pay, allowance and bonus. Moreover, motivation is not one time trigger for high performance of employees. Employees need to be motivated continuously. In 21st century organisations use performance based pay to motivate their employee to make reevaluate employee motivation regularly and individual as well as group productivity. Regardless of which theory of employee motivation is followed, the outcomes of research conclude that interesting work, appreciation, pay, good working conditions and job security are important factors for motivate.

References

McGregor, The Human side of Enterprise, 1960, (British Association for Industrial and Commercial Education).

Handbook of Management Training Exercises published in 1978, Herzberg's work by BACIE Glucksberg, S., Journal of Experimental Psychology, 1962, p3641 Sayles, L. R. and Strauss, G., Human Behaviour Organization, 1968, Prentice Halls. William E. Upton, "Altruism, Attribution, and Intrinsic Motivation in the Recruitment of Blood Donors", 1973.
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Skinner, B. F. Contingencies of reinforcement 1969 2008

Wendy Ginsberg, Pay-for-Performance: Linking Employee Pay to Performance Appraisal, Cynthia Fisher, Lyle F. Schoenfeldt, and James B. Shaw, Human Resource Management, p. 541.

Deci, E. Effects of externally mediated rewards on intrinsic motivation. Journal of Personality and Social Psychology, 1971, p18, p105-115 Wikipedia.com, Definition of white collar and blue collar workers

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