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IMPROVING EMPLOYEE MOTIVATION WITH MONEY.
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Examines whether pay/wages is a useful method of improving employee motivation.... More...
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Paper Abstract:
Examines whether pay/wages is a useful method of improving employee motivation. Links the concept of money to motivation theory & link with job satisfaction. Discusses causal models; hierarchy of needs model; Expectancy theory; goal setting; Management-By-Objectives (MBO). Assessment of money as the prime motivator. Performance-based compensation system. Concludes that compensation is not the only motivator.
Paper Introduction:
MONEY AS A MOTIVATOR: A REVIEW
Introduction
This review focuses on the following question: How useful is pay as a method of improving employee motivation? In the review, the concept of money as a motivator is linked to motivation theory.
Defining Motivation and Motivation Theory
Motivation is the process of persuading individuals to act in a desired way. Within most organizational environments, motivation is the process of persuading members of the organization to perform in a productive manner. The need to motivate members of an organization to perform in a productive manner is a well-accepted premise. Disagreement exists, however, in relation to the best means of motivating individuals within organizatio
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When the lower orderneeds are absent in the life of an individual, the satisfaction of thoseneeds become the center of the individual's life. First, money providespeople with the ability to acquire material benefits, and second, money"represents status and worth in society, therefore, more money equals moresuccess" (Gupta & Shaw, 1998, p. Chicago: Rand McNally. Journal of Business, 53, 315-331. New York: John Wiley & Sons. Some researchers have considered the effects of thesefactors separately, whereas others have summed or averaged them into aglobal measure. & Yetton, P. Bassett (1994)contended further that the use of money as a motivator "undermines anemployee's sense of intrinsic task interest" (p. Lambert, C., & Lambert, V. (Ed.). Locke, E. Assessing Money as a Motivator Gupta and Shaw (1998) are among the latest of that group of humanresources management theorists, experts, and commentators to contend thatmoney is the strongest motivator in relation to obtaining desired levels oforganizational performance and commitment. Herzberg's motivational factors included such things asopportunities to achieve, opportunities to gain responsibility, and soforth, as motivational factors in the organizational life of an individual,the absence of which would not result in any disincentive to perform. In such a relationship, each party makes demands onthe other, and each party provides something to the other in return. Acommittee of eight managers was charged with the responsibility of creatinga new compensation and benefits plan. (1954). (1991). Maidani, E. The author, however, also drew attention to astructural problem associated with a performance-based compensation system. Rosenberg(1998) reviewed the practice in many public accounting firms, wherein the"firms pay all their partners equally even though they do not make equalcontributions to the organizational success" (p. These insights were then used in thedesign of a third plan which was found to be the best for the company"(Burchard, 1997, p. New York: Harper &Bros., Publishers. 46). Professional firms have encountered similar problems. Relationships among facultypractice involvement, perception of role stress, and psychologicalhardiness of nurse educators. References Bagozzi, R. At ageneral level, these theories tend to fall into content and processcategories. New York: WorldPublishing. Under an MBO regime,organizational superiors and subordinates jointly establish performanceobjectives for the subordinate. Wright (1994) argued further that higher performancegoals often are attained through trade-offs in product quality levels. Rosenberg(1998), thus, recommends that professional firms develop performance-basedcompensation systems that that account for varying levels of capabilitiesand contributions by perform. A. New York:McGraw-Hill. H. There are several types of reward; however,compensation is usually considered to be the primary reward for performance(Rubery, 1995). Bassett (1994) contended that performance-based compensation bribes"employees to sustain their interest and to exert effort in their jobs" (p.21). New York: John Wiley & Sons, Inc. (1995, September). The measurementof satisfaction in work and retirement. This argument holds that moneymotivates people regardless of the type of work in which they are involved. The most consistent criticism is that allocation systems areunfair, and, thus, good performance is not always rewarded (Marsden &Richardson, 1994). Organizations: Rational, natural, and opensystems. Journal of Management Studies, 32(5), 637-654. Nurses' job satisfaction: Ameta-analysis of related variables. L. (1973). Compensation will alwaysbe an important motivator. Another concept, management by objectives (MBO), also is used tomotivate individuals in organizational environments. Another motivational theory is goal setting. The nature and causes of self-esteem,performance, and satisfaction. A failure to adjust performance-based compensation plans according to performance outcomes, however, causesan organization to risk the loss of potentially talented workers (Gummer,1993). Operationally, motivation andjob satisfaction has been investigated as a person's affective staterelative to several job facets, including the supervisor, the work itself,pay, promotion opportunities, and coworkers (Smith, Kendall, & Hulin, 1969;Blegen, 1993). Performance-related pay and theprospects for gender pay equity. Used wisely, moneyas an incentive can result in substantial benefits" (Gupta & Shaw, 1998, p.3 ). Performance-based compensation is gaining in popularity as amotivational technique. Gummer (1993), in contrast to Bassett (1994), pointed out thatcompensation has been found to be effective in the motivation of workers toperform better, and that rewards enable organizations to attract moretalented individuals. Expectancy theory, thus, could be appliedeffectively in an analysis of an individual's performance on any job;however, the theory would be less useful in the prediction of career choicedecisions. Marsden, D., & Richardson, R. Goal setting is acognitive theory of motivation based on the premise that people have needsthat can be thought of as specific outcomes or goals they hope to obtain.Goal theory makes the assumption that human behaviour is purposeful andthat goals direct and sustain an individual's energies towards performing aparticular action (Locke & Latham, 199 ). D. Gupta, N., & Shaw, J. Thetwo-factor model divided the factors involved in an individual'sorganizational life into hygiene factors and motivation factors. TheUS Shoe Corp. (1994, March-April). What's in it for me? Law & Society Review,28(1), 113-148. Vroom and Yetton (1973) offered the expectancy theory of motivation.Expectancy theory, as an example of a universally applied theory ofmotivation, is a cognitive theory based on an individual's perceptions "ofthe likelihood of obtaining desired outcomes contingent on" specificactions by the individual (Mastrofski, Ritti, & Snipes, 1994, p. 3 ). One such testfound that public sector workers tended to value extrinsic, or hygiene,factors to a greater extent than was true among private sector employees.For public sector employees, both motivation factors and hygiene factorswere found to be sources of job satisfaction (Maidani, 1991). InDunnette, M. In the review, the concept ofmoney as a motivator is linked to motivation theory. Most contemporary content theories of motivation and job satisfactionfocus on specific factors of job, organization, and individual and theinterrelationships between these factors. Performance-based compensation may be applied in organizations otherthan professional firms. This contention is based on the attribution of two primarycharacteristics of money that motivate people. Herzberg, Mausner, and Snyderman (1959) developed the two-factor modelof motivation that is often confused with Maslow's hierarchy of needs. With respect toorganizational commitment, organizations and their employees are in anexchange relationship. H. Thus, it was Maslow's contention that other means had to beemployed to motivate individual within organizational structures.Specifically, factors had to be introduced that would enhance anindividual's opportunity to attain self-actualization. Thus,employees exchange their performance for organizational reward within aninstitutional structure. This body of work hascome to be known as content theories of motivation and job satisfaction(Scott, 1992). Organizational behavior. Burchard, T. Herzberg's two-factor theory continues to be tested. Within most organizational environments, motivation is theprocess of persuading members of the organization to perform in aproductive manner. The lower order needs are primary, such as food, shelter,sex, and physical security, while the higher order needs involveaffiliation, love for others, and self-actualization. R., & Snipes, J. The need to motivate members of an organization toperform in a productive manner is a well-accepted premise. The causal models wereprocess-oriented in that the researchers attempted to identify and assessthe types of organizational phenomena that influenced individualperceptions of satisfaction that, in turn, would or would not motivate themto perform productively. McClelland (1961) offered a dynamic theory of needs that implied thatmotivation was need driven and that need drivers change with situations.McClelland (1961), however, tended to emphasize the need to wield power asa prime motivator. Scott, W. 46). They contend that humanresource managers should "design incentive schemes based on the premisethat money is an effective and highly potent motivator. (1997). Perspectives on thedistribution of rewards in organizations. Luthans, F. L. (1959). "This committee devised twocompensation plans that were eventually found to be limited. P. Compensation and Benefits Review,3 (2), 26-31. Performing for pay: Theeffects of merit pay on motivation. (1983). The causal models did not provide the strength and preciseness ofanalysis required to accurately define the relationships betweenmotivation, job satisfaction, and various organizational outcomes, and todevelop effective strategies to promote desirable organizational outcomesthrough the enhancement of motivation and job satisfaction (Blegan, 1993).Researchers then oriented studies toward the identification of the specificfactors that affected job satisfaction and could motivate individualswithin organizational environments (Locke, 1983). Maslow, A. What the company failed to realize initially, however,was the level of difficulty that was involved in maintaining perceptions ofcompensation equity which shifting from a focus on individual output to afocus on work group output. Defining Motivation and Motivation Theory Motivation is the process of persuading individuals to act in adesired way. The psychology of science: A reconnaissance. Seldom, however, will compensation be the onlymotivator, and frequently may not be the strongest motivator. Work and the nature of man. Not all partners are created equal.CPA-Journal, 68(l), 46-51. This problem is the choice of either overpaying average workers orcontinually reducing the compensation of such workers to reflectcomparative performance deteriorations. (199 ). (1993). Other widely used measures of job satisfaction divide theconstruct into intrinsic and extrinsic components (Lambert & Lambert,1993). The motivationto work. The causal models, then, measured and assessed theeffects of motivating factors on organizational outcomes primarily withinthe context of need-value conflict. Compensation and BenefitsReview, 26(3), 41-49. This contention,however, is a minority opinion, and it is important to bear in mind that,while legitimate and important differences of opinion exist in relation tothe performance-based compensation, the American economy is not structuredto depend too heavily on altruism. The objectives typically are related torewards for the attainment of the objectives, a combination that isintended to motivate performance (Luthans, 1997). (1993, Spring). (1998, January). Comparative study of Herzberg's two-factortheory of job satisfaction among public and private sectors. (1993, January/February). Administration in Social Work,17(2), 123-138. M. A., & Latham, G. Expectancytheory and police productivity in DUI enforcement. 21). 118).Expectancy theory functions through four factors, as follows: (1) theeffort/performance expectancy (individuals must perceive that they possessboth the ability and opportunity to perform); (2) the instrumentality ofperformance (a recognized linkage between specific behavior and reward mustbe in place); (3) the performance/reward expectancy (the level of effortrequired to obtain a specific level of reward must be known); (4) and thereward/cost balance (potential rewards must be commensurate with the effortrequired to obtain them). Firms observing thispractice argue that such a scheme both reduces "conflicts and fostersteamwork" (Rosenberg, 1998, p. Gummer, B. (1994). Bassett, G. NewYork: Harper & Row, Publishers. Conclusion Different approaches to compensation and benefits management can leadto success. D. A. (1994, June). Motivation is closely linked with the concept of job satisfaction.The early efforts to measure motivation and job satisfaction resulted inthe development of causal models (Locke, 1983). Herzberg, F., Mausner, B., & Snyderman, B. In most modernsocieties, however, the primary needs are satisfied. 45). Maslow'shierarchy of needs and Herzberg's two-factor model are not identical.Herzberg (1966) included such factors as compensation, working conditions,and so forth in the hygiene group. Merit pay increases are a mistake.Compensation and Benefits Review, 26(2), 2 -22. McClelland, D. Still others consider the construct only in a global context(Bagozzi, 198 ; Blegen, 1993). British Journal of IndustrialRelations, 32(2), 243-261. Motivation and personality. P. (6th ed.). These models were not completelysatisfactory (Locke, 1983). Thus, real motivation-especially within organizational structures-results from individual desiresto satisfy their higher order needs (Maslow, 1966). A. Herzberg, F. A., Kendall, L. D., Ritti, R. (1998, March-April). A theory of goal setting andtask performance. B. Maslow, A. (1966). Vroom, V. Handbook of industrial and organizationalpsychology. (1961). Asatisfactory status for these factors would motivate an individual to seekexceptional levels of performance. Mastrofski, S. (1994, May-June). Disagreementexists, however, in relation to the best means of motivating individualswithin organizational environments (Luthans, 1997). Englewood Cliffs, New Jersey: Prentice-Hall, Inc. B. (1966). Rosenberg (1998) concluded fromconsultations with 288 professional accounting firms "that the compensationsystem should be based on performance, motivate partners to perform what isrequired of them, reward the values held to be most important by partners,be perceived as fair by partners, flexible and involve the marketingdepartment" (p. Rubery, J. Leadership and decision-making.(Pittsburgh, Pennsylvania: University of Pittsburgh Press. Wright, P. Rosenberg, M. New York: IrvingtonBooks. Despite thefailure of these early initiatives, a moderate level of success wasachieved and lessons were learned. (4th ed.). The approach adopted by an organization, however, must conformto the needs of the organization and its employees and the plan should bereviewed periodically to assess such conformance. Employees in organizations where the approach hasbeen applied, however, tend to have mixed opinions about performance-basedcompensation. 3 ). Nursing Research, 42(1), 36-41. Blegan, M. Several theoretical approaches for the explanation and development ofmotivation within organizational environments have been advanced. Let the evidence speak:Financial incentives are effective!! A. Maslow (1954) dealt with motivation through the theory of thehierarchy of needs. An unsatisfactory status of any ofthese hygiene factors could result in a disincentive for the individual toperform productively. Phenomenological factors incorporated in thecausal models were primarily those associated with individual needs andindividual values. The nature and causes of job satisfaction. Journal of Nursing Education, 32(4), 171-179. Goal setting and monetary incentives:Motivational tools that can work too well. H. A performance-based compensation systemestablishes a link between performance and reward. By contrast, however, a satisfactory status for thefactors would not motivate the individual to exceptional levels ofperformance. M., & Hulin, C. Maslow (1954) recognized the significance of lower order needs asmotivators, yet contended that, in modern societies, these needs weregenerally met. US Shoe recognized at the outset that thereorganization would require substantial changes to its compensation andbenefits system. (198 , July). (1997). PublicPersonnel Management, 2 (4), 441-448. If the contentions of this author are correct, however, one couldquestion to entire concept of compensation differentials. Englewood Cliffs, New Jersey: Prentice-Hall, Inc. 46). Locke, E. IIE-Solutions, 29(3), 3 -37. The hierarchy divided human needs into higher andlower orders. W. encountered problems when the company attempted to redefineits compensation and benefit system when the company reorganized itsmanufacturing processes around a team-based work group structure. R. The achieving society. Relying on money as the prime motivator, however, does not ease thetask of developing an effective compensation and benefits system that canbe isolated from other factors affecting organizational performance. Smith, P. money as a motivator: a review Introduction This review focuses on the following question: How useful is pay as amethod of improving employee motivation? (1969). (1997, March). An experiment an compensation. Rosenberg (1998), however, contendsthat this model of compensation management may, in fact, "lead todissatisfaction and failure to maximize performance" (p.
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