Self Esteem/Self Efficacy and Communication/Team Building

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5Motivation in the Workplace

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Learning Objectives

After reading this chapter and studying the materials, you should be able to:

Describe the nature of motivation in the workplace, given the intersection of personal motivation and organizational motivation. Use the job characteristics model to improve employee motivation and performance. Apply the job performance model motivational system. Employ goal-setting theory and employee involvement programs to motivate workers. Implement pay and reward systems that motivate employees.

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Personal motives can be impacted by circumstances at and outside of work, many having to do with one's stage in life. What motivates you?

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5.1 The Nature of Motivation in the Workplace What do you want from your job? This seemingly simple question may require a somewhat complicated answer. Early in a career the answer might be, "A paycheck." Over time, personal motives grow as life circumstances evolve. A young, single employee might remain protective of time away from work to enjoy other activities. A new mother or father may be driven by the desire for health insurance and the �lexibility required to provide care for a child. Later in life, a challenging job with greater responsibility and the opportunity to mentor others might become a powerful motivational force, as can being vested in a company's pension plan without worrying that it will disappear or be reduced.

Chapter 4 of this book described a series of motivational theories from the content, operant process, and cognitive process perspectives. Motivation occurs as a result of individual needs, the reinforcements employees encounter, perceptions of equity, or the drive to achieve and receive intrinsic and extrinsic valences. The resulting behaviors mentioned were those that are advantageous to the company, such as effort and productivity on the one hand and stopping undesirable habits (smoking, goo�ing off ) on the other. Much of the time, these outcomes also bene�it the employee; however, the worker can be equally driven by motives outside of the company's interests or in�luence, and this sometimes results in con�licts between personal and organizational motives.

Consequently, there may be circumstances in which a contrast can be drawn between personal motives and organizational motives. At times these are one and the same. At others, they may be in opposition. As an example, your motive may be to be promoted to a higher rank. The organization's motive will be to �ind the person best suited to the job, which may or may not be you. A personal motive would be to obtain the highest possible level of compensation. The organization, seeking to remain competitive, may need to hold down payroll costs.

The work–life balance dilemma offers another example of a con�lict between personal and organizational motives. On the one hand, employees want a reasonable work schedule, one that allows them to start each day fresh and energized, feeling as though they have had enough time with family. On the other, competitive forces and deadlines may drive the manager to demand overtime and travel of subordinates. A successful management program seeks to reconcile these competing goals in a way that would motivate employees. The following OB in Action feature box regarding Zehnder Communications provides an example.

When seeking to develop a program of motivation in the workplace, it may be helpful to consider Figure 5.1. This simpli�ied model suggests that managers can develop successful motivational systems by using a more comprehensive approach, incorporating the contextual elements that are featured in this chapter: (1) the nature of the job, and (2) other organizational processes including goal setting programs and pay systems. In other words, although the theories described in Chapter 4 identify some elements of the organizational context, additional factors should be considered when seeking to enhance workplace motivation.

Figure 5.1: Personal and organizational goals

While companies and individuals have separate goals that motivate them to accomplish certain tasks, sometimes these goals can overlap.

Management's task should be to optimize the overlap between personal and organizational motives. In the remainder of this chapter, various programs designed to achieve that outcome are described.

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OB in Action: Zehnder Communications

The world of advertising and marketing communication is a dynamic, challenging, and continually evolving environment. For years, advertising was a relatively straightforward process. Traditional media outlets (television, radio, newspapers, magazines, and billboards) were selected, and individuals created messages designed to resonate with potential customers that use those media.

Today, such an approach would be outdated and would likely fail. The world of social media and instant communication has shifted the tasks to be performed and the methods required to complete them. As advertising expert Dave Woods noted,

Mobile marketing is exploding. You can't really separate mobile marketing from 'traditional' e-commerce . . . because 80% of folks are using mobile devices when they are away from home and work and more standard e-commerce sites in their of�ices for their jobs and at home when they shop online. (personal communication, November 1, 2015)

He points out that a single message might need to be adapted to �it more than a dozen different screen sizes and types.

Such a situation creates signi�icant tension and pressure to perform for advertising agency employees, who face continuing demands to create advertising and promotional messages that lead to measurable results. Any advertising program must meet the needs of a diverse set of venues in which communications will be sent.

Zehnder Communication has been able to successfully overcome many of these challenges. The company has been noted as a top 10 place to work by local media outlets (in New Orleans and Baton Rouge) for more than a decade (New Orleans CityBusiness, 2016). Jeffery Zehnder, founder and CEO, believes part of the key to success is employee freedom and empowerment.

One application of his managerial philosophy is the VAN program. Vacation-as-needed program allowed employees to take time off when they need it, if doing so did not interfere with or slow down the activities of others in the company.

The combination of an exciting work environment with a caring and supportive management team has created success for the organization. As Zehnder states, "As experts, it's not enough that we remain well versed in new media trends. We owe it to our clients to remain at the forefront of innovation, dedicated to developing new ways to reach the consumer" (personal communication, May 4, 2013).

Re�lection and Application Questions

1. What motives do you believe are most important to advertising agency employees? 2. Do you think that freedom and empowerment, which play key roles in Jeffrey Zehnder's leadership style, would succeed in every type of

organization? 3. What is your reaction to the VAN program? Would it work in every type of company?

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5.2 Job Design and the Job Characteristics Model This section focuses on the ways job design and the job characteristics model can be used to enhance employee performance. Ensuring employees are satis�ied with and inspired by the job context can become a key aspect of motivation in the workplace. Job design refers to the practice of preparing and/or changing a job description to meet organizational requirements. The job characteristics model offers insights into the interactions between a person and a job.

Job Design

For years, the process of job design largely took place in the human resources department, where personnel specialists worked with management to assign tasks to individual jobs. Table 5.1 displays three standard steps of job design.

Table 5.1: Standard steps of job design Step Description

Job analysis Assigning speci�ic tasks to speci�ic jobs

Job description A formal list of tasks and duties placed in the company manual, handbook, or website

Job speci�ication A listing of eligibility requirements or job quali�ications, used in recruiting and selection processes

Over time, it has become apparent that job descriptions and job speci�ications produce expectations regarding the types of tasks to be performed and the skills needed to complete those tasks, both in applicants and in those who are hired. When such expectations are met, the employee will likely report higher levels of satisfaction with the job and commitment to the organization (Irving & Montes, 2010). Conversely, unmet expectations ("This isn't what I expected when I took this job") result in dissatisfaction, decreased motivation, and at times a job search or the intention to quit (Bridges, Johnston, & Sager, 2007).

The Job Characteristics Model

The job characteristics model offers insights into the interactions between a person and a job (Hackman & Oldham, 1980). The approach suggests that the nature of a job in�luences several personal and organizational outcomes. A progression takes place in which core job characteristics affect critical psychological states, which in turn lead to various organizational outcomes (see the top portion of Figure 5.2; the bottom portion includes other variables that will be discussed later in this section).

Figure 5.2: Job characteristics model

The job characteristics model describes the interaction between a person and a job. Core job dimensions lead to critical psychological states, which in turn lead to personal and work outcomes. Variables such as employee growth and need strength, combined with employee knowledge and skill, in�luence both perceptions of the core job dimensions as well as personal and work outcomes.

Source: Adapted from Hackman, J. R., & Oldham, G. R. (1980). Work redesign, pp. 78–80. Upper Saddle River, NJ: Pearson.

Core Job Characteristics The �irst element in the job characteristics model shown in Figure 5.2 contains �ive core job dimensions that can be modi�ied to improve personal and work outcomes. Each characteristic can be examined to see whether it is present or absent in any form of employment.

Skill variety refers to the number of skills needed to be able to successfully perform a given job. Some jobs involve relatively few skills, whereas others require a complex set. For example, pressing shirts in a dry cleaning operation requires far fewer skills than performing surgery or working as an auto mechanic.

Task identity refers to the extent to which a job includes the completion of an identi�iable piece of work. A musician composing a song possesses a strong level of task identity. In contrast, a lathe operator who makes legs for tables, alongside three other lathe operators, has little or no task identity.

Task signi�icance, or human interaction, re�lects the degree to which a job has a bene�icial impact on other people, or in other words, is the work helpful and meaningful to others? Someone who works as a nurse or psychologist performs a job with high task signi�icance. Someone tabulating information to be entered into a computer database may not.

Autonomy is the amount of freedom an employee has to perform a job in a manner in which the individual sees �it. A mechanic who decides which car to repair �irst, chooses the parts needed to make the repair, and completes the job without asking a supervisor's opinion or permission holds a high level of autonomy. The holder of an outbound telemarketing job in which phone numbers are dialed by a computer and the employee follows a prompted script to make presentations while being carefully supervised does not have autonomy.

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An important condition for psychological satisfaction at work is that the tasks one performs are meaningful.

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Feedback is the degree to which the employee receives information about how well a job has been performed. Such information often results from the job itself. The individual can see the result of his or her efforts when the output is complete and identi�iable. For instance, making a sale or successfully installing a computer program and seeing that it works creates jobgenerated feedback. Many retail sales positions offer high degrees of feedback, as the sale is either made or not made. Individuals that provide support services, such as clerical employees, often receive little feedback on a routine basis, other than comments by supervisors.

Critical Psychological States The extent to which a particular job ful�ills each of the core job characteristics contributes to an employee's perceptions of the job itself. These perceptions, or the critical psychological states displayed in Figure 5.2, are associated with employee motivation, performance, and job satisfaction as positive outcomes and withdrawal behaviors such as absenteeism and intentions to turnover as negative outcomes (Hackman & Oldham, 1976).

A job with a high level of skill variety, task identity, and task signi�icance provides the employee with the feeling that the work he or she performs is meaningful. A meaningful job makes the workplace more palatable, as the employee uses his or her skills in completing tasks. Meaningfulness also emerges from helping others.

A job with a high level of autonomy creates feelings of greater responsibility regarding the outcomes of the work. This critical psychological state involves receiving credit when tasks are accomplished and being held accountable when they are not. Abraham Maslow was among the �irst to note the craving for esteem as a motive, which was reinforced by David McClelland in the need theory of motivation, as discussed in Chapter 4.

Finally, a job that provides a high level of feedback gives the employee knowledge of the actual results of work activities. Intrinsic motives are associated with both experienced responsibility and knowledge of results. An employee who succeeds gains additional valence from the actual achievement, in terms of self-ef�icacy and positive self-regard.

Personal and Work Outcomes Higher levels of core job characteristics lead to improved psychological states and therefore improved outcomes, or the lower portion of the model shown in Figure 5.2. Lower degrees of core job characteristics negatively in�luence psychological states and result in reductions in these valued outcomes. The job characteristics model suggests that the four ideal personal and work outcomes are

high internal work motivation, high-quality work performance, high satisfaction with the work, and low absenteeism and turnover.

High internal work motivation, the �irst outcome, represents the individual's desire to perform at a high level. This motivation occurs without the presence of extrinsic rewards such as pay and bene�its. The same holds true for the other three outcomes. High-quality work performance, the second outcome, refers to the worker's ability to produce a greater quantity as well as better quality, of goods or services. High satisfaction with the work means that employees will be less likely to damage organizational property or �ile grievances against supervisors and may be more likely to make positive statements about the company. Low absenteeism and turnover are indicators of satisfaction with work.

These outcomes create value for the person and the company. A motivated individual who produces high quality work and expresses satisfaction with that work will likely show up to work each day and will be less inclined to look for another job. From the organization's perspective, companies offering jobs with high values in the core dimensions receive the bene�its of motivated employee efforts, including improved performance in terms of quantity and quality, and spend less time �illing positions for workers who do not arrive and those who quit (Grif�in, 1991).

Table 5.2 summarizes the elements involved in each of the job characteristics model's key variables.

Table 5.2: Summary of key variables in the job characteristics model Core job characteristics

→

Critical psychological states

→

Personal and work outcomes

Skill variety Task identity Task signi�icance

Experienced meaningfulness of the work High internal work motivation High-quality work performance High satisfaction with the work Low absenteeism and turnoverAutonomy Experienced responsibility for the outcomes of the work

Feedback Knowledge of the actual results

Moderating Variables There is one complication to the principles stated in the job characteristics model. In organizational research terminology, employee growth need strength and employee knowledge and skill are moderating variables. Moderating variables specify conditions under which relationships depicted in Figure 5.2 are present. In the job characteristics model, the variables either strengthen or weaken the predicted relationships. Consequently, any analysis of workplace motivation would be in�luenced by the moderating variables (Johns, Xie, & Fang, 1992).

Employee growth need strength refers to an individual's degree of self-esteem and desire for self-actualization. The job characteristics model posits that the �ive core job dimensions will be more important to and valued by individuals who have the high growth need strength personality characteristic. This means that employees with higher levels of growth needs are those who will be most motivated by the core job characteristics and subsequent critical psychological states. High growth need strength is an expression of a strong degree of internal motivation. It is connected to the desire to provide high-quality work, levels of satisfaction with a job, and, when paired with higher levels of the core job characteristics, results in lower levels of absenteeism and turnover. The relationships between the core job characteristics and personal/job outcomes will be weaker or nonexistent for employees with low levels of growth need strength.

The same pattern takes place for employees with higher (and lower) levels of knowledge and skill. The job characteristics model will be more predictive of positive employee and company outcomes when employees are skilled and have high knowledge levels. Companies employing individuals with low levels of

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knowledge and skill are less likely to receive the bene�its of offering challenging and exciting jobs posited by the model.

Motivating Potential Score (MPS) The relationship among the variables shown in Table 5.2 results in a predictive index, which allows for calculation of the strength of the core job characteristics as motivating factors (Nadler, Hackman, & Lawler, 1979). The motivating potential score (MPS) formula is calculated as follows:

MPS = skill variety + task identity + task signi�icance

× autonomy × feedback 3

The score can be calculated by an outside observer (e.g., someone in the HR of�ice), a researcher investigating the usefulness of this approach, by a supervisor, or by the individual employee.

In any case, to achieve a high motivating potential score, a job must be high on at least one of the �irst three factors that lead to experienced meaningfulness at work. Then both autonomy and feedback must be present. A high motivating potential score indicates that the personal and work outcomes displayed in Table 5.2 will result. A substantial amount of research indicates support for the job characteristics model using the motivating potential score and other measures (Fried & Ferris, 2006).

Note that an MPS score by itself has little meaning. Only when one job is compared with another will the resultant scores allow for interpretation. For example, the job of administrative assistant could be compared to that of an outbound telemarketer. To calculate the MPS score, a value would be assigned to each variable, such as 1=low and 5=high for skill variety, task identity, task signi�icance, autonomy, and feedback. For the administrative assistant, one could reasonably assume the following values:

MPS = 4 (skill variety) + 3 (task identity) + 5 (task signi�icance)

× 3 (autonomy) × 4 (feedback) 3

The resulting score would be:

MPS = 12

× 3 × 4 = 64 3

For the telemarketer, the values might be:

MPS = 1 (skill variety) + 1 (task identity) + 1 (task signi�icance)

× 1 (autonomy) × 3 (feedback) 3

In that instance, the score would be:

MPS = 3

× 1 × 3 = 9 1

The analysis would imply that the motivating potential of the job of administrative assistant would be slightly more than seven times higher than that of an inbound telemarketer, regardless of all other factors, including pay, bene�its, and other company conditions. The administrative assistant should be much more motivated, simply by the job he or she performs daily.

Criticisms of the Job Characteristics Model Two criticisms of the job characteristics model exist. The �irst is that the evaluation of each variable is subjective, not objective. For instance, when considering the MPS formula for the administrative assistant, do you believe each of those values is correct? One person may believe skill variety deserves a score higher than the "4" indicated; another may think 4 is too high. The same holds true for every other item. Assessments of all the factors in the model are personal rather than a hard-and-fast number or degree.

Second, it may not be the case that every person values each of the variables. For instance, a person with a low locus of control, who believes destiny is determined by outside forces including chance, luck, fate, or more powerful people, may not value autonomy and in fact prefer direction and hands-on management. Another individual may not enjoy interacting with other people, which would mean higher task signi�icance (human interaction) may not be a good thing. The model assumes all workers are the same and have the same motives— which may or may not be the case. The inclusion of the moderating variables shown in Figure 5.2 is partly designed to address this issue.

In summary, despite the criticisms, the job characteristics model offers insights into the interactions between a person and a job. A progression takes places in which core job characteristics contribute to the critical psychological states necessary to improve personal and work outcomes, noting that growth need strength and individual knowledge and skill could accentuate or reduce those effects.

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5.3 The Job Performance Model of Motivation The job performance model developed by Mitchell and Daniels (2003) provides an example of an integrated approach to conceptualizing motivational processes in the workplace (see Figure 5.3). The approach accounts for individual characteristics as well as the organizational context and opens the door to discussion of the impact of contextual variables on employee motivation. The job performance model incorporates the following elements: individual characteristics, job context, motivational processes, motivated behaviors, and actual performance.

Figure 5.3: Job performance model

The job performance model suggests that job context contributes to motivational processes and motivated behaviors through enhancement or limit, whereas individual characteristics contribute to these motivations by skill level. All of these factors work together to contribute to actual performance.

Source: Adapted from Mitchell, T. R., & Daniels, D. (2003). Motivation. In Borman, W. C., Ilgen, D. R., & Klimoski, R. J., Handbook of psychology (Vol. 12, p. 226). New York, NY: John Wiley & Sons.

Individual Characteristics

Every person possesses a unique set of skills, abilities, and mental functions. Motivated behaviors become more likely when the employee's skill set and mental disposition match the requirements of the job. Both elements are crucial to performance. An individual who does not have the required job knowledge may �ind the work exciting and challenging but cannot perform at high levels because a key ingredient is missing. At the same time, an individual may be able to perform required job tasks, but emotions, moods, beliefs, or values may reduce the willingness to apply those skills. Someone who is depressed, believes the company acts unethically or discriminates, or is mad about an unrelated issue may be less willing to apply his or her work skills. The result will be fewer motivated behaviors and a lower level of performance.

The Job Context

Just as each person brings a distinct set of attributes to the workplace, every work environment will be different from all others. Even in organizations that produce the same products and services and use basically the same building design—such as fast-food restaurant chains, big-box retailers, �inancial service providers such as Edward Jones, or car maintenance companies such as Jiffy Lube or Goodyear Tire—differences still appear. Although the physical environment may be the same and the jobs are equivalent, supervisory styles and in-house social norms may differ.

A pleasant and positive job context, as noted regarding the Zehnder Communications company earlier in this chapter, contributes to individual and company success by enabling employees to do their best work. Through processes such as mentoring and rewarding, which help to build self-ef�icacy and self-esteem in individual workers, motivated behaviors can be increased. A company with an unpleasant physical environment, poor reward system, unquali�ied or inept supervisors, or counterproductive cultural norms limits motivated behaviors (Kamdar & Van Dyne, 2007).

Motivational Processes

Mitchell and Daniels consider motivational processes to include arousal, attention, direction, intensity, and persistence. These factors constitute cognitive processes, or motivational forces, in the terms of expectancy theory. Arousal points the individual to the task at hand. Attention removes distractions that would prevent the employee from giving full effort to a task. Direction means that the employee focuses on the correct completion of the assignment. Intensity represents the required level of effort needed to achieve a desired outcome. Persistence indicates the employee's willingness to keep trying or working until the job is done.

Motivated Behaviors

Motivated behaviors are the tangible outcomes that result from three factors: individual inputs, the job context, and motivational processes, which are shown in Figure 5.3. These combine to produce observable employee effort. In the Mitchell and Daniels model, these behaviors are observed through focus, intensity, quality, and duration. Motivated behaviors, then, include staying on task, trying hard, producing quality outputs, and continuing to produce over longer periods of time.

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Motivation is directly connected to the job context, which encompasses everything from the physical work environment to the style of management.

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Actual Performance

The �inal outcome, performance, is indicated by organizational measures and goals. Performance in production will be signaled by the number of units correctly produced. Higher sales re�lect improved performance by a salesperson. Accountants that prepare �inancial documents on time with complete accuracy perform at high levels. In the job performance model of motivation, improved performance occurs when all the other variables are combined correctly.

The job performance model provides an integrated approach to conceptualizing motivational processes in the workplace. The model offers a background that incorporates more than the variables explained in content, operant process, and cognitive process theories of motivation. Among the key factors to be included are the nature of the job, goals and goal-setting processes, social factors at work, and the organization's pay system and reward structure.

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5.4 Goal-Setting and Employee Involvement Programs At the personal level, motivation may be derived from unmet needs, reinforcements, the desire for equity, or intrinsic and extrinsic rewards. Another important element of motivation in the workplace is individual goals, including the goal-setting process itself and involving the employee in that process. Goal setting and employee involvement often go hand in hand when it comes to motivation.

Goal-Setting Theory

Goal-setting theory offers the tools to design performance targets that motivate employees to achieve personal and organizational objectives. The theory, as originally developed by Edwin Locke (1968), suggests that individuals with well-established goals are likely to perform at higher levels than those without such goals. Locke suggests that goals begin in values and value judgments, which in turn determine emotions and intentions. Emotions and intentions play major roles in determining behavior—in this case, the efforts or activities toward achieving goals—which leads to subsequent results (see Figure 5.4).

These stages represent the progression noted in Chapter 3 regarding perceptions. When a person values an outcome associated with a goal, for personal or career-based reasons, the individual's level of emotional commitment rises. For instance, knowing that increasing one's personal productivity (more sales, more units of production, �inishing an R&D research project) will increase the odds of receiving a positive performance appraisal, pay raise, or promotion, the person has a stronger emotional attachment to achieving the goal. This attachment turns into intentions ("I'm going to come to work a little early, stay a little late, and try harder") which then become actual behaviors.

Figure 5.4: Goal setting and motivation

Goal-setting theory posits that values determine emotions and intentions, which in turn in�luence goal-oriented behavior; these factors work together to achieve end results.

Adapted from: A. D. Szilagyi and M. J. Wallace, Jr. (1980). Organizational Behavior and Performance: 2nd edition, Santa Monica, CA, page 135.

Goal-Setting Components The goal-setting approach further establishes the conditions under which goals are linked to performance. To optimize the bene�its of goal setting, effective goals should have the characteristics shown in Table 5.3.

Table 5.3: Characteristics of effective goals Characteristic Description

Dif�icult but attainable Should not overwhelm the employee but be challenging to achieve; goals that are too dif�icult result in the employee "giving up" and goals that are too easy may lead to the employee hitting the target and then relaxing or failing to continue to try hard

Measurable Should be clearly stated so that the employee and manager both know if the goal was achieved

Flexible Should be adjusted when conditions change, such as an external shift (economic downturn; terrorist attack) or an internal problem (company crisis due to a natural disaster or unethical company activities)

Goals should be dif�icult enough that employees must try hard to reach them. Consistent research indicates the relationship between goal dif�iculty and performance (Wright, 1990). Unattainable goals often cause workers to simply give up, because they lead to frustration and subsequent lower levels of effort. This means that a quality goal is achievable. Easily met goals do not challenge the employee to continue higher levels of effort.

Clearly stated, measurable goals re�lect goal speci�icity, which conveys whether a goal has been de�ined using quanti�iable outcomes. Higher levels of goal speci�icity have been linked to performance increases (Mento, Steele, & Karren, 1987). For example, goal speci�icity in a sales job would be found in the statement, "I will make 10 calls on entirely new potential clients each month in the coming year with the goal of creating 2 successful sales." Goal speci�icity in an IT department might be to "create one new usable and marketable app in the coming year." Goal speci�icity for an accountant might be "I will �inalize all reports and statements on time or one day early throughout the year."

In addition to goal speci�icity, a linkage has been established between goal accomplishment and self-ef�icacy (Vancouver, 2001). The research reinforces the idea that a clearly de�ined and achievable goal provides the greatest opportunity for the person to perform effectively. Success at reaching the goal in turn builds self- ef�icacy. Increased self-ef�icacy is another positive outcome associated with goals and goal setting programs, when they are carefully created.

With regard to goal �lexibility, many times organizational circumstances change dramatically, which in turn affects the goals set by and for employees. The sudden resignation of a CEO, a �ire or �lood in a major manufacturing facility, or some other internal event could make previously set goals unrealistic. The same holds true when external environmental forces change. A dramatic economic downturn might make previous production and sales goals unachievable. It only makes sense to revise them to more realistic performance targets as events unfold.

Two additional factors contribute to the success of any goal-setting program: feedback and goal commitment. Employees who receive feedback on their progress toward their goals have a better idea of when they are on course and when corrections need to be made. Strong relationships exist between feedback, dif�icult goals, and subsequent performance (Langeland, Johnson, & Mawhinney, 1998).

Goal commitment expresses the degree to which an employee feels personally involved in achieving a goal, either because the person helped set the goal or because the person strongly agrees with the goal's intent. Research suggests goal commitment constitutes a moderating variable. That is, dif�icult goals are related to performance only when higher degrees of goal commitment are present (Donovan & Radosevich, 1998).

Organizational programs including Six Sigma have achieved greater levels of success when quality goals are instituted (Linderman, Schroeder, Zaheer, & Choo, 2003). Effective organizational operations become more likely when the goals meet the conditions stated in Table 5.3.

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MBO programs work best when top management clearly demonstrate their investment to employees at all levels.

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Goal Setting and Motivational Mechanisms Locke's goal-setting program incorporates four motivational mechanisms. First, goals direct attention toward key activities and away from less important activities. Clearly stated goals provide a sense of direction. Second, goals regulate effort. An employee who knows what he or she should accomplish in a given time period can dedicate suf�icient effort to the task. Third, goals increase persistence, or the willingness to keep working on a task over time. Fourth, goal setting is related to conceptual and strategic thinking. In other words, goals spur strategy development. Pondering over how to reach a goal enables the individual to succeed (Locke & Latham, 2002).

Management by Objectives

Management by objectives (MBO) is a participative goal-setting program that takes advantage of the bene�its and principles present in goal-setting theory (Drucker, 1954). Several versions of the program have been used in organizational settings (Caroll & Tosi, 1973). The essential ingredients of the programs are (1) the actual steps involved and (2) meeting the MBO prerequisites (such as commitment from top management and an environment where employees feel supported).

Steps The steps involved in MBO are job analysis, employee goal preparation, manager goal preparation, the meeting, and the follow-up.

The job analysis phase constitutes a key element in the MBO process. Before any goals are written, the key functions of the job should be enumerated. Job analysis answers this question: "Why was I hired?" The answer to that question points to areas in which goals should be set.

The next phase involves employee goal preparation. In most MBO programs, employees prepare goal lists on an annual basis. In some organizations they are written in late December or early January. Other companies prefer to set goals in the off-season or at the end of the �iscal year, during slower times.

In the manager goal preparation phase, the manager writes two separate goal lists. The �irst is a personal list of the manager's objectives for the coming year. The second is the list that the manager prepares for each team member. At the completion of this step, the employee has a self-prepared list and the manager's prepared goal list for that employee.

In the meeting phase, the manager and employee convene to discuss the two goal lists, which are then blended into a single document. Managers and their employees negotiate the �inal set of objectives. The meeting strengthens the element of participation in the process.

The follow-up stage identi�ies speci�ic times for goals to be assessed in terms of actual performance. Follow-ups can be annual, semiannual, or quarterly, depending on company preference.

Prerequisites Many companies have adopted MBO programs, with results ranging from programs that were successful to some that did not fare as well (Batten, 2003; Ford, 1979). Early indications were that as few as one third of Fortune 500 company leaders and employees believed the program was of value (Dinesh & Palmer, 1998; Schuster & Kimball, 1974). The lessons learned from these applications include the conclusion that MBO is not for every company. Instances have occurred in which an MBO program created more problems than it solved. Consequently, the best approach seems to be to seek out conditions in which the system can succeed (McConkie, 1979; Thompson, Luthans, & Terpening, 1981). Successful MBO programs meet seven prerequisite conditions.

First, top management must be committed and involved. Employees are "signal readers," meaning they observe managers to see which issues are treated as important. If top management just pays lip service to a program, workers quickly catch on. When company leaders treat an issue with care and sincerity, employees follow. For an MBO program to work, managers at all levels should set goals and participate in meetings with those of higher and lower ranks (Rogers, Hunter, & Rogers, 1993). When they do not, employee con�idence quickly wanes.

Second, the proper environment, in which employees feel empowered and supported by managers, should be in place. An organization's climate and culture determine whether managers will feel threatened or invigorated by worker participation and involvement. Authoritarian environments are poor candidates for MBO programs. When employees conclude that the system is merely another form of performance appraisal rather than something designed to help them achieve at higher levels, it generally leads to contempt. The program cannot be one that appears to be more punitive than positive. The opposite should be the case. Bill Packard, one of the two founders of Hewlett-Packard, said of MBO,

No operating policy has contributed more to Hewlett-Packard's success (than) ...MBO ...(it) is the antithesis of management by control. Management by objectives ...refers to a system in which overall objectives are clearly stated and agreed upon, and which gives people the �lexibility to work toward those goals in ways they determine best for their own areas of responsibility. (The Economist, 2009)

Third, the company should have suf�icient resources and the willingness to tie rewards to performance. The linkage of rewards to performance will be crucial to the long-range success of the program. Companies in �inancial crisis will likely experience problems if it is not possible to provide tangible rewards for improved performance.

Fourth, an MBO program works best using a systematic approach. Goal-setting time frames and the follow-up stage should be built into some form of annual calendar, whether it commences in January or at some other point during the year (a �iscal calendar beginning in July, for example). When the process feels random or disorganized, employees may have less con�idence in the program.

Fifth, successful MBO programs rely on quality objectives. From the goal-setting literature, we know that effective objectives are dif�icult but attainable, clearly stated, measurable, and �lexible.

Sixth, employees should be able to prepare two kinds of objectives. One set, which may be labeled "for the company," includes important organizational outcomes, such as increasing sales, reducing defects, turning paperwork in on time, and so forth. The second set would be labeled "for yourself." As part of the process, an employee can aspire to lose weight, cut down on caffeine, learn a foreign language, adapt to updated software or technology, or engage in some other form of self-improvement. Ideally, the best systems tie "for the company" goals with "for yourself " goals. In other words, success in one area leads to success in

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the other. An individual who raises sales for the company should enjoy the rewards. An employee who learns Spanish for herself has become more valuable to the company.

Finally, MBO programs require patience. Installing the system takes time. The process may need to be �ine-tuned for several years before it operates without any glitches.

Implications The management by objectives approach was designed to take advantage of two organizational processes: goal setting and participation. The second process, participation, helps build lines of communication and trust between employers and employees as well as leads to other valuable outcomes such as organizational commitment.

Management by objectives programs can create value in one other key way. A well-designed program links goals together at all levels (see Figure 5.5). These goals, in turn, help the organization achieve its ultimate mission or purpose. A quality MBO program keeps managers and the overall company on track, working on the same larger objectives, and creates a situation in which individual goals support departmental goals, departmental goals support organizational goals, and those goals are based on the organization's mission. The program can therefore provide individual workers with a strong sense of direction and purpose as they carry out their jobs.

Figure 5.5: Goals by level

By linking goals together at all levels, an organization can effectively achieve its ultimate mission or purpose.

Employee Involvement

Although it is speci�ically a goal-setting program, management by objectives illustrates the importance of employee involvement at the individual level. Employee involvement as a broader motivational force at the organizational level is also key. In general, employee involvement describes any organizational process that seeks to utilize the full capacities of employees while encouraging increased commitment to the organization's success (Cotton, 1993). The two primary aspects of employee involvement are participative management and representative management, but other employee involvement programs, such as quality circles and employee stock ownership plans, have also been effective.

Participative Management Participative management includes methods designed to share decision making and other aspects of organizational direction with employees at lower levels. The participation aspect of MBO is an example of what this kind of employee involvement might look like. The advantages of participative management include the ability to solicit ideas and creative approaches from all organizational members. Also, participative management in decision making often leads to increased commitment to the decision after it has been made. Companies engaged in participative management tend to offer jobs that are more interesting and meaningful.

Participation may or may not be linked to increased productivity. This suggests that participation programs generate the greatest value when employees have the skills and knowledge required to make meaningful contributions (Heller, Pusic, Strauss, & Wilpert, 1998). Under that condition, trust and con�idence can be

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Namaste Solar: Employees as Owners

The founders of Namaste Solar explain how they created a company where employees are also owners.

Critical Thinking Questions

1. What do you think are the bene�its of this kind of company structure? What are the drawbacks?

2. Do you think that this model could work for a larger company?

built between managers and employees.

Representative Management In a representative management approach, employees do not engage directly in organizational decision making but instead choose a small group who will participate and represent them. This system tends to redistribute power within companies by placing labor on a more equal standing with management and stockholders. Two of the more common forms of representative management are work councils and board representatives (Keller, 2002).

A work council is a group created to link employees with management. The council consults with management when decisions are made regarding personnel issues and concerns. Members are elected to serve on the council.

Board representatives are employees who are part of the company's board of directors. They represent employee interests. Board representative arrangements are common in Europe and are even required by law in some European Union nations.

Representative management applies more to larger organizational issues than to day-to-day operations. It may be for this reason that the impact on employee performance and motivation appears to be minimal (Cotton, 1993).

Other Employee Involvement Techniques In addition to the more general participative management and representative management systems, two other programs encourage employee involvement: quality circles and employee stock ownership plans. A quality circle is a group of 7 to 10 employees that meets regularly to discuss company quality problems. The group holds responsibility for investigating the causes of the problem, making recommendations on how to solve it, and, in some instances, leading the implementation of solutions. Effective quality circles generate feedback regarding the successes of various actions taken, with management maintaining �inal control (Cotton, 1993). The use of this technique has largely waned in the United States due to a lack of both strategic oversight and full integration into the organization's operations (Hammersley & Pinnington, 1999), although the program has enjoyed success in other countries, most notably Japan.

Employee stock ownership programs have met with success in many organizations (Pierce & Furo, 1990; McDonald, 2000). The actual programs take many forms, from employees buying stock in the company where they work to individuals in a company purchasing and operating the organization. Opportunities to purchase shares of stock in an employer company are part of many company bene�it packages. Normally, a trust will be established for ownership of employee shares. Companies either buy stock or allocate stock to the trust, and employees can only take physical possession when leaving the organization.

The strongest bene�it of employee stock plans tends to be improved worker satisfaction (Buchko, 1993). Evidence that stock plans lead to heightened levels of motivation is less compelling, with some companies experiencing growth in share values but others not achieving the same results (Davidson & Worrell, 1994). To achieve positive results, company leaders are advised to provide consistent feedback about organizational performance and employees should be able to voice opinions about the direction of the company (Stamps, 1996). Company leaders may also have to respond to circumstances in which stock values decline, as was the case during the 2009 recession. In those instances, �irms that took a long-term perspective, encouraging employees to stay the course, hold their shares, and watch as those shares regained value over time, were the most likely to avoid the negative impact of the economic downturn on employee morale.

In summary, goal-setting theory suggests that individuals with well-established goals are likely to perform at higher levels. Employee involvement is any organizational process that seeks to utilize the entire capacities of employees while encouraging increased commitment to the organization's success.

Namaste Solar: Employees as Owners From Title: We the Owners: Employees Expanding the America...

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The EpiPen controversy is an example of motivation through disincentive. Mylan's dramatic price hikes created controversy and negative publicity for the company.

Laures/iStock/Thinkstock

5.5 Pay Structures and Reward Systems Whenever money is involved, people tend to pay particular attention. This statement is true regarding prices of products as well as pay schedules for employees. Pay is not the only type of reward that can be used to motivate employees, however, and this section details the various programs—in addition to pay—that can be used to attract talent and encourage performance. Money remains a powerful incentive, however, and the OB in Action story regarding the EpiPen controversy serves as an example of what can go wrong.

OB in Action: The EpiPen Episode

One ongoing phrase heard regarding the world of commerce is, unfortunately, corporate greed. Such became the case in a dramatic turn of events regarding the product called EpiPen. For those suffering from severe allergies (especially children), the EpiPen can be a literal lifesaver. Someone allergic to a bee sting, or to peanuts can quickly inject the medicine in the EpiPen (epinephrine) to receive immediate relief from an allergic attack.

The New York Times was among the �irst to report a series of events after the pharmaceutical company Mylan purchased the rights to EpiPen in 2007. At the time, the wholesale price was less than $100 for a two-pen set. By 2009, the price went up to $103.50 for a set and rose to $264.50 by July 2013. Then the wholesale price increased to nearly $461 in May 2015 and to $608.61 by May 2016.

The drug itself is relatively inexpensive to produce. Marc Leavey, an internist at Baltimore's Mercy Medical Center noted, "In capable hands, a vial of epinephrine and a syringe, together costing only a few dollars, can administer the medication almost as quickly as the EpiPen, certainly within a minute" (Miller, 2016, para. 11).

The American Academy of Pediatrics (AAP) said it "is gravely concerned some families will be left without access to this important medication" (Frieden, 2016, para. 15). AAP president Benard Dreyer called for "all interested stakeholders—families, doctors, manufacturers, distributors, payers and government agencies like the Food and Drug Administration—to act quickly to alleviate the �inancial hardships faced by families" (Frieden, 2016, para. 15).

To make the matter worse, Mylan CEO Heather Bresch received a 600 percent pay increase as the price of the EpiPen rose by 400% (Popken, 2016). The company's stock price nearly tripled during the same time period. Outrage across the country was widespread, and a congressional investigation followed. As of 2016, however, no concrete action had been taken against Bresch or the company.

To try to quiet the criticisms of the company, Bresch �irst instituted a discount coupon program for the product. When that approach appeared to not gain traction, the company eventually released a generic version at a substantially lower price (Kodjak, 2016).

Re�lection and Application Questions

1. What motives do you believe are in place for top management at Mylan and similar companies? 2. What do you believe will be the impact of this story, in terms of motivation, on rank-and-�ile employees at companies such as Mylan? 3. Describe the connections between company pricing strategies, executive compensation, and employee motivation through the reward system on

a more general level.

Pay and Reward Variables

Individual companies employ one of two philosophies regarding pay and rewards. The �irst, an equity pay philosophy, results from the belief that employees should view the pay system as being fair. The philosophy often leads to more uniform pay systems, including pay rate cards, whereby employees know the level of pay to expect based on organizational rank and years of experience. A clear example of this approach may be found in compensation systems in many primary and secondary education settings. Teachers are paid based on personal levels of education (undergraduate, master's, Ph.D., or Ed.D.) and years of experience.

The second method, an exchange pay philosophy, emphasizes the idea that some individuals and skills are more valuable than others and the company is willing to pay accordingly. Those who exhibit higher levels of performance and those who possess more valued skills are rewarded accordingly. In the exchange philosophy, two factors in�luence pay structures: market forces and skill values.

Market Forces Market forces drive wages when shortages are present or when higher competition for skill sets exist. For example, most colleges and universities pay faculty members in some areas at lower levels than others. Faculty in English, sociology, philosophy, history, education, and the arts tend to earn less money, due to the large number of individuals with a terminal degree (Ph.D., Ed.D.) seeking employment. Other disciplines, including the sciences and business, offer higher salaries because fewer applicants hold terminal degrees, and those who do often receive competitive offers from two sets of employers—universities and outside industry.

Skill Values Skill values constitute the second force in the exchange philosophy. Skill-based pay, which is also known as competency-based or knowledge-based pay, establishes pay levels based on the number of skills an employee holds or how many jobs that person can perform (Ledford, 1995). The approach is particularly useful for organizations that seek to hire "generalists" who can complete greater numbers of tasks, such as retail salespersons who can also stock shelves, count inventory, and sell a variety of products. In an era of downsizing and layoffs, generalists have become more valuable. Some evidence suggests that the skill-based approach improves communication between workers who work cooperatively across job assignments, which leads to fewer "turf wars" over job assignments (Lawler, Ledford, & Chang, 1993).

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Skill-based pay has linkages to motivational concepts. When employees can expand skill sets through cross-training or outside learning programs, the need for achievement can be satis�ied and intrinsic motivation may rise. More important, skill-based pay offers the potential to integrate equity and exchange concepts. Individuals with a greater numbers of job skills receive higher compensation (exchange), but the pay differential may be perceived as being fair (equity) when other employees can observe the differences in skill sets and jobs performed (Lee, Law, & Bobko, 1999).

A few potential problem areas are associated with skill-based pay. First, skills that once were valuable to an organization may become obsolete, forcing management to value them in new ways. Second, employees may reach the point at which no new skills may be accumulated, which would level out any new pay increases and potentially affect motivational levels. Third, employees may gain skills that the organization does not value. Despite these issues, company leaders may conclude that skill-based pay is useful.

Pay-for-Performance Systems

The pay philosophies used by organizations normally apply to pay systems based on periods of time, such as hourly wages or an annual salary. In contrast, pay- for-performance systems are designed to enhance employee effort using incentives. As a group, performance-based reward and pay systems are sometimes referred to as variable-pay programs. Table 5.4 outlines several types of variable pay plans, or programs, which are tied to either individual or company performance levels.

Table 5.4: Types of variable-pay plans Individual

Piece-rate pay

Task-and-bonus plan

Modi�ied piece-rate pay

Commissions

Bonuses

Organizational

Pro�it-sharing plan

Gainsharing plan

Individual Variable-Pay Plans Individual pay incentives date back to the Industrial Revolution. The earliest version, piece-rate pay, assigned a �ixed amount to each unit produced (Taylor, 1903) in manufacturing operations. At the time, distrust between companies and employees often disrupted the system, as workers would fear that producing too many units would result in the piece rate being cut to a lower level. To help overcome the problem, task-and-bonus pay systems established set numbers of units for which the regular piece rate would be paid (Gantt, 1919/1973). Any employee who exceeded the quota would earn an additional amount per unit. Consequently, pure piece-rate plans have become rare in the United States.

Some companies employ modi�ied piece-rate pay systems that pay per time period plus an incentive. In those systems, a standard daily or hourly rate for pay is established, meaning the worker knows the lowest amount he or she will earn for an hour or day. Then, a piecerate differential will be established for those that exceed a speci�ied quota or simply by the unit. For example, a medical transcriber may be paid $9.00 per hour plus 25 cents per page completed. The modi�ied piece-rate approach attempts to combine a sense of security with �inancial incentives to perform at higher levels.

In sales positions, a straight commission approach resembles a piece rate per sale. Salespersons can be paid by the unit or as a percentage of sales over a time period, normally one month. The straight commission method can motivate the salesperson—or cause him or her to push too hard to �inalize deals. An alternative method, salary plus commission, resembles the task-and-bonus system. The salesperson gains a sense of security from a base pay amount and can be motivated through commission incentives. Additional incentives can be added for tending to other aspects of the job, such as following up on orders and maintaining accounts in other ways.

Bonuses can be paid to individual employees, often on an annual basis for achieving various goals or outcomes. Most bonus plans are geared to sales positions. The primary problem associated with annual bonuses is that when they become routine, employees begin to expect them. Failure to pay a bonus in a given year often leads to morale problems.

Organizational Variable-Pay Plans To create motives for sets of employees, two organizational variable-pay plans have been established: pro�it sharing and gainsharing. Pro�it-sharing plans distribute funds based on an established formula related to company pro�itability. The funds may be paid as shares of stock or as bonus payments. When these incentives are clearly made known, company employees can be encouraged to work together to increase pro�its through better ef�iciency and improved productivity. Pro�it-sharing plans have resulted in improved pro�itability in organizations, when compared to companies without such plans (Magnan & St. Onge, 1998).

Gainsharing plans are company incentive funds that are divided between employees and managers, often as a 50-50 split. The difference between gainsharing and pro�it sharing is that gainsharing will be based on productivity rather than pro�its. Pro�its are often affected by factors beyond the control of employees, such as shifting interest rates or losses in operations in other countries.

The future of pro�it-sharing and gainsharing programs may be in�luenced by economic circumstances. Because many companies faced declining revenues during the 2008 recession, their ability to pay such bonuses lessened. Companies facing international competition might be less able to earn the level of income that would make such programs viable.

Bene�its

Bene�it packages represent an expensive component of a compensation program. Providing health insurance, paid vacation days, holiday pay, purchase discounts, in-house child care, plus government-required disability insurance and unemployment insurance fees takes time and often makes it more dif�icult for a U.S. company to compete with foreign �irms. The question becomes, "Do bene�it programs motivate workers?" In some ways, the answer would be "yes"; however, not in terms of performance. Instead, bene�its have been linked to recruiting and retention.

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Competitive bene�its make a difference in recruitment and retention, but may not impact performance in the same manner.

JDiamante/iStock/Thinkstock

In terms of recruiting, applicants being strongly considered for positions at some point will be asked about compensation. The basic pay package will be one primary factor in their decision to take a job. Most applicants then inquire about bene�its. When the base pay is the same but one company pays health insurance premiums while another does not, the company that offers bene�its has a recruiting advantage. Applicants also compare vacation days as part of this process.

In the area of retention, companies that provide health insurance premium payments often hold on to employees longer. Someone might say that he or she would like to change jobs, but cannot afford higher health insurance premiums. Once again, whether this represents a positive motivational force is debatable. Employees may also decide to stay with a company because of the pension plan. When someone becomes vested in a pension system but might lose bene�its for leaving, the plan becomes the "golden fetters" that retain senior workers.

As the workforce becomes increasingly diverse, employee needs in terms of bene�its expand. Greater numbers of employees remain unmarried and an increasing component of the workforce consists of two-income families with no children. Flexible bene�it programs allow employees to choose the bene�its that best suit their needs (Barringer & Milkovich, 1998).

Three primary versions of �lexible bene�it plans are found in the United States. A modular plan establishes sets of bene�it packages from which employees can choose. Young employees might pick one package emphasizing health care bene�its for children with little or no contribution to a pension plan, while older workers might select another that features larger contributions to a pension plan plus an insurance plan to cover the costs of nursing home care in the future. A core-plus plan offers a standard set of bene�its, as well as a series of additional options that employees can select. For instance, an older worker may use any funds provided to augment a pension package, whereas a younger worker might use the funds to purchase additional term life insurance.

Flexible spending plans, the third option, have become popular in many U.S. companies. Employees set aside funds to pay for speci�ic items, and the funds are withdrawn on a pretax basis, essentially turning them into a tax deduction. The most prevalent plans are monies held for health care, dental services, and child care expenses.

Flexible bene�it plans may take advantage of the concept found in expectancy theory that organizational rewards should be tied to individual goals. Flexible bene�it packages also assist in the same areas, recruiting and retention, as standard bene�it programs.

Employee Recognition Programs

Compliments are free. In a tough economy in which companies seek to lower costs in as many ways as possible, offering �inancial inducements to improve performance are often not feasible. Some would argue that employee recognition programs are a cynical attempt to entice workers to try harder for the same amount of pay (Dunham, 2002). Others would counter that recognition, when managed properly, serves as a method to help employees attain intrinsic rewards for doing good work as a variable-ratio form of positive reinforcement (Glasscock & Gram, 1999).

Both formal and informal elements of employee recognition exist. Informally, compliments and expressions of gratitude for performance can be delivered by managers at all ranks. Savvy CEOs are aware of the impact of a personal "thank you" from top managers. Formal employee recognition programs may involve several methods. Employee of the Month awards are common, as are specially designated parking spaces for winners. Many companies post employee accomplishments on physical and digital bulletin boards that are strategically placed for everyone to see.

What would seem apparent is that employee recognition cannot provide an all-encompassing solution to motivational problems. However, it can offer a viable method to supplement other efforts to motivate employees and create job satisfaction at the same time.

Ethics and Motivation

Criticisms of managerial tactics abound and have existed for centuries. At the crux of many debates over management actions is the basic assumption that employee–management relationships are essentially adversarial. In many ways, U.S. laws regarding union–management arrangements subscribe to that point of view. From that vantage point, any attempt to inspire higher levels of performance could be construed to simply be a form of manipulation.

Ethical debates over motivational programs should account for more than a mere money-foroutput formulation. Examples abound where professional athletes have been willing to settle for lower remuneration in exchange for a better chance to win a championship. The career of LeBron James serves as an example. James made a controversial decision to sign a contract with the Miami Heat in the NBA, thereby enhancing his chances of winning a championship, even though his pay would be lower. Following his time in that city, he moved back to Cleveland, near his home town, to be a champion for that part of the state of Ohio. While extreme, his moves indicate that an employee might work for more than a paycheck and that psychic income can enter the picture. Recognition, accomplishments, working with friends, and a variety of additional non-pay elements are all strong motivators. With that caveat in mind, ethical challenges remain. Employees are often acutely aware of distributive and procedural justice issues in the workplace. A motivational system can be perceived as being fair, unfair, unethical, or illegal.

Pay discrimination based on gender and race continues. Even with new laws designed to level pay structures, the problem has not gone away. In the 2008 recession, African American workers suffered disproportionate job losses compared to Caucasians (Cawthorne, 2009). These injustices represent ethical, legal, and workplace morale issues.

Also, many employees and unions argue that jobs are lost in the United States to companies in other countries in which pay systems do not provide a quality standard of living. Further, many of these organizations do not provide protections for workers and operate in unsafe work facilities that pollute water and land. The counterargument would be that, from the perspective of employees in those foreign countries, the wages constitute the best they can achieve, and these workers are highly motivated as a result, even in poor working conditions.

As noted in the Mylan story in this chapter, executive pay remains a contentious ethical problem. CEO salaries as compared to employee wages have reached extremely disproportionate levels. Is it ethical for top managers, even in struggling companies, to receive these large payments? The Dodd–Frank Wall Street Reform and Consumer Protection Act, signed into law in 2010, sought to make the CEO pay process more transparent—although executive pay remains a controversial topic, as top managers still receive high salaries with apparently little regard for public perceptions.

In the future, debates regarding fair payment and treatment of employees undoubtedly will persist as ethical and moral questions. Also, as the job performance model suggests, the organizational context adds a series of variables into a company's motivational environment. Workplace issues in that context, such as discrimination in promotion decisions, constitute both motivational and ethical areas of concern.

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Summary and Resources

Chapter Summary

Personal motives and organizational motives are connected at some times and disparate at others. One managerial goal should be to optimize the overlap between personal and organizational motives.

The job characteristics model includes skill variety, task identity, task signi�icance (or human interaction), autonomy, and feedback. These connect to the critical psychological states that are associated with employee motivation, including experienced meaningfulness of the work, experienced responsibility for outcomes, and knowledge of actual results. These critical psychological states, as a group, collectively in�luence personal and work outcomes.

The relationships between the variables in the job characteristics model can be used to create a predictive index, which allows for calculation of the motivating potential score of the job. Growth need strength and employee knowledge and skill can moderate or alter the calculation of the motivating potential score.

The job performance model integrates various motivational processes in the workplace. It combines individual characteristics with job context, motivational processes, motivated behaviors, and levels of performance.

The keys to effective goal-setting programs include setting dif�icult but attainable performance targets that are both measurable and �lexible when needed. Goal speci�icity conveys whether a goal can be stated using quanti�iable outcomes. Goal commitment expresses the degree to which an employee feels personally engaged in achieving a goal. Locke's goalsetting program incorporates four motivational mechanisms into the workplace, including direct attention to key activities, regulating effort, increasing persistence, and inspiring conceptual and strategic thinking.

Management by objectives (MBO) is a participative goal-setting program. The steps of MBO include job analysis, employee goal preparation, manager goal preparation, a meeting, and follow-up. The prerequisites of effective MBO programs include top management commitment and involvement, the proper environment, suf�icient resources, the willingness to tie rewards to performance, a simple system, quality objectives for the company and for oneself, and patience. Management by objectives takes advantage of two organizational processes: goal setting and participation. They create value by instilling a sense of direction for workers.

Employee involvement describes any process that utilizes the full capacities of employees while encouraging increased commitment to the organization's success. The two primary aspects of employee involvement are participative management and representative management. Involvement programs include quality circles and employee stock ownership programs.

Pay philosophies guide many reward system decisions. An equity pay philosophy represents the belief that employees should view the pay system as being fair. The exchange pay philosophy is founded on the premise that some individuals and some skills are more valuable than others and the company pays accordingly. Skill-based pay, which is also known as competency-based or knowledge-based pay, establishes pay levels based on the number of skills an employee holds or how many jobs that person can perform.

Performance-based reward and pay systems are referred to as variable-pay programs. Individual variable pay plans include piece-rate pay, task-and-bonus plans, modi�ied piece rate, commissions, and bonuses. Organizational variable plans comprise pro�it-sharing and gainsharing programs.

Bene�it plans are only tangentially related to employee motivation. They exhibit the greatest in�luence in the areas of employee recruiting and retention. Flexible bene�it plans allow workers greater choice in the bene�its they will receive.

Employee recognition programs may have some impact on motivation. Informal plans include compliments and expressions of gratitude. Formal systems use a variety of formats to note employee accomplishments. While they do not offer all-encompassing motivation solutions, they can supplement other company efforts.

Ethical challenges in motivation include concerns regarding pay discrimination based on gender and race. U.S. companies often lose jobs to countries where companies offer subsistence pay and poor working conditions, which affect motivational levels in both countries. Exorbitant executive pay remains a contentious problem in today's workplace environment.

CASE STUDY: Say what?

Molly Wistrom experienced a dilemma she could not have expected. Her position as a customer service coordinator for a major shipping company had been a source of pride for several years. After working for the inbound customer and client call desk for three years, she was promoted to a new position, where she served as the primary liaison between the company and several clients. Her primary responsibilities included ensuring clear communications between companies shipping packages and those receiving the packages that were handled by her company, and troubleshooting when that did not occur. She thought of herself and her company as a "linking pin" between vendors and customers.

For years, Molly's immediate supervisor was Stephanie Rouse. Stephanie took pride in her department and the function that it served. Five years earlier, she had been asked to help implement a management by objectives program in the company. Stephanie viewed the program as an opportunity to create even better lines of communication between all ranks in the company. She carefully followed all protocols as the program was put into place and worked diligently to make sure management by objectives was perceived as a fair pathway to increase access to rewards.

Molly had carefully marked her calendar for June. Each year, she was asked to set three yearlong company goals and one personal objective. The company preferred June, because it is a much slower shipping season than December and January. Molly would then meet with Stephanie and they would �inalize the goal list for the next year. Her performance review for the previous year would take place each July.

Stephanie had announced her retirement at the company Christmas party. Tears were shed by long-time friends and coworkers. A new manager, Craig Johanssen, began duties in January.

In early February, Craig burst into Molly's of�ice. "It's time to put together a goal list for this year," he announced.

"I'm sorry," Molly replied, "but we have always written those in June."

"I heard," Craig replied, "but that doesn't really work for our area. And besides, I'm not all that convinced management cares about this anyway."

Not wishing to create an immediate confrontation, Molly agreed to prepare her list. Her �irst goal was to complete a customer satisfaction survey for package recipients to make sure they were happy with delivery times and practices. Her second company-based goal was to request an upgrade to the tracking system, which had fallen behind the technologies used in other companies. Her third company-related goal was to make a personal contact with each company that shipped items to thank them for their business. Her personal goal was to begin to learn Spanish.

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Again, without notice, Craig walked into Molly's of�ice with the list in hand. "I can go along with your second and third goals, but I think a customer satisfaction survey would be a waste of time," he said �irmly.

Molly responded, "The survey was Stephanie's idea. We both thought it might help improve our service, and I was just waiting until June to make it of�icial."

Craig replied, "Well, think of something else. I know, do the same thing as your third goal. Just make a call to each company that receives packages and thank them." He paused, "And this Spanish goal has got to go."

"Why?" Molly asked. "We have more Latino companies as clients each year. I think it would be great to be able to say a few words in their �irst language."

"I'd rather they learn how to speak English," Craig retorted. "Think of something else, like maybe working out a couple of times a week."

"And when do you want this?" she inquired.

"Whenever," he answered.

"When will I be evaluated on these goals?" Molly asked.

"Who knows? When we get to it I guess."

Still wishing to avoid con�lict, Molly agreed. She also carefully documented the entire conversation, in case it would be needed at some future point. She included her original goal list in the �ile.

Case Questions

1. Which of the prerequisites of effective MBO programs had Craig violated? 2. What would you expect in terms of performance from Molly and her peers, given Craig's approach? 3. How should Molly respond to these changes? 4. If you were Craig's manager and found out what he had done, what would be your response?

Review Questions

Click on each question to see the answer.

Name and de�ine the �ive core job characteristics of the job characteristics model. (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

Core job characteristics include �ive factors. Skill variety refers to the number of skills needed to be able to successfully perform a given job. Task identity indicates whether the job includes a complete, identi�iable piece of work. Task signi�icance, or human interaction, re�lects the degree to which a job has an impact on other people or whether the work is helpful and meaningful to others. Autonomy implies working without supervision and being free to perform a job in the ways the employee sees �it. Feedback is the degree to which the employee receives immediate information about how well a job has been performed.

Identify the sources of the three critical psychological states identi�ied by the job characteristics model. (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

Critical psychological states are associated with employee motivation. Skill variety, task identity, and task signi�icance lead to experienced meaningfulness of the work. Autonomy leads to experienced responsibility for the outcomes of the work. Feedback results in knowledge of the actual results of work activities.

Name and explain the role of the two moderating variables that are part of the job characteristics model. (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

In organizational research terminology, employee growth need strength and employee knowledge and skill are the moderating variables that in�luence conditions under which relationships hold. Employee growth need strength consists of an individual's degree of self-esteem and desire for self-actualization. The job characteristics model will be more predictive of positive employee and company outcomes when employees are skilled and have higher knowledge levels.

What are the components of the job performance model of motivation? (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

The job performance model incorporates the following elements: individual characteristics, the job context, motivational processes, motivated behaviors, and levels of performance.

De�ine goal speci�icity and goal commitment. (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

Goal speci�icity conveys whether a goal can be stated using quanti�iable outcomes. Goal commitment expresses the degree to which an employee feels personally involved in achieving a goal, either because the person helped set the goal or because the person strongly agrees with the goal's intent.

What �ive steps are involved in management by objectives programs? (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

The steps of MBO are job analysis, employee goal preparation, manager goal preparation, the meeting, and follow-up.

What are the seven major prerequisites for management by objectives programs? (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

The prerequisites of effective MBO programs include top management commitment and involvement, the proper environment, suf�icient resources, the willingness to tie rewards to performance, a simple system, quality objectives for the company and for oneself, and patience.

Explain participative management and representative management, and name two employee involvement techniques. (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

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Employee involvement is any organizational process that seeks to utilize the entire capacities of employees while encouraging increased commitment to the organization's success. The two primary aspects of employee involvement are participative management and representative management. Participative management includes methods designed to share decision making and other aspects of organizational direction with employees at lower levels. Representative management means that instead of being involved directly, employees are represented by a smaller group.

Explain the difference between the equity and exchange pay and reward philosophies. (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

Pay philosophies guide many reward system decisions. An equity pay philosophy represents the belief that employees should view the pay system as being fair. The exchange pay philosophy is founded on the premise that some individuals and some skills are more valuable than others and the company is willing to pay accordingly.

Brie�ly describe a skill-based pay program and a pay-for-performance variable-pay program. (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

Skill-based pay, which is also known as competency-based or knowledge-based pay, establishes pay levels based on the number of skills an employee holds or how many jobs that person can perform. Performance-based reward and pay systems are referred to as variablepay programs. Individual variable pay plans include piece-rate pay, task-and-bonus plans, modi�ied piece rate, commissions, and bonuses. Organizational variable plans comprise pro�it-sharing and gainsharing programs.

Analytical Exercises

1. Using Figure 5.1, explain the how personal and organizational motives would interact with the elements of Figure 5.2, the job performance model. 2. The motivating potential score for a job is

MPS = skill variety + task identity + task signi�icance

× autonomy × feedback 3

Using a scale of 1 (little or none) to 5 (the greatest amount for each variable), calculate the motivating potential scores of the following jobs and explain the implications of those scores.

janitor in a high school assembly-line worker car salesman psychologist CEO of a corporation

3. Some writers have suggested that in today's workplace environment younger employees view themselves as free agents who will work for the organization that pays the most and offers the best opportunities. They are not loyal to any given employer. Assuming this is true, how would this phenomenon affect the following?

perceptions of personal and organizational motives the three critical psychological states identi�ied in the job characteristics model the impact of goal-setting programs the impact of employee involvement programs perceptions of equity and exchange pay and reward philosophies

4. Identify �ive companies or professions that you believe would be best suited to employee involvement programs. Explain your reasoning. Identify �ive companies or professions that would be least suited to employee involvement programs. Explain your reasoning.

5. Explain the impact of CEO pay disparities versus regular employees in terms of the impact on employee involvement programs. perceptions of formal and informal employee recognition programs. perceptions of equity.

Key Terms

Click on each key term to see the de�inition.

autonomy (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

Working without supervision; being free to perform a job in the manner that one sees �it.

board representatives (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

Employees who are part of the company's board of directors.

employee involvement (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

Any organizational process that seeks to utilize the full capacities of employees while encouraging increased commitment to the organization's success.

equity pay philosophy (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

The belief that employees should view the pay system as being fair, in terms of both distributive and procedural justice.

exchange pay philosophy (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

The belief that some individuals and some skills are more valuable than others and should be paid accordingly.

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feedback (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

The degree to which the employee receives immediate information about how well a job has been performed.

goal commitment (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

The degree to which an employee feels personally engaged in achieving a goal.

goal speci�icity (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

The concept that a goal can be stated using quanti�iable outcomes.

job design (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

The practice of preparing and/ or changing a job description to meet organizational requirements.

participative management (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

The practice of sharing decision making and other aspects of organizational direction with employees at lower levels.

representative management (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

The practice of having employees represented by a small group instead of participating directly in workplace decisions.

skill-based pay (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

Establishes pay levels based on the number of skills an employee holds or how many jobs that person can perform (also known as competency-based or knowledge-based pay).

skill variety (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

The number of skills needed to be able to successfully perform a given job.

task identity (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

The extent to which the job includes a complete, identi�iable piece of work.

task signi�icance (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

Also known as human interaction; the degree to which a job has an impact on other people.

variable-pay programs (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

Performancebased reward and pay systems.

work council (http://content.thuzelearning.com/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633.17.1/sections/cover/books/Baack.3633

A group of employees created to liaise with management.

Flashcards

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