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Topic2.1MotivationRewardandEngagementatWork1.pptx

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Breakthrough Leadership Skills MN7028 Topic 4: Motivation, Reward and Engagement at Work 1

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Learning Outcomes To understand the importance of work to individuals and functions it performs. To understand, explain and critically evaluate major theories of motivation. To relate the contribution of employee motivation to commitment and engagement. To explore the concept of Total Reward To understand and explain the nature of the psychological contract and its role in forging commitment and engagement. To consider several HR strategies in relation to building greater employee engagement: case study of M&S

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The Importance of Work Motivation Central role in management Integral to performance Permeates many sub-fields in the study of management Research history Research future

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Origin and Definitions From the Latin - Movere ‘The contemporary (immediate) influence on direction, vigor, and persistence of action’ (Atkinson, 1964) ‘A process governing choice made by persons…among alternative forms of voluntary activity’ (Vroom, 1964)

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Early History of Motivation Research Scientific Management movement (Taylor, 1911) Human Relations movement (Mayo, 1933) Theory X and Theory Y (McGregor, 1960)

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Theory X (McGregor, 1961) People inherently dislike work and, whenever possible, will attempt to avoid it. Since people dislike work, they must be coerced, controlled, or threatened with punishment to achieve goals. People will avoid responsibilities and seek formal direction whenever possible. Most people place security above all other factors associated with work and display little ambition

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Theory Y (McGregor, 1961) People will exercise self-direction and self-control if they are committed to the objectives of their work. The average person wants to accept responsibility and will seek it as well. The ability to make innovative decisions is widely dispersed throughout the population and is not necessarily the sole province of those in management positions.

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Theory Z (Ouchy, 1980) Elements of this are now considered outdated (e.g. the job for life) However Ouchy places profound emphasis on the notion of Trust

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Content Theories Individual differences/needs: Hierarchy of needs (Maslow, 1954) Three needs: components of ERG Theory (Alderfer, 1972)

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Maslow’s Hierarchy of Needs Physiological needs Safety needs Social needs Ego/esteem needs Self-actualisation needs

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Applying Maslow’s model to the context of work Physiological – pay, pleasant work conditions, dining facilities Safety – health and safety, job security Social – cohesive work group, friendly supervision, professional associations Esteem – social recognition, job title, high-status job, feedback from job itself Self-actualisation – challenging job, opportunities for creativity, achievement in work, advancement in the organisation

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Content theories (2) Defined needs of achievement, affiliation, power, and autonomy (McClelland, 1961, 1971) Work activities/nature of job: Motivation-hygiene (Herzberg, 1966)

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Herzberg’s two factor theory Hygiene Factors Company policy & administration Supervision Working conditions Salary Relationship with peers Personal life Relationship with subordinates Status Security Satisfiers Achievement Recognition Work itself Responsibility Advancement Growth

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Process Theories The ‘golden age’ of cognitive motivation theories Expectancy Theory (Vroom, 1964; Porter and Lawler, 1968) Goal-setting (Locke, 1968; Locke and Latham, 1990)

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Expectancy Theory (Vroom, 1964; Porter and Lawler, 1968) Effort expended Effective level of performance Rewards (desired outcomes) related to performance Availability of rewards

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Equity Theory Equity (Adams, 1963) Animals share this sense of equity Individual exercise – how fair is your employer?

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Recent Developments 1960s and 1970s research extended and refined in the 1980s 1990s research into motivation has declined World of work has changed dramatically Future of motivation research? Academy of Management Review (2004) Special Topic Forum on the Future of Work Motivation Theory , Vol. 29, No. 3, July 2004, pp. 339-499.

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Roots of the concept of Employee Engagement Kahn (1990) was the first to propose that individuals could become personally engaged in their work. He defined ‘personal engagement’ as ‘the harnessing of organization members’ selves to their work roles : in engagement, people employ and express themselves physically, cognitively, emotionally and mentally during role performances”.

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Levels of engagement Engaged employees work with passion and feel a profound connection to their work and company. They drive innovation and move the organisation forward. Disengaged employees are essentially ‘checked out’. They’re ‘sleep walking’ through their work- day putting time (not energy or passion)into their work. Actively disengaged employees aren’t just unhappy at work: they’re busy acting out their unhappiness. These employees can often undermine what their engaged colleagues accomplish. See :Engaged employees inspire company innovation (2006) Gallup management Journal; http://gmj.gallup.com

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Commonly recognised Components of Employee Engagement (e.g. Armstrong 2017) Commitment Organizational Citizenship Behaviour Motivation Job Satisfaction (critiqued by Macey and Schneider, 2008)

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Some antecedents of EE might be Satisfaction (although dismissed by Macey and Schneider). Social Exchange Theory (SET) is presented by Saks (2006) who believes it poses a strong case A basic principle of SET is that ‘relationships evolve over time into trusting, loyal and mutual commitments as long as the parties abide by certain rules of exchange’ (Kular et al, 2008, referencing Cropanzano and Mitchell, 2005) So ... In both SET and EE mutuality is required (and mutuality we agreed last week is one of the factors distinguishing EE from some closely related concepts such as Motivation) Trust

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Elaborating on SET ‘when individuals receive economic and socio-emotional resources from their organisation, they feel obliged to respond in kind and repay the organisation (Kular, 2008 referencing Cropanzano and Mitchell, 2005) We may conclude that the concept of SET represents at least one factor explaining why employees chose to engage or disengage at work.

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Trust Erosion of trust evident at societal level in ‘distrust of political elites’ (The Economist, 2017). ‘Rising distrust of … big business, banks and the media’ (ibid). Erosion of ‘public confidence in major companies’ (CIPD, 2014a). Two thirds of employees no longer trust senior management, influenced by recession, cost reduction programs, reduced working hours, freezes on payrises/benefits/promotions.

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Erosion of the trust which is/was implicit in the ‘psychological contract’ (Rousseau, 1995) The most important trust relationship for HR is that between employees and management (CIPD, 2012). The increasing ‘personalisation of trust’ through social media channels (CIPD, 2013) means that scrutiny of the behaviours of the organisation is more intense. When HR adopts a ‘hard model’ of HRM ( Legge ) and aligns itself to ‘organisational aims’, it will also suffer from an erosion of trust and a breakdown of the psychological contract. HR professionals may need to recalibrate toward a ‘soft’ model (ibid) which emphasises elements like socialisation, training and transparent communication with employees.

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The psychological contract Definitions: A set of perceived reciprocal promises and obligations between the individual and the organisation (Makin, P., 1999) The perceptions of both parties to the employment relationship, organisation and individual, of the reciprocal promises and obligations implied in that relationship (Guest, D. 2004)

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The “deal” Employer delivers on promises Employee delivers on promises = fairness, trust, commitment, well-being, performance.

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The Changing Nature of the Psychological Contract Old deal v. new deal (Ref: Guest, D. 2004) Breakdown of the traditional ‘deal’ A career in return for loyalty A fair day’s work for a fair day’s pay Individualisation of the employment relationship Organisational change and violation

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The impact of the psychological contract Fulfilling the psychological contract is important - it influences: Performance Extra role behaviour Job satisfaction Organisational commitment Intention to quit Source: Makin, P. and van Ruitenbeek, D., 1999

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Reward Understand the concept of financial rewards. Have an appreciation of the main types of payment Understand the concept of non-financial rewards. Understand the concepts of new reward and total reward.

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Reward or ‘compensation’? Marchington et al (2016) refer to the negative connotations related to compensation for ‘something bad happening to you’ Contrast with the more positive ‘rewards’, which may include ‘money, activities, variety, status, social contacts’ (ibid)

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Performance and Rewards Rewards are of obvious concern to both employers and employees. The emergence of HRM has produced or coincided with great expansion of both: Performance-related pay (a culture of “pay for contribution not pay for position”) Performance management

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Philosophy of Pay/Reward Systems Management will normally seek a pay system which they believe will give: the best balance between cost and supervisory control, and; provide the best incentive for employees. Marchington et al (2016) stress the importance of the reward philosophy in reflecting the overall objectives of the employer. Likewise the different elements of the package should all coherently ‘send a clear message to employees’

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Employer’s Assumptions about Reward Systems That the HR processes are a strategic fit for the business strategy Unitarist perspective which assumes that employees will endorse the business strategy Deterministic assumption that reward will have a direct impact on organisational performance Assumption that employees will work in a way that, in the absence of the reward system, they would not

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Employee’s Assumptions about Reward Systems Expectancy Theory (Vroom, 1964; Porter and Lawler, 1968) Motivational Force (MF) = Expectancy x Instrumentality x Valence

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Fairness Any pay system will fail if it is perceived to be unfair by the employees. Fairness of pay is a comparative concept not an absolute one. Equity Theory tells us that people will be better motivated if they feel that they are fairly paid – called the ‘felt-fair’ principle (Jacques, 1962) But fair in relation to what or whom? Usually the person at the next desk!

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Types of Payment Systems (e.g. Gilman, 2016) Payment by time. Performance-related pay or “Incentive Pay Schemes”: Payment by Results (PBR) - a variable element is determined by some ‘objective’ measure of the work done or its value. In the UK, this is losing favour in the shadow of the pension selling scandals. Merit-based systems - the variable element is related to an assessment of overall job performance

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Benefits of Payment by Results (PBR) according to Armstrong (2010) Motivate employees Serve as a lever for innovation and change (through modifications of processes to achieve performance) Send a message about the importance of good performance Link rewards directly to performance (and perhaps also to organisational goals) Help attract and keep the best staff Diminish the possibility of “golden handcuffs” where under-performers linger Meet the fundamental human need for achievement.

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Flaws of Payment by Results (PBR) according to Marchington et al (2016) Demotivate other employees Generally cost more to implement than they generate in increased revenue. Assume everyone works for/is motivated by money

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Payment by Results policies are growing in popularity NHS, teachers, Civil Service in the UK Asian countries – even Japan (which historically has paid on seniority)

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Case study of Payment by Results (Marsden, 2015) A PBR was rolled out in USA in certain schools who allocated part of their budget to spend on high performing teachers. The plan failed, arguably because: They didn’t give it enough time (2 years) There was a lack of understanding about how it worked There was a lack of money motivation in the targets (who instead focused on other more pastoral priorities) The PBR did not “create new budget”. The money had to be taken from somewhere else, creating tensions.

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Reasons to Pay well: Delivers a better choice of applicant Reduces performance ‘issues’ (Marchington et al, 2016) Reduces staff turnover May increase effort/contribution (in line with Social Expectancy Theory)

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‘New rewards’ (Lawler, 1990) Asserted that reward: Can (and should) align with the business strategy Can therefore help deliver the business strategy Offer the potential to lever/deliver cultural change Yet two‐thirds of organisations in the United Kingdom do not have a reward strategy (Chartered Institute of Personnel and Development 2008)

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Rejection of ‘new rewards’ logic CIPD (2015) report suggests that strategies of ‘new rewards’ are being ‘set aside or at least tempered by contemporary operating conditions’ Individual pay schemes are being used despite ambitions to promote a team ethic Such schemes ‘frustrate team cooperation’ HR prescriptions around team based logic has not gained traction.

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Nature of rewards: Financial Job-based pay Person-based pay Pensions Financial recognition schemes (bonuses?) Share schemes

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Financial “benefits” ‘Fringe’ or ‘employee’ benefits: to ensure that a competitive total remuneration package is provided to attract, retain and motivate staff. to increase the employee’s commitment to the organization. to take advantage of tax efficient methods of rewarding employees.

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Typical Non-Pay (but still Financial) Benefits Pension schemes Share schemes Company car Personal security E.g. extra-statutory sick pay; death in service benefits; personal accident cover; medical insurance etc Financial assistance

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Pension schemes Around half of employees in the UK are in occupational pensions schemes Pension schemes are the single most costly element in remuneration (notably in relation to workers with longer service) Two types: Defined benefit (DB): where the risk is taken by the employer Defined contribution (DC): where the risk is taken by the employee DC is on the increase but DBs are being wound up. (Antunes, 2016)

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Share ownership schemes Benefits? Education Motivation Recruitment and retention Performance Paternalism Drawback? Lack of direct correlation between effort and reward

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Cafeteria Approach to Rewards Management (Perkins and White, 2011) Allows employees a degree of choice in their total remuneration package, e.g. by permitting them to take less in non-pay benefits and more in pay, or vice versa The core benefit element will be salary The costed benefits will be elements such as car, Health Insurance, Childcare, extra holiday Employees chose the package” they wish to “construct”. The total overall value of their compensation will be the same whatever choices they make. This allows the individual to tailor their rewards to their particular needs and alter these as their needs change.

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Non financial rewards and recognition ‘managers do not motivate employees by giving them higher wages, more benefits, or new status symbols. Rather, employees are motivated by their own inherent need to succeed at a challenging task. The manager’s job then is not to motivate people to get them to achieve; instead, the manager should provide opportunities for people to achieve so they will become motivated.’ (Herzberg, 1987) ‘The desire of many individuals to seek opportunities for personal growth through their work is very powerful’ (Marchington et al, 2016, citing Giancola , 2010)

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Armstrong on Non-financial rewards ‘Financial incentives may increase engagement for some people in the short run, but the greatest impact on engagement is made by non-financial rewards, especially when they generate intrinsic motivation through the work itself and the work environment, and when they are provided by line managers’ (Armstrong, 2017, p.132).

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Reilly and Brown (2008) propose an engagement model for the Reward Strategy Examine the current strategy and structure Decide on the desired strategy and structure Understand ‘what brings people to work, keeps them with the organisation and motivates them to perform while there ...’

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Nature of rewards: Non-financial (after Armstrong, 2017) Recognition in looser sense Achievement Personal growth Learning and Development opportunities Enhancement of well-being Some are extrinsic (e.g. verbal encouragement from manager) Some are intrinsic (e.g. job content)

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‘Total rewards’ defined. The CIPD define total reward as encompassing ‘all aspects of work that are valued by employees, including elements such as learning and development opportunities and/or an attractive working environment, in addition to the wider pay and benefits package’ (CIPD, 2015)

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Elements of ‘Total rewards’ The CIPD (2015) cite the US organisation WorldatWork as identifying six separate components of the work experience in addition to pay and benefits: performance and recognition work/life balance organisational culture employee development and career opportunities business strategy human resource strategy.

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Elaboration of ‘Total rewards’ concept Zingheim and Schuster (2001) suggest that the concept of total rewards has four components: Compelling future Individual growth Positive Workplace Total Pay. Towers and Perrin and Hay Group have adopted this model

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Managing the intrinsic element through job design Lawler (1969) identifies three elements to job design which are necessary to make a job ‘intrinsically’ motivating: Feedback relating to performance: this should be meaningful (Armstrong, 2010). Armstrong also states that this means they be able to see more of the picture, i.e. how their role fits into the whole process. Abilities: the jobholders must feel that they are making use of those abilities which they values. Self-control (autonomy): the jobholders must feel they have discretion

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Increased focus on ‘job characteristics’ in job design (Hackman and Oldham, 1976) Hackman and Oldham, 1976, propose a ‘job characteristics model’ (ibid), comprising five key elements: Skill variety (the range of skills and talents required) Task identity (the breadth within the task) Task significance (in relation to the “bigger picture”) Degree of autonomy (discretion, e.g. in methods) Feedback (clarity on performance) If jobs are designed in a way that maximises these dimensions then three psychological states can occur: Experience of meaningfulness at work Experience of responsibility for work outcomes Knowledge of results of work

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Motivation alone is not enough Marchington et al (2016) argue that people with a high ‘growth need’ will be more likely to experience changes in their psychological contract as a result of exposure to such job design However they also need abilities. As with performance more generally AMO seems to apply: Performance = Ability x Motivation X Opportunity

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Recurrent theme in the EE literature: ‘The line manager relationship is crucial’ (Robinson and Hayday, 2009) ‘Leaders and leadership can influence each facet of engagement through a range of processes’ (Soane, E (Leadership and Employee Engagement. in Truss et al, 2014, Employee Engagement in Practice)

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Selected Bibliography Armstrong, M. (2017) Armstrong's Handbook of Human Resource Management Practice. 14 th Edition. London: Kogan Page Armstrong, M. (2010) Armstrong's Handbook of Reward Management Practice. London: Kogan Page (available as ebook through Lonmet catalogue) CIPD (2015) Reward Strategy and Total Reward Factsheet (updated 2016) accessed 31/10/17 at https://www.cipd.co.uk/knowledge/strategy/reward/strategic-total-factsheet#7370 Henderson, I. (2010) Human Resource Management for MBA Students. London: CIPD Institute for Employment Studies (IES) (2016) The Relationship between Total Reward and Employee Engagement. Accessed 31/10/17 at http://www.nhsemployers.org/~/media/Employers/Publications/Reward/Total%20reward%20and%20employee%20engagement%20report.pdf Marchington, M., Wilkinson, A., Donnelly, R. and Kynighou , A. (2016) Human Resource Management at Work. 6 th Edition. London: CIPD

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