Robbins: Organizational Behavior

Chapter Seven

MOTIVATION: FROM CONCEPT TO APPLICATIONS

CHAPTER NOTES:
Management by Objectives
A. What Is MBO?

Notes:

1. Management by objectives emphasizes participatively set goals that are

tangible, verifiable, and measurable. It is not a new idea. It originated more
than 50 years ago.
2. MBOs appeal lies in its emphasis on converting overall organizational
objectives into specific objectives for organizational units and individual
members. MBO operationalizes objectives by devising a process by which
objectives cascade down through the organization. (Exhibit 7-1).
3. Four ingredients common to MBO programs are: goal specificity, participative
decision-making, an explicit time period, and performance feedback.
4. Goal specificity:

The objectives in MBO should be concise statements of expected

accomplishments. Example To cut departmental costs by seven percent,
to improve service by ensuring that all telephone orders are processed
within 24 hours of receipt, or to increase quality by keeping returns to less
than one percent of sales.

5. Participative decision making:

The objectives in MBO are not unilaterally set by the boss and then
assigned to employees.

The manager and employee jointly choose the goals and agree on how
they will be measured.

6. An explicit time period:

Each objective has a specific time period in which it is to be completed.

Typically three months, six months, or a year

7. Performance feedback

MBO seeks to give continuous feedback on progress toward goals so that

workers can monitor and correct their own actions.

B. Linking MBO and Goal-Setting Theory

1. Goal-setting theory demonstrates that:

Hard goals result in a higher level of individual performance than do easy

goals.
Specific hard goals result in higher levels of performance than no goals at
all or generalized goals.
Feedback on ones performance leads to higher performance.

2. MBO directly advocates specific goals and feedback.

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Implies that goals must be perceived as feasible
Is most effective when the goals are difficult enough to require stretching

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3. The only area of possible disagreement with goal setting theory is participation
MBO strongly advocates it. Goal-setting theoryassigning goals to
subordinatesfrequently works just as well participation.
C. MBO in Practice

Notes:

1. Reviews of studies suggest that MBO is a popular techniqueit is used in

business, health care, educational, government, and nonprofit organizations.
2. MBOs popularity should not be construed to mean that it always works.

Where it has failed, the problems rarely lie with MBOs basic components.

Rather, factors such as unrealistic expectations regarding results, lack of

top-management commitment, and an inability or unwillingness by
management to allocate rewards based on goal accomplishment are the
cause.

Instructor Note: At this point in the lecture you may want to introduce the TEAM EXERCISE Goal Setting Task
found in the text and at the end of these chapter notes. The purpose of the exercise is to learn how to write
tangible, verifiable, measurable, and relevant goals as might evolve from an MBO program.
Employee Recognition Programs
A. What Are Employee Recognition Programs?
1. Employee recognition programs consist of personal attention, expressing
interest, approval, and appreciation for a job well done. They can take
numerous forms.
2. The best ones use multiple sources and recognize both individual and group
accomplishments.
B. Linking Recognition Programs and Reinforcement Theory
1. Fifteen-hundred employees were surveyed in a variety of work settings about
what they considered to be the most powerful workplace motivator. Their
response was recognition!
2. Consistent with reinforcement theory, rewarding a behavior with recognition
immediately following that behavior is likely to encourage its repetition.
3. Recognition can take many forms:

Personally congratulate an employee.

Send a handwritten note or an e-mail message.
Bragging Boards, etc.

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C. Employee Recognition Programs in Practice

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1. Most organizations are under severe cost pressures, which is why recognition
programs are particularly attractive. Recognizing an employees superior
performance often costs little or no money.
2. One of the most well known and widely used recognition devices is the use of
suggestion systems. Employees offer suggestions for improving processes or
cutting costs and are recognized with small cash awards.
3. The Japanese have been especially effective at making suggestion systems
work. A typical high performing Japanese plant generates 47 suggestions per
employee a year and pays approximately the equivalent of U.S. $35 per
suggestion.

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Chapter Seven

Employee Involvement Programs

A. What Is Employee Involvement?

Notes:

1. Employee involvement has become a catchall term to cover a variety of

techniques. It encompasses employee participation or participative
management, workplace democracy, empowerment, and employee ownership.
2. Employee involvement is a participative process that uses the entire capacity of
employees and is designed to encourage increased commitment to the
organizations success.
3. The underlying logic is that by involving workers in those decisions that affect
them and by increasing their autonomy and control over their work lives,
employees will become more motivated, more committed to the organization,
more productive, and more satisfied with their jobs.
4. Participation and employee involvement are not synonyms. Participation is a
more limited term and is a subset within the larger framework of employee
involvement.
B. Examples of Employee Involvement Programs
1. Four forms of employee involvement are participative management,
representative participation, quality circles, and employee stock ownership
plans.
2. Participative management:

The distinct characteristic common to all participative management

programs is that subordinates actually share a significant immediate
degree of decision-making power with their superiors.

It has been promoted as a panacea for poor morale and low productivity.
However, it is not appropriate for every organization. For it to work, there
must be adequate time to participate, the issues in which employees get
involved must be relevant to their interests, employees must have the
ability (intelligence, technical knowledge, communication skills) to
participate, and the organizations culture must support employee
involvement.

Why would management want to share its decision-making power with

subordinates?
a.
b.
c.
d.

Managers often do not know everything their employees do.

Better decisions
Increased commitment to decisions
Intrinsically rewarding employees makes their jobs more interesting
and meaningful

Dozens of studies have been conducted but the findings are mixed. It
appears that participation typically has only a modest influence on
productivity, motivation, and job satisfaction.

3. Representative participation:

Almost every country in Western Europe has some type of legislation

requiring it. It is the most widely legislated form of employee involvement
around the world.

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Chapter Seven

B. Examples of Employee Involvement Programs (cont.)

The goal is to redistribute power within an organization, putting labor on a

more equal footing with the interests of management and stockholders.

The two most common forms:

a. Works councils link employees with management. They are groups of
nominated or elected employees who must be consulted when
management makes decisions involving personnel.
b. Board representatives are employees who sit on a companys board of
directors and represent the interests of the firms employees.
c. In some countries, large companies may be legally required to make
sure that employee representatives have the same number of board
seats as stockholder representatives.
d. The overall influence seems to be minimal. The evidence suggests that
works councils are dominated by management and have little impact
on employees or the organization.

If one were interested in changing employee attitudes or in improving

organizational performance, representative participation would be a poor
choice.

4. Quality circles (See Exhibit 7-3):

Quality circles are probably the most widely discussed and undertaken
formal style of employee involvement. Originally begun in the United
States and exported to Japan in the 1950s, the quality circle became quite
popular in North America and Europe during the 1980s.

A quality circle consists of a work group of eight to ten employees and

supervisors who have a shared area of responsibility. Key components
are:
a. They meet regularly on company time to discuss their quality problems,
investigate causes of the problems, recommend solutions, and take
corrective actions.
b. They take over the responsibility for solving quality problems and they
generate and evaluate their own feedback.
c. Management typically retains control over the final implementation
decision.

A review of the evidence indicates that they are likely to positively affect
productivity, however, they tend to show little or no effect on employee
satisfaction.

The failure of many quality circle programs to produce measurable benefits

has also led to a large number of them being discontinued.

One author offers two possible explanations for their disappointing results:
a. First is the little bit of time (usually just an hour per week) that actually
deals with employee involvement. That does not translate to much
impact on the job.
b. Second, the ease of implementing quality circles often worked against
them. The lack of planning and top-management commitment often
contributed to quality circle failures.

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B. Examples of Employee Involvement Programs (cont.)

Notes;

5. Employee stock ownership plans:

Employee ownership can mean any number of things. Most common is

ESOPs which are company-established benefit plans in which employees
acquire stock as part of their benefits.

In the typical ESOP, an employee stock ownership trust is created.

Companies contribute either stock or cash to buy stock for the trust and
allocate the stock to employees.

Employees usually cannot take physical possession of their shares or sell

them as long as they are still employed at the company.

The research indicates that they increase employee satisfaction, but their
impact on performance is less clear.

6. The evidence consistently indicates that it takes ownership and a participative

style of management to achieve significant improvements in an organizations
performance.
C. Linking Employee Involvement Programs and Motivation Theories
1. Employee involvement draws on a number of the motivation theories previously
discussed:

Theory Y is consistent with participative management. Theory X aligns

with the more traditional autocratic style of management.

Two-factor theoryemployee involvement programs could provide intrinsic

motivation.

Employee involvement is compatible with ERG theory and efforts to

stimulate the achievement need.

D. Employee Involvement Programs in Practice

1. Germany, France, Holland, and the Scandinavian countries have firmly
established the principle of industrial democracy in Europe. Other nations,
including Japan and Israel, have traditionally practiced some form of
representative participation.
2. Participative management and representative participation were much slower
to gain ground in North American organizations. Employee involvement
programs that stress participation have become the norm.
3. The names of companies that have used quality circles read like a Whos Who
of Corporate America. But the success of quality circles has been far from
overwhelming. In recent years, many organizations have adopted more
comprehensive team-based structures.
4. ESOPs have become the most popular form of employee ownership. They
have grown to around 10,000, covering approximately 10 million employees.

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Chapter Seven

Variable Pay Programs

A. What Are Variable-Pay Programs?

Notes:

1. Variable Pay Programs can take the form of piece-rate plans, wage incentives,
profit sharing, bonuses, and gainsharing.
2. A portion of an employees pay is based on some individual and/or
organizational measure of performance. Unlike more traditional base-pay
programs, variable pay is not an annuitythere is no guarantee.
3. The fluctuation in variable pay programs makes them attractive to
management. The organizations fixed labor costs turn into a variable cost
reducing expenses when performance declines. Also, tying pay to performance
recognizes contribution rather than being a form of entitlement.
4. Four widely used programs are piece-rate wages, bonuses, profit sharing, and
gain sharing:

Piece-rate wages
a.
b.
c.
d.

Around for nearly a century

Popular as a means for compensating production workers
Workers are paid a fixed sum for each unit of production completed.
A pure piece-rate planthe employee gets no base salary and is paid
only for production. For example: Selling peanuts in ballparks works
this way.
e. Modified piece-rate planemployees earn a base hourly wage plus a
piece-rate differential.

Bonuses
a. These can be paid exclusively to executives or to all employees.
b. Increasingly, bonus plans are taking on a larger net within
organizations to include lower-ranking employees to reward production
and increased profits.

Profit-sharing plans
a. Organization wide programs that distribute compensation based on
some established formula designed around a companys profitability
b. Direct cash outlays or, particularly in the case of top managers,
allocated as stock options

Gainsharing
a. This is a formula-based group incentive plan.
b. Improvements in group productivityfrom one period to another
determine the money allocated.
c. Gainsharing and profit sharing are similar but not the same thing. It
focuses on productivity gains rather than profits.
d. Gainsharing rewards specific behaviors that are less influenced by
external factors. Employees in a gainsharing plan can receive
incentive awards even when the organization is n0t profitable.

2. Variable-pay programs are generally successful in increasing motivation and

productivity. Studies generally support that organizations with profit-sharing
plans have higher levels of profitability than those without.
A. What Are Variable-Pay Programs? (cont.)
6. Gain sharing has been found to improve productivity in a majority of cases and
often has a positive impact on employee attitudes. For example:
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An American Management Association study of 83 companies.

On average, grievances dropped 83 percent, absences fell 84 percent, and
lost-time accidents decreased by 69 percent.

7. The downside of variable pay is its unpredictability.

Depending how your variable pay is determined, company downturns can

cut income.
Moreover, people begin to take repeated annual performance bonuses for
granted.

B. Linking Variable-Pay Programs and Expectancy Theory

1. Variable pay is probably most compatible with expectancy theory predictions.
Individuals should perceive a strong relationship between their performance
and the rewards they receive if motivation is to be maximized.
2. The evidence supports the importance of this linkage:

Group and organization-wide incentives reinforce and encourage

employees to sublimate personal goals for the best interests of their
department or the organization.

Group-based performance incentives are also a natural extension for

building a strong team ethic.

C. Variable-Pay Programs in Practice

1. Variable pay is rapidly replacing the annual cost-of-living raise. This is because
of its motivational power and cost implications, avoiding the fixed expense of
permanent salary boosts.
2. This pay strategy has been practiced in managerial levels for the last 10 or so
years. The new trend has been expanding this practice to non-managerial
employees.
3. Variable-pay plans are becoming increasingly popular: Seventy-eight percent
of U.S. companies have some form of variable pay plan with rank and file
workers. Even Japan has introduced these programsa recent survey found
that 21.8 percent of Japanese companies now use such pay systems.
4. Gain sharings popularity seems to be narrowly focused among large,
unionized manufacturing companies.
5. Common concerns among firms that have not introduced performance-based
compensation programs are:

C. Variable-Pay Programs in Practice (cont.)

Notes:

What should constitute performance, and how it should be measured?

Overcoming the historical attachment to cost-of-living adjustments and the

belief that they have an obligation to keep all employees pay in step with
inflation.

Salary scales keyed to what the competition is paying, etc.

From the employees standpoint, the major concern is a potential drop in

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earnings.

Chapter Seven

Skilled-Based Pay Plans

A. What Are Skill-Based Pay Plans?

Notes:

1. Skill-based pay is an alternative to job-based pay. It is sometimes called

competency-based pay or knowledge-based pay.
2. Competency-based pay sets pay levels on the basis of how many skills
employees have or how many jobs they can.
3. The appeal, from managements perspective is flexibility:

Filling staffing needs is easier when employee skills are interchangeable.

Organizations today require more generalists and less specialists.
It facilitates communication across the organization because people gain a
better understanding of others jobs.
It lessens dysfunctional protection of territory behavior.
Additionally, it helps meet the needs of ambitious employees who confront
minimal advancement opportunities.
It appears to lead to performance improvements.

4. Downside of skill-based pay:

People can top out, learning all the skills the program calls for them to
learn.
Skills can become obsolete. Organizations paying for skills they no longer
need.
Skill-based plans do not address level of performance.

B. Linking Skill-Based Pay Plans to Motivation Theories

1. Skill-based pay plans are consistent with several motivation theories.

ERG theorybecause they encourage employees to learn, expand their

skills, and grow

Achievement needpaying people to expand their skill levels, high

achievers will find their jobs more challenging

Reinforcement theoryby encouraging employees to develop their

flexibility, to continue to learn, to cross-train, to be generalists rather than
specialists, and to work cooperatively with others in the organization.

2. Skill-based pay may additionally have equity implications. When employees

make their input-outcome comparisons, skills may provide a fairer input
criterion for determining pay than factors such as seniority or education.
C. Skill-Based Pay in Practice
1. A number of studies conclude that skill-based pay is expanding and that it
generally leads to higher employee performance and satisfaction.
2. The increased use of skills as a basis for pay is strongest among organizations
facing aggressive foreign competition and those with short product life cycles.
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3. Skilled-based pay appears to be an idea whose time has come. Your market
value is now based on what you skill set is.

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Chapter Seven

Flexible Benefits
A. What Are Flexible Benefits?

Notes:

1. The idea is to allow each employee to choose a benefit package that is

individually tailored to his/her own needs and situation.
2. Average fringe benefits equal approximately 40% of salary. Traditional benefit
programs were designed for a male with a wife and two children at home.

2. Less than 10 percent of employees now fit this stereotype. Traditional

programs do not tend to meet their needs: Some facts:

Twenty-five percent of todays employees are single.

A third are part of two-income families without any children.

4. An organization sets up a flexible spending account for each employee, usually

based on some percentage of his or her salary, and then a price tag is put on
each benefit. There are three basic types of programs:

Modular Plans: pre-designed with each module put together to meet the
needs of a specific group of employees.
Core-plus Plans: a core of essential benefits and a menu like selection of
other benefit options.
Flexible Spending Plans: employees set aside a specific dollar amount for
benefits tax-free and draw against the account for medical and dental
services as needed.

B. Linking Flexible Benefits and Expectancy Theory

1. Flexible benefits turn the benefits expenditure into a motivator. Approximately
13 percent of large and medium sized U.S. companies have flexible benefits
plans.
2. Consistent with expectancy theorys thesis that organizational rewards should
be linked to each individual employees goals, flexible benefits individualize
rewards by allowing each employee to choose the compensation package that
best satisfies his/her current needs.
C. Flexible Benefits in Practice
1. Benefit for employees is the flexibility. It is attractive because they can tailor
their benefits and levels of coverage to their own needs.
2. From the organizations standpoint, it often produces savings. Once in place,
costly increases often have to be substantially absorbed by the employee.
3. Drawbacks from the employees standpoint is that the costs of individual
benefits often go up, so fewer total benefits can be purchased.
A. Drawbacks for the organization are that these plans are more cumbersome
for management to oversee, and administering the programs is often
expensive.

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Chapter Seven

Special Issues in Motivation

A. Motivating Professionals

Notes:

1. The typical employee today is more likely to be a highly trained professional

with a college degree than a blue-collar factory worker.

They receive a great deal of intrinsic satisfaction from their work.

They tend to be well paid.

2. Professionals are typically different from nonprofessionals.

They have a strong and long-term commitment to their field of expertise.

Their loyalty is more often to their profession than to their employer.
They need to regularly update their knowledge, and their commitment to
their profession.
They rarely define their workweek in terms of 8 to 5 and five days a week.

3. What motivates professionals?

Money and promotions typically are low on their priority list. They tend to
be well paid, and they enjoy what they do.
Job challenge tends to be ranked high. They like to tackle problems and
find solutions.
Professions value support.
The place a high value on skill development opportunities.

4. Implications

Provide them with ongoing challenging projects.

Give them autonomy to follow their interests and allow them to structure
their work.
Reward them with educational opportunities.
Also reward them with recognition.

5. An increasing number of companies are creating alternative career paths for

their professional and technical people, allowing employees to earn more
money and status, without assuming managerial responsibilities.
B. Motivating Contingent Workers
1. Approximately 6 million Americans, or 4.9 percent of those with jobs,
considered themselves as part of the contingent workforce. These include parttimers, on-call workers, short-term hires, temps, day laborers, independent
workers, and contractors.
2. Their common denominator is that they do not have the stability or security
permanent employees have. As such, they do not identify with the
organization or display the commitment that other employees do.
B. There is no simple solution for motivating temporary employees. Those
who prefer the freedom of their temporary status and professionals who do
not want the demands of a permanent job seem to be considerably more
people than originally thought. Recent estimates show that 3377 percent
of contingent workers have voluntarily chosen this status.

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C. Motivating Contingent Workers (cont.)

Notes:

4. What will motivate involuntarily temporary employees?

An opportunity for permanent status.

The opportunity for trainingthey are eager to develop salable skills.
From an equity standpoint, you should also consider the repercussions of
mixing permanent and temporary workers where pay differentials are
significant.

C. Motivating the Diversified Workforce

1. The needs of women, singles, immigrants, the physically disabled, senior
citizens, and others from diverse groups are not the same as a married white
American male with three dependents.
2. If you are going to maximize your employees motivation, you have got to
understand and respond to this diversity.
3. The key word to guide you should be flexibility. Be ready to design work
schedules, compensation plans, benefits, physical work settings, and the like
to reflect your employees varied needs.
D. Motivating Low-Skilled Service Workers
1. One of the most challenging motivation problems are in industries such as
retailing and fast food. These jobs are filled with people with limited skills and
education. Often the pay level is little more than minimum wage.
2. Traditional approaches for motivating these people have focused on providing
more flexible work schedules and filling these jobs with teenagers and retirees
whose financial needs are less. This has met with less than enthusiastic
results.
3. Unless pay and benefits are significantly increased, high turnover probably has
to be expected in these jobs. This can be somewhat offset by widening the
recruiting net, making these jobs more appealing, and raising pay levels.
E. Motivating People Doing Highly Repetitive Tasks
1. Motivating individuals in these jobs can be made easier through careful
selection.
2. People vary in their tolerance for ambiguity. Many individuals prefer jobs that
have a minimal amount of discretion and variety.
3. Standardized jobs should also be the first considered for automation.
4. Many standardized jobs, especially in the manufacturing sector, pay well.

This makes it relatively easy to fill vacancies.

You may not be able to do much more than try to make a bad situation
tolerable by creating a pleasant work climate.

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