Organizational Behavior
Lecture 9
Dr. Amna Yousaf
PhD (HRM)
University of Twente,
the Netherlands
Recap Lecture 8
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


Job Characteristics Model
How can Jobs be Redesigned?
Alternative Work Arrangements
Conclusions
Motivation: From Concepts to Applications (2)
Lecture 8
Outline
 Employee Involvement
– Participative Management
– Representative Participation
– Quality Circles
 Linking Employee Involvement programs &
Motivation Theories
 Using Rewards to Motivate Employees
 What to Pay: establishing a Pay Structure
 How to Pay: Rewarding individual Employees
Through Variable-Pay Programs
– Piece-Rate Pay
– Merit Based Pay
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Outline
–
–
–
–
–
Bonuses
Skill Based Pay
Profit-sharing plans
Gain –sharing
Employee Stock Ownership Plans
 Global Implications
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What is Employee Involvement?
Employee Involvement Program
A participative process that uses the entire capacity
of employees and is designed to encourage increased
commitment to the organization’s success.
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Examples of Employee Involvement Programs
Participative Management
A process in which subordinates share a significant
degree of decision-making power with their
immediate superiors.
MBO an Example
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Examples of Employee Involvement Programs
(cont’d)
Representative
Participation
Workers participate in
organizational decision
making through a small
group of representative
employees.
Works Councils
Groups of nominated or elected
employees who must be
consulted when management
makes decisions involving
personnel.
Board Representative
A form of representative
participation; employees sit on
a company’s board of directors
and represent the interests of
the firm’s employees.
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Representative Participation
 Does not enhance employee involvement
– Representative employee’s involvement and motivation
may increase
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Examples of Employee Involvement Programs
(cont’d)
Quality Circle
A work group of employees who meet regularly
to discuss their quality problems, investigate
causes, recommend solutions, and take
corrective actions.
Mixed results of enhanced productivity
No effects on employee job satisfaction
Being discontinued – band-wagon by
management
Limited employee involvement – one or two
hours out of 40 hours of work
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Linking EI Programs and Motivation Theories
Theory Y
(Believing
employees
want to be
involved)
Employee
Involvement
Programs
ERG Theory
(Employee
Needs)
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Two-Factor
Theory
(Intrinsic
Motivation)
Rewarding Employees: Four Aspects
•What to Pay (Internal vs. external equity)
•How to Pay (e.g Piece rate, merit based,
bonuses, profit sharing, gain sharing,
ESOPs, skill-based pay)
•What Benefits to Offer (e.g.,Flexible
benefits)
•How to Recognize Employees
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Rewarding Employees: Four Aspects
 What to pay: Setting pay structures can be
complex to organization
 Internal equity:
– worth of job to organization usually established
through job evaluation
 External Equity:
– pay equity with reference to industry competitors
 Best pay systems attains strategic balance
 Pay leaders versus less payers (Wal-Mart –
outsources to China)
 Pay more, get the best but what are the costs –
small firm case – trade offs
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How to Pay: Rewarding Employees
Variable Pay Programs
A portion of an employee’s pay is based on some
individual and/or organization measure of
performance.
• Piece rate pay plans
• Profit sharing plans
• Gain sharing plans
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Rewarding Employees: Four Aspects
 Piece-rate Pay Plans
– Workers are paid a fixed sum for each unit of
production completed.
– No base salary
– Not feasible for many jobs – footballer may not be
ready to get piece-rate pay package from his league
tied to every win
• Can lead to unethical behaviors such as cheating –
Example of Sears
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Rewarding Employees: Four Aspects
 Merit Based Pay
– Unlike piece-rate pay plans which are linked to
objective outcomes; these are linked to individual
performance – performance ratings
– Can be motivating if designed correctly otherwise can
cause unfairness perceptions in employees
– Employers increasing use these systems and keep high
differentials between high and low performers
– Can be an important means of goal achievement ; not
just a way to change wages
– Accuracy depends on accuracy of performance ratings
– Pay raise pool fluctuates based on economic conditions
– can be sometimes demotivating for top performers
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Rewarding Employees: Four Aspects
 Bonuses
– For many jobs, bonuses important component of
overall pay
– Net increasing to lower ranked jobs
– Advantage is bonuses reward employees for recent
performance rather than past performance as in merit
based pay
– Downside: employees may start viewing them only as
pay; may not remain motivating
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Skill-Based Pay Plans
Pay levels are based on how many skills employees
have or how many jobs they can do.
Benefits of Skill-based Pay Plans:
1. Provides staffing flexibility.
2. Facilitates communication across the organization.
3. Lessens “protection of territory” behaviors.
4. Meets the needs of employees for advancement
(without promotion).
5. Leads to performance improvements.
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Skill-Based Pay Plans (cont’d)
Drawbacks of Skill-based Pay Plans:
1. Lack of additional learning opportunities that will
increase employee pay.
2. Continuing to pay employees for skills that have
become obsolete.
3. Paying for skills which are of no immediate use
to the organization.
4. Paying for a skill, not for the level of employee
performance for the particular skill.
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Linking Skill-based Plans and Motivation
Theories
Reinforcement
Theory
Skill Based
Pay Plans
ERG Theory
(Growth)
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Equity
Theory
McClelland’s
Need for
Achievement
Rewarding Employees: Four Aspects
 Profit-Sharing Plans
 Organization wide programs that distribute
compensation based on some established formula
designed around a company’s profitability.
– Can be direct case outlays or allocation of stock
options to top managers
 Gain Sharing
 An incentive plan in which improvements in group
productivity determine the total amount of money
that is allocated.
 In gain sharing rewards are tied to productivity
unlike profit sharing so employees can receive
awards even when company profits are not too
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Prentice Hall Inc. All rights reserved.
Rewarding Employees: Four Aspects
Employee Stock Ownership Plans (ESOPs)
Company-established benefit plans in which
employees acquire stock as part of their benefits at
below market price.
Increase employee satisfaction and motivation,
however links with performance not clear
Employees need have ownership feelings by
keeping them updated on status of business and
opportunity to exercise influence
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Variable Pay Programs & Motivation
 Profit-sharing programs and gain sharing
programs reported to increased organizational
performance, profitability, positive employee
attitudes compared to organizations not having
them
– Claims by sociologists that monetizing incentives
undermines performance seem to be refuted by data
– Caution: Not every one responds alike to variable pay
plans such as risk averse persons!
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Intrinsic Motivation: Employee Recognition
Programs
 Intrinsic rewards: stimulate intrinsic motivation
– Can have long term effects
– Personal attention given to employee
– Approval & appreciation for a job well done
– Growing in popularity and usage
 Benefits of programs
– Fulfill employees’ desire for recognition
– Inexpensive to implement – can start with a Thank you
note
– Encourages repetition of desired behaviors
 Drawbacks of programs
– ©Susceptible
to manipulation by management for political
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motives especially where performance is not objective
E X H I B I T 7–2
From the Wall Street Journal, October 21, 1997. Reprinted by permission of Cartoon Features Syndicate.
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Global Implications
 Job Characteristics Model and Job Enrichment
– Model more applicable to individualistic culture as is
more individual oriented
– Job enrichment strategies may not have same effect
on collectivist cultures
– Caution: Conflicting findings – job involvement seems
to work well in Japan and Hungary as well!
 Telecommuting
– Data on US and Europe available but not with rest of
world: not tested on cultural dimensions
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Global Implications
 Variable pay
– Do individual pay systems such as pay for performance
work well for individual cultures while gain sharing and
profit sharing as group based rewards work well for
collectivist cultures? No empirical answer!
 Employee involvement Programs
– Seem to work well in individualistic cultures than
collectivist cultures such as India where society is high
power distance and accepts a high authority from
managers!
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Implications for Managers
 In Order to Motivate Employees
– Recognize individual differences.
– Use goals and feedback.
– Allow employees to participate in decisions that affect
them.
– Link rewards to performance.
– Check the system for equity.
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Check-Up: Motivation Applications
Flexible benefits are recommended
most strongly by __________
Theory.
Expectancy theory suggests that
individuals should be rewarded with
something they value.
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Check-Up: Motivation Applications
According to Expectancy Theory, a student
will not be motivated to attend class if s/he
doesn’t care about grades. What other kind
of application might be plausible for a
professor to implement as a reward theory in
class? Use models from this chapter to
discuss with a classmate and arrive at a
suggestion.
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Thank You
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