Motivation in Practice Monetary Methods PEOPLE MOTIVATION AND LEADERSHIP
Motivation in PracticeMonetary Methods
PEOPLEMOTIVATION AND LEADERSHIP MOTIVATION AND LEADERSHIP
Payment Methods
Definition and Explanation Definition and Explanation
Time Based
Where workers are rewarded according to the time they spend at work, as opposed to output or performance.
Where workers are rewarded according to the time they spend at work, as opposed to output or performance.
Payment Methods
Definition and Explanation Definition and Explanation
Time Based
Workers paid set amount per hour, week, month or year.
Rates fixed in relation to standard hours worked per week, written into contract of employment.
Workers paid set amount per hour, week, month or year.
Rates fixed in relation to standard hours worked per week, written into contract of employment.
Common to this system is overtime pay – where workers are often paid a higher rate if they work longer than their contracted / agreed hours.
Common to this system is overtime pay – where workers are often paid a higher rate if they work longer than their contracted / agreed hours.
Payment Methods
Time BasedOvertimeOvertime
Overtime payments more common to manual workers.
White collar workersoften expected to put in additional hours without extra pay, but may receive time off in lieu.
Overtime payments more common to manual workers.
White collar workersoften expected to put in additional hours without extra pay, but may receive time off in lieu.
Payment Methods
Time BasedOvertimeOvertime
Overtime can be cheaper and more flexible than recruiting new staff in the short-term, but if used repeatedly…
Overtime can be cheaper and more flexible than recruiting new staff in the short-term, but if used repeatedly…
• may prove less cost-effective in the long-term.
Payment Methods
Time BasedOvertimeOvertime
Overtime can be cheaper and more flexible than recruiting new staff in the short-term, but if used repeatedly…
Overtime can be cheaper and more flexible than recruiting new staff in the short-term, but if used repeatedly…
• workers may depend on it as extra pay and conflict may occur if opportunities for overtime suddenly withdrawn.
Payment Methods
Time BasedOvertimeOvertime
Relative Advantages
Relative Advantages
Relative Disadvantages
Relative Disadvantages
Payment Methods
Time Based
Relative Advantages
Relative Advantages
RelativeDisadvantages
• Employees have guaranteed income which may promote feelings of job security.
Payment Methods
Time Based
Relative Advantages
Relative Advantages
RelativeDisadvantages
• Total wage bill for the year (excl. overtime) is known in advance - helps budgeting, forecasting, decision making.
Payment Methods
Time Based
Relative Advantages
Relative Advantages
RelativeDisadvantages
• High quality products/services may be more likely – as workers focus on quality first, quantity second.
Payment Methods
Time Based
RelativeAdvantages
RelativeDisadvantages
RelativeDisadvantages
• Little incentive to work hard, supervisors may be required to ensure workers working at acceptable level.
Payment Methods
Time Based
RelativeAdvantages
RelativeDisadvantages
RelativeDisadvantages
• Staff who work particularly hard may resent being paid at the same rate as those less productive or conscientious.
Payment Methods
Time Based
• It is difficult to measure output or performance of individual workers, for example, teachers or nurses;
• Quality matters rather than quantity.
Time rate payment systems are most appropriate when:Time rate payment systems are most appropriate when:
Payment Methods
Time Based - Appropriateness
• The business is subject to significant changes in demand, for example: situations where an employee may be idle from 2 or 3pm every day but still get paid for a full day’s work.
Least appropriate when:Least appropriate when:
Payment Methods
Time Based - Appropriateness
Merit Based
Where payment is made for each quality good produced to encourage workers to increase productivity.
Eg if I make 10 pens I get twice as much as someone who only makes 5 pens
Eg if I make 10 pens I get twice as much as someone who only makes 5 pens
Piecework - Definition and Explanation
Relative Advantages
Relative Advantages
Relative Disadvantages
Relative Disadvantages
Merit Based
Piecework - Definition and Explanation
Relative Advantages
Relative Advantages
RelativeDisadvantages
• Increased incentive to work hard - increased productivity.
• Less supervision required to ensure workers work at an acceptable rate.
• Group schemes may encourage teamwork and minimise potential conflict.
Merit Based
Piecework - Definition and Explanation
RelativeAdvantages
RelativeDisadvantages
RelativeDisadvantages
• No basic pay to fall back on if machinery breaks down, supplies aren’t delivered on time, quality isn’t acceptable - may cause resentment, lead to feelings of insecurity, adversely affect motivation and productivity.
Merit Based
Piecework - Definition and Explanation
RelativeAdvantages
RelativeDisadvantages
RelativeDisadvantages
• More supervision may be required to ensure quality and safety does not decline.
• Group schemes may be perceived as unfair if one or two members are not seen to put in as much effort as others.
Merit Based
Piecework - Definition and Explanation
• Where individual or group output can easily be measured, such as in the manufacturing industry.
Merit Based
Piecework - Appropriateness
Performance-related Pay
A payment system whereby staff whose work is considered above average are rewarded.
Definition and Explanation
Performance-related Pay
• Used for staff whose work cannot be assessed easily numerically (eg volume/value of units/products sold).
• Common to white collar workers where annual salary is linked to performance during the year.
Definition and Explanation
• Used widely by banks, in some schools, some Gov. workers, hotel industry etc
Definition and Explanation
Performance-related Pay
1. Establish targets at an appraisal interview for employees involved in the scheme.
2. Review and discuss employee’s achievements against those targets over the year.
Performance-related Pay
Method for Determining PRP
3. Award outstanding achievements with pay rise or bonus worth perhaps 5% of their salary.
In some cases the entire salary will be reviewed and may depend upon this process.
In some cases the entire salary will be reviewed and may depend upon this process.
Performance-related Pay
Method for Determining PRP
Relative Advantages
Relative Advantages
Relative Disadvantages
Relative Disadvantages
Performance-related Pay
Method for Determining PRP
Relative Advantages
Relative Advantages
RelativeDisadvantages
• Chance to earn more money may increase employees motivation and thus performance.
Performance-related Pay
Method for Determining PRP
RelativeAdvantages
RelativeDisadvantages
RelativeDisadvantages
• Rewards individuals, does little to promote teamwork.
• Can cause unhealthy rivalry between those involved.
Performance-related Pay
Method for Determining PRP
RelativeAdvantages
RelativeDisadvantages
RelativeDisadvantages
• Staff often suspect those awarded maximum bonus / pay rise have secured this through favouritism – may damage relationships and team spirit.
Performance-related Pay
Method for Determining PRP
Financial Incentive Schemes
Can be regarded as an extension of a group payment by results scheme, where employees receive a bonus based on the business’s profits.
Can be regarded as an extension of a group payment by results scheme, where employees receive a bonus based on the business’s profits.
Can represent a substantial bonus on top of basic earnings.Can represent a substantial bonus on top of basic earnings.
Profit Share
Relative Advantages
Relative Advantages
Relative Disadvantages
Relative Disadvantages
Financial Incentive Schemes
Profit Share
Relative Advantages
Relative Advantages
RelativeDisadvantages
• May encourage employees to consider whole business rather than concentrating on their own job
• May encourage cost saving / revenue generating ideas.
Financial Incentive Schemes
Profit Share
Relative Advantages
Relative Advantages
RelativeDisadvantages
• May encourage employees to work harder and smarter but not stop them working as a team.
• Focus on profitability may make it easier to accept change / lessen resistance to change.
Financial Incentive Schemes
Profit Share
RelativeAdvantages
RelativeDisadvantages
RelativeDisadvantages
• May seem meaningless, have no effect at all, if only small proportion of profit awarded.
• May create conflict with shareholders and / or reduce the amount of capital available for long-term investment.
Financial Incentive Schemes
Profit Share
RelativeAdvantages
RelativeDisadvantages
RelativeDisadvantages
• Employees may not be motivated by such a scheme if they feel their own efforts are not likely to have much effect on the organisation as a whole, and its profitability.
Financial Incentive Schemes
Profit Share
Provide employees with the added incentive of being part owners of the business in which they work.
Provide employees with the added incentive of being part owners of the business in which they work.
Share Option SchemesShare Option Schemes
Financial Incentive Schemes
Share Ownership
• Staff usually save about £50 a month, over 5 year period.
• At end of the period can convert savings into shares at the price the shares were at the start of the 5 year period.
Financial Incentive Schemes
Share Ownership
Share Option SchemesShare Option Schemes
• Senior managers are given the opportunity to buy a substantial number of company shares at a discounted price, at an agreed date in the future.
Financial Incentive Schemes
Share Ownership
• May encourage employees to increase work effort in order to help the business build up and grow.
• Encourages employees to remain loyal to firm for several years, minimising labour turnover and associated costs.
Financial Incentive Schemes
Share Ownership
Relative AdvantagesRelative Advantages
One-off payments to recognise contribution to sales/profits.Bonuses to boost pay at certain times of year, eg Christmas.
One-off payments to recognise contribution to sales/profits.Bonuses to boost pay at certain times of year, eg Christmas.
Financial Incentives
Cash Bonus Payments
Relative Advantages
Relative Advantages
Relative Disadvantages
Relative Disadvantages
Financial Incentives
Cash Bonus Payments
Relative Advantages
Relative Advantages
RelativeDisadvantages
• may lead to a short-term increase in motivation or loyalty.
Financial Incentives
Cash Bonus Payments
RelativeAdvantages
RelativeDisadvantages
RelativeDisadvantages
• Regular bonuses may simply be accepted as employee’s ‘right’ and have no motivational affect at all.
Financial Incentives
Cash Bonus Payments