What Is Employee Motivation?
→ Motivation is the willingness of employees to work hard and put effort into achieving business objectives.
→ A motivated employee is more likely to:
→ Work efficiently
→ Take responsibility
→ Achieve targets
→ Remain with the business
→ Accept new working methods
→ Make a positive contribution to the business
Why People Work
People work for both financial and non-financial reasons.
Financial Reasons
→ To earn an income
→ To pay for basic needs such as food and housing
→ To support their family
→ To achieve financial security
→ To afford a better standard of living
→ To save for the future
Non-Financial Reasons
→ Job satisfaction
→ Enjoyment of the work
→ Recognition and praise
→ Career progression
→ Personal development
→ Responsibility
→ Social interaction
→ Sense of achievement
→ Job security
→ The importance of each reason differs between employees.
Example:
→ A young employee may be motivated by promotion and career development.
→ Another employee may place greater importance on job security and flexible working.
Benefits of a Well-Motivated Workforce
Improved Labour Productivity
→ Labour productivity measures the output produced by employees for a given amount of labour.
→ Higher motivation
→ Greater effort and commitment
→ More output from employees
→ Higher labour productivity
Example:
→ Motivated production workers may work more efficiently and produce more goods during the same working hours.
Reduced Absenteeism
→ Absenteeism occurs when employees are regularly absent from work.
→ Higher motivation and job satisfaction
→ Employees are more willing to attend work
→ Fewer days lost through absence
→ Less disruption to the business
→ This can reduce the need for the business to employ temporary or replacement workers.
Lower Labour Turnover
→ Labour turnover is the rate at which employees leave a business and are replaced.
→ Higher motivation
→ Greater job satisfaction
→ Employees are more likely to stay
→ Labour turnover falls
→ Lower labour turnover can reduce:
→ Recruitment costs
→ Selection costs
→ Training costs
→ Loss of experienced employees
Greater Willingness to Accept Change
→ Businesses often need employees to accept:
→ New technology
→ New production methods
→ New working practices
→ Changes in responsibilities
→ New organisational structures
→ Motivated employees are more likely to cooperate with these changes.
Example:
→ A factory introduces automated machinery.
→ Employees who are motivated and feel valued may be more willing to learn how to use the new equipment.
Main Motivational Theories
Maslow’s Hierarchy of Needs
→ Abraham Maslow suggested that people have a hierarchy of needs.
1. Physiological Needs
→ These are basic needs required for survival.
Workplace examples:
→ Wages sufficient to afford food and housing
→ Reasonable working conditions
→ Rest breaks
2. Safety Needs
→ Employees need security and protection.
Workplace examples:
→ Job security
→ Safe working conditions
→ Employment contracts
→ Protection from workplace hazards
3. Social Needs
→ Employees need relationships and a sense of belonging.
Workplace examples:
→ Teamwork
→ Friendly relationships with colleagues
→ Team activities
4. Esteem Needs
→ Employees want recognition and respect.
Workplace examples:
→ Praise from managers
→ Awards
→ Employee of the month
→ Recognition for achievement
5. Self-Actualisation
→ Employees want to achieve their full potential.
Workplace examples:
→ Challenging work
→ Greater responsibility
→ Opportunities for personal development
→ Career progression
Applying Maslow
→ Businesses can use different methods to satisfy different needs.
Basic financial needs → Wages
Safety needs → Job security and safe working conditions
Social needs → Teamwork
Esteem needs → Recognition and praise
Self-actualisation → Challenging work and promotion
→ Maslow’s theory suggests that once lower-level needs are reasonably satisfied, higher-level needs can become more important motivators.
Taylor’s Theory
→ Frederick Taylor believed that employees are mainly motivated by money.
→ He developed scientific management, which involves studying jobs carefully to find the most efficient way of completing them.
Main Idea
→ Employees should be rewarded according to their level of output.
Example:
→ A worker receives £2 for every unit produced.
→ More units produced
→ Higher earnings
→ Greater incentive to increase output
Link to Piece-Rate Pay
→ Taylor’s theory is closely linked to piece-rate pay.
→ Employees receive payment based on the quantity they produce.
Strength of Taylor’s Theory
→ Financial rewards can be a powerful motivator, particularly when employees can directly influence their level of output.
Limitation of Taylor’s Theory
→ Money is not the only reason people work.
→ Employees may also want:
→ Recognition
→ Responsibility
→ Job satisfaction
→ Career development
→ Good working relationships
→ Therefore, financial rewards alone may not motivate every employee.
Herzberg’s Two-Factor Theory
→ Frederick Herzberg identified two groups of factors that affect employee motivation.
Hygiene Factors
→ These factors do not necessarily motivate employees, but poor hygiene factors can cause dissatisfaction.
Examples:
→ Salary
→ Working conditions
→ Job security
→ Company policies
→ Relationship with managers
→ Relationship with colleagues
Poor hygiene factors
→ Employee dissatisfaction
→ Lower morale
→ Possible increase in labour turnover
Motivators
→ These factors can create greater job satisfaction and motivation.
Examples:
→ Achievement
→ Recognition
→ Responsibility
→ Promotion
→ Personal growth
→ Interesting and challenging work
Good motivators
→ Greater job satisfaction
→ Higher motivation
→ Greater commitment
Applying Herzberg
→ Simply increasing wages may not create long-term motivation if employees have boring jobs and little responsibility.
→ Improving the nature of the job through job enrichment, recognition and responsibility may create stronger motivation.
Methods of Motivation
Financial Methods of Motivation
Time-Based Pay
→ Employees are paid according to the amount of time they work.
Example:
→ An employee earns $15 per hour.
→ 40 hours × $15 = $600 per week.
Advantages
→ Easy to calculate
→ Employees know how much they will earn
→ Provides predictable income
→ Suitable when quality is more important than speed
Disadvantages
→ Does not directly reward higher output
→ Employees may have little financial incentive to work faster
→ Labour productivity may not increase
Suitable for:
→ Jobs where individual output is difficult to measure, such as administrative work.
Piece-Rate Pay
→ Employees are paid according to the quantity of output they produce.
Example:
→ An employee receives $3 for every item produced.
→ 100 items × $3 = $300.
Advantages
→ Direct incentive to increase output
→ Can improve labour productivity
→ Employees can increase their earnings through greater output
Disadvantages
→ Quality may fall if employees concentrate only on quantity
→ Not suitable when output is difficult to measure
→ Employees may feel pressured to work quickly
Suitable for:
→ Production jobs where individual output can be measured accurately.
Salary
→ Employees receive a fixed amount of pay, usually paid monthly or annually.
Advantages
→ Provides income security
→ Easy for employees to plan their finances
→ Suitable for professional and managerial employees
→ Employees are not under pressure to produce a specific number of units
Disadvantages
→ Employees may not have a direct financial incentive to increase output
→ Additional rewards may be needed to encourage higher performance
Bonus
→ A bonus is an additional payment given to employees for achieving a target or performing well.
Example:
→ A sales employee receives a bonus for exceeding the annual sales target.
Advantages
→ Encourages employees to achieve targets
→ Can increase effort and productivity
→ Can reward good performance
Disadvantages
→ Employees may focus only on targets linked to the bonus
→ Can create competition between employees
→ Employees may become disappointed if bonuses are reduced or removed
Commission
→ Commission is payment based on the value or number of sales made by an employee.
Example:
→ A salesperson receives 5% commission on sales.
→ $20,000 sales × 5% = $1,000 commission.
Advantages
→ Strong incentive to increase sales
→ Links employee earnings directly to performance
→ Can increase sales revenue
Disadvantages
→ Employees may pressure customers to buy
→ Income can be uncertain
→ Competition between sales employees may reduce teamwork
Suitable for:
→ Sales employees whose individual sales can be measured.
Profit Sharing
→ Employees receive a share of the business’s profits.
→ Higher business profit
→ Employees may receive a larger payment
Advantages
→ Encourages employees to think about the success of the whole business
→ Can improve commitment
→ Encourages teamwork
Disadvantages
→ Employees may not see a direct link between their own effort and total business profit
→ Profit can be affected by factors outside employees’ control
Fringe Benefits
→ Fringe benefits are additional benefits provided to employees in addition to their normal pay.
Examples:
→ Company car
→ Health insurance
→ Staff discounts
→ Free meals
→ Accommodation
→ Extra holidays
Advantages
→ Can attract skilled employees
→ Can improve employee satisfaction
→ Can encourage employees to remain with the business
Disadvantages
→ Increase costs for the business
→ Employees may value different benefits differently
Non-Financial Methods of Motivation
Job Enrichment
→ Job enrichment means giving employees more challenging work, responsibility and opportunities to make decisions.
Example:
→ A production worker is given responsibility for checking the quality of products produced by the team.
→ Greater responsibility
→ Greater sense of achievement
→ Higher job satisfaction
→ Increased motivation
Suitable for:
→ Skilled employees who want greater responsibility.
Job Rotation
→ Job rotation means moving employees between different tasks or jobs.
Example:
→ An employee works in production one week and quality control the next week.
Advantages
→ Reduces boredom
→ Provides variety
→ Develops different skills
→ Helps employees understand different parts of the business
Disadvantages
→ Training may be required
→ Employees may initially be less productive when learning a new task
→ Some employees may prefer specialising in one job
Training
→ Training gives employees opportunities to develop their knowledge and skills.
Advantages
→ Improves skills
→ Increases confidence
→ Creates career development opportunities
→ Employees may feel valued
→ Can prepare employees for promotion
Disadvantages
→ Training can be expensive
→ Employees may leave after receiving training
→ Employees may need time away from their normal work
Opportunities for Promotion
→ Employees are given the opportunity to move to positions with greater responsibility.
Advantages
→ Provides a career path
→ Encourages employees to improve performance
→ Can increase commitment
→ Helps retain ambitious employees
Disadvantages
→ There may be limited promotion opportunities
→ Competition for promotion can create conflict
Praise
→ Managers recognise employees for good performance.
Examples:
→ Verbal praise
→ Written appreciation
→ Public recognition
→ Recognition during a team meeting
→ Praise can make employees feel valued without creating a large financial cost.
Employee of the Month
→ A business recognises an employee for good performance during a particular month.
Advantages
→ Provides recognition
→ Can encourage employees to perform well
→ Relatively inexpensive
→ Can improve morale
Disadvantages
→ Employees may feel the selection is unfair
→ Can create unhealthy competition if poorly managed
→ One award may not motivate all employees
Choosing an Appropriate Method of Motivation
→ The most appropriate method depends on the business situation and the needs of its employees.
Consider:
→ Type of work
→ Skills of employees
→ Whether output can be measured
→ Cost to the business
→ Employee expectations
→ Business objectives
→ Importance of teamwork
→ Existing level of motivation
→ Reason employees are leaving or becoming dissatisfied
Situation 1: Sales Employees
→ Commission may be appropriate.
→ Sales increase
→ Commission increases
→ Employees have a direct financial incentive to sell more.
→ However, the business should monitor customer service because employees may focus too heavily on making sales.
Situation 2: Repetitive Production Work
→ Job rotation may be appropriate.
→ Employees perform different tasks
→ Work becomes more varied
→ Boredom may decrease
→ Motivation may increase
→ Piece-rate pay could also be considered if individual output can be measured accurately.
Situation 3: Highly Skilled Employees
→ Job enrichment may be appropriate.
→ Skilled employees receive greater responsibility and more challenging work
→ Sense of achievement increases
→ Job satisfaction may increase
→ Employees may be more motivated to remain with the business.
Situation 4: High Labour Turnover
→ Promotion opportunities, training and improved fringe benefits could be considered.
→ Employees see opportunities for development
→ Job satisfaction may increase
→ Employees may be more likely to remain with the business
→ Labour turnover may fall.
Situation 5: Business Needs Higher Production
→ Piece-rate pay or performance bonuses may be appropriate if output can be measured.
→ Higher output
→ Higher financial reward
→ Employees have an incentive to increase productivity.
→ However, quality must be monitored so that employees do not increase output at the expense of product quality.
How to Justify a Recommendation
→ Identify the problem facing the business.
→ Select the most appropriate motivational method.
→ Explain how the method will motivate employees.
→ Link it directly to the situation.
→ Consider a possible disadvantage.
→ Explain why the benefits are likely to outweigh the disadvantage in that particular situation.
Example:
→ A clothing factory wants to increase output, and the number of garments produced by each worker can be measured accurately.
→ Piece-rate pay would be appropriate because employees would receive more pay when they produce more garments. This gives them a direct financial incentive to increase output, which could improve labour productivity. However, the business would need quality checks because employees might focus on producing more garments rather than maintaining quality.