Motivation & Reward Management

Lt Cdr Kuldeep Dadwal

(05590 B)

Explain the importance of human resource management.

Motivation

Explain how Maslow’s hierarchy-of-needs theory, goal setting, job design, and managers’ attitudes relate to employee motivation

Reward Management

Objectives of Reward Management

Objectives & Element of Reward Strategy

Management Approach to Rewards, Types & Categories of Reward

1

2

3

4

5

6

7

Learning

Goals

1) Providing qualified, well-trained employees for the organization.

2) Maximizing employee effectiveness in the organization.

3) Satisfying individual employee needs through monetary compensation, benefits, opportunities to advance, and job satisfaction.

Vital to All

Organizations

Human resource management - function of attracting, developing, and retaining enough qualified employees to perform the activities necessary to accomplish organizational objectives. Three main objectives:

Human Resource

Responsibilities

Motivation

The force within us that activates our behavior. It is a function of three distinct components, Intensity, Direction, and Persistence.

Intensity

Persistence

Direction

MotivationMotivation

Motivation - Intensity

Intensity refers to the amount of mental and physical effort put forth by the salesperson.

Persistence

Direction

MotivationMotivation

Intensity

Motivation - Direction

The extent to which an individual determines and chooses efforts focused on a particular goal.

Intensity

Persistence

Direction

MotivationMotivation

Motivation-Persistence

The extent to which the goal-directed effort is put forth over time.

Intensity

Persistence

Direction

MotivationMotivation

Motivation: Intrinsic vs.

Extrinsic

When doing the job is inherently motivating

Intrinsic

ExtrinsicWhen rewards

such as pay and formal recognition

act as motivators

Motivation

• Motivation starts with good employee morale, the mental attitude of employees toward their employer and jobs.

• High morale = sign of a well-managed organization

• Poor morale shows up through absenteeism, employee turnover, strikes, falling productivity, and rising employee grievances

Motivating

Employees

• Maslow’s hierarchy of needs: people have five levels of needs that they seek to satisfy.

• A satisfied need is not a motivator; only needs that remain unsatisfied can influence behavior.

• People’s needs are arranged in a hierarchy of importance; once they satisfy one need, at least partially, another emerges and demands satisfaction.

– Physiological needs

– Safety needs

– Social (belongingness) needs

– Esteem needs

– Self-actualization needs

Maslow’s Hierarchy

of Needs Theory

Herzberg’s Two-

Factor Theory

Hygiene Factors• Job Environment• Salary• Job Security• Personal Life• Working Conditions• Status• Interpersonal Relations• Supervision• Company Policies

Motivator Factors• Achievement• Recognition• Advancement• The job itself• Growth Opportunities• Responsibility

Expectancy Theory

and Equity Theory

Expectancy Theory – the process people use to evaluate the likelihood their effort will yield the desired outcome and how much they want the outcome.

Equity Theory – individual’s perception of fair and equitable treatment.

Expectancy Theory

Expectation Effort Outcome

Instrumentality Outcome Reward

Valence Reward has Value

Must have all 3 to be motivated!

• Goal: target, objective, or result that someone tries to accomplish.

• Goal-setting theory - people will be motivated to the extent to which they accept specific, challenging goals and receive feedback that indicates their progress toward goal achievement.

Goal-Setting

Theory

• Systematic and organized approach that allows managers to focus on attainable goals and achieve the best results.

• MBO helps motivate individuals by aligning their objectives with the goals of the organization.

• MBO Principals:– A series of related organizations, goals, and objectives– Specific objectives for each individual– Participative decision making– Set time period to accomplish goals– Performance evaluation and feedback

Management by

Objective

Job enlargement: job design that expands an employee’s responsibilities by increasing the number and variety

of tasks assigned to the worker.

Job Design &

Motivation

Job enrichment: change in job duties to increase employees’ authority in planning their work, deciding how

it should be done, and learning new skills.

• Two assumptions manager make about employees, according to psychologist Douglas McGregor:

• Theory X: employees dislike work and try to avoid it whenever possible; managers must coerce or control them or threaten punishment to achieve the organization’s goals.

• Theory Y: typical person likes work and learns to accept and seek responsibilities; managers assume creative people solve work-related problems.

• A third theory from management professor William Ouchi:

• Theory Z: worker involvement is key to increased productivity for the company and improved quality of work life for employees.

Managers’

Attitudes and

Motivation

> > > > > > > >

THE OBJECTIVES OF A REWARD STRATEGYTHE ELEMENTS OF REWARD STRATEGYMANAGEMENT APPRAOCH TO REWARDREASONS TO LINK PAY TO PERFORMANCEDEVELOPING A REWARD STRATEGYTYPES OF REWARDGLAXCO WELLCOME & HALIFAX PLC

20

Reward

Management

• Employee Reward is about how people are rewarded in accordance with their value to an organisation.

• Torrington & Hall note hat our attitude to pay is bound up in historical views on pay and attitudes towards capitalism. The concept of `fair day's pay for a fair day's work` is generally accepted but few people can define the term `fair`.

• It involves both financial and non-financial reward which consists of an organisation's integrated policies, processes and practices for rewarding its employees in accordance with their contribution, skill and competence framework of an organisation strategies (Armstrong, 2004).

21

Objectives of

Reward Strategy

Armstrong and Mullins (1994) suggest that reward management strategies must:

• Be congruent with and support corporate values and beliefs.

• Be linked to organisational performance• Drive and support desired behaviour at all levels.• Fit desired management styles• Provide the competitive edge needed to attract and

retain the level of skills the organisation needs.

22

Elements of

Reward Strategy

1. BASE PAY

2. ADDITIONAL TO BASE PAY• Individual performance related pay• Bonuses-lump-sums paid for successful performance• Incentives-target related pay to motivate people• Commissions-Percentage on sales value• Service related pay-increasing pay scale• Skill based pay-knowledge based• Allowances

3. EMPLOYEE BENEFITS• Pension• Company car• Annual holidays, Insurance cover and sick pays

23

Management

Approach To

RewardGenerally, the approach to reward adopted by employers

takes one of three forms:• Focus on service -is characterised by open-ended

agreements about continuity of employment, incremental pay scales ad annual reviews.

• Focus on skills – produces higher rates of pay with greater skills.

• Focus on performance –emphasises target setting, adapting to change and a close relationship between what the employee achieves and what the employee is paid.

24

Reasons To Link

Pay To

Performance• MOTIVATION• RETENTION• PRODUCTIVITY• COST-SAVINS• EMPLOYEECOMMITMENT

25

Developing A

Reward Strategy

Reward strategies deal with issues concerning:

• Pay structures• The use of job evaluation• The approach to keeping with market rates• Paying for individual performance, competence or skills.• Team pay• Relating bonuses to organisational performance• The provision of pensions and benefits.

26

Types of Reward

Type of reward Type of effortIndividual Basic WageReward Over time Time: maintaining work attendance

CommissionsBonusesMerit Competence: completing task without error

paid leaveBenefits

Team Reward Team Bonuses Co-operation with co-workersGain sharing

Organisational profit sharingReward Share ownership

Gain sharingSource: Bratton and Gold, Human Resource Management: Theory and Practice

Two Basic Categories

of Rewards

Compensation Rewards:Those given in return for acceptable performance or effort. They can include nonfinancial compensation.

Non-Compensation Rewards:Those beneficial factors related to the work situation and well-being of each salesperson.

Optimal Sales Force

Reward System

1. Provides an acceptable ratio of costs and sales force output in volume, profit, or other objectives

2. Encourages specific activities consistent with the firm's overall, marketing, and sales force objectives and strategies

3. Attracts and retains competent salespeople, thereby enhancing long-term customer relationships

4. Allows the kind of adjustments that facilitate administration of the reward system.

Types of Sales Force

Rewards

Intrinsic

Extrinsic

Motivation

Pay

Promotion

Sense of AccomplishmentPersonal Growth Opportunities

Recognition

Job security

Compensation

Components

• Salary

• Commission

• Incentive/Bonus

• Benefits

• Sales Contests

Compensation: Salary

Fixed sum of money paid at set intervals

How most of the country is paid Function of experience, competence,

tenure, past performance Motivate effort on non-sales activities Adjust for differences in territory

potential Motivate investment in long-term

sale

Financial Compensation:

Straight SalaryAdvantages

- Salaries are simple to administer- Planned earnings are easy to project.- Salaries can provide control over salespeople’s

activities, and reassignments are less of a problem.

- Salaries are useful when substantial development work is required.

Disadvantages- Salaries offer little incentive for better

performance.- Salary compression could cause perceptions of

inequity among experiences salespeople.- Salaries represent fixed overhead.

Compensation: Commission

Payment based on short-term results

Usually a % of $ sales, or $/volume Direct link between performance

and payment Motivates high level of selling

effort Encourages sales success

Financial Compensation:

Straight Commission

Advantages- Income is linked directly to desired results.- Straight commission plans offer cost-control

benefits.

Disadvantages- Straight commission plans contribute little to

company loyalty.- Problems may also arise if commissions are not

limited by an earnings cap.

Straight Commission:

Plan Variations

1. Commission base — volume or profitability

2. Commission rate — constant, progressive, or a combination

3. Commission splits — between two or more salespeople or between salespeople and the employer

4. Commission payout event — when the order is confirmed, shipped, billed, paid for, or some combination of these events

Straight Commission:

RatesConstant rates:

– Rates that remain unchanged over the pay period. Pay is linked directly to performance.

Progressive rates:– Rates that increase as salespeople reach pre-

specified targets.

Regressive rates:– Rates that decline at some predetermined point.

Compensation:

Incentive/Bonus

Additional commission tied to sales or profitability (e.g. + 1% after $2,000,000)

Bonus for meeting or exceeding target

Direct effort to strategic objectives Provide additional rewards to top

performers Encourage sales success

Financial Compensation:

Performance Bonuses

Advantages- Organization can direct emphasis to what it

considers important in the sales area.- Bonuses are particularly useful for tying rewards

to accomplishment of objectives.

Disadvantages- It may be difficult to determine a formula for

calculating bonus achievement if the objective is expressed in subjective terms.

- If salespeople do not fully support the established objective, they may not exert additional effort to accomplish the goal.

Financial Compensation:

Combination Plans

Advantages- Combination pay plans are flexible.- They are also useful when the skill levels of the

salesforce vary.- Combination pay plans are attractive to high-

potential but unproven candidates for sales jobs.

Disadvantages- Combination pay plans are more complex and

difficult to administer.- A common criticism of combination pay plans is

that they tend to produce too many salesforce objectives.

Non-Financial Rewards

Promotion Career Development Valence declines with age Add perquisites (perks) with

position: Car Better working conditions (hours,

facility) Compensation, Profit-sharing

Nonfinancial Compensation

Opportunity for Promotion:– The ability to move up in an organization along one

or more career paths

Sense of Accomplishment:– The internal sense of satisfaction from successful

performance– Sales managers should facilitate salespeople’s

ability to feel this a sense of accomplishment

Nonfinancial Compensation

Opportunity for Personal Growth:– Access to programs that allow for personal

development (e.g., tuition reimbursement, leadership development seminars)

Recognition:– The informal or formal acknowledgement of a

desired accomplishment

Job Security:– A sense of being a desired employee that comes

from consistent exceptional performance