Unit IV Sustaining Employee Interest

UNIT IV

SUSTAINING EMPLOYEE INTEREST
by
Ramya Rajendran
Asst Professor
VIMS

UNIT IV: SUSTAINING EMPLOYEE INTEREST

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CHAPTER OUTLINE

Compensation plan

Reward

Motivation

Application of theories of motivation

Career management

Development of mentor Protg relationships


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COMPENSATION PLAN


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WHAT IS COMPENSATION?
Deals with every type of reward individuals receive in exchange for performing organizational tasks.Chief reason why most individuals seek employment.An exchange relationship.

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OBJECTIVES OF COMPENSATION
AdequateEquitableBalancedCost-effectiveSecureIncentive-providingAcceptable to the employee

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COMPENSATION METHODS/PLANS
FLAT RATESPAYMENT FOR TIME WORKEDVARIABLE PAY: INCENTIVE COMPENSATIONOWNERSHIPPEOPLE BASED PAYEXECUTIVE PAY

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Flat rates
Uniform wage ratesEx: Administrative assistants - $11/hourBonus/incentives (sales professions)For satisfied workforce

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Payment for time worked

S. NOWAGESSALARY1Pay calculated at hourly ratesAnnual or monthly rates2Overtime payNo overtime
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Payment for time worked
General, across-the-board increase for all employees (WAGES)Merit increases paid to some employees (SALARY)based on some indicator of job performanceCost-of-living adjustment (COLA)based on the consumer price index (CPI)Seniority

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VARIABLE PAY: INCENTIVE COMPENSATION

Definition for variable pay:

Any compensation plan that emphasizes
a shared focus on org. success, broadens opportunities for incentives to nontraditional groups & operates outside the base pay increase system.

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Variable Pay: Key Design Factors

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TYPES:
Merit incentivesIndividual incentivesTeam incentivesOrg. Incentives

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Merit incentives:
Performance increasesPay increasesHigher base salary after annual performance evaluation
ISSUES:
Employees fail to make the connection between pay and performanceThe secrecy of the reward is perceived by other employees as inequityThe size of the merit award has little effect on performance

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INDIVIDUAL INCENTIVES:
PieceworkPay fluctuates based on production units/timeEg: sewing mills 25 shirtsProduction bonusesPays a bonus when a employee exceeds the standard (labor savings)CommissionsCompensation on Sales % in units/money (marketing professions)

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TEAM INCENTIVES
When it is difficult to measure individual outputWhen cooperation is needed to complete a task or projectWhen management feels this is a more appropriate measure on which to base incentives

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Organization wide Incentives

Usually based on one of two performance concepts:
A sharing of profits generated by all employees altogetherA sharing of money saved as a result of employees' efforts to reduce costs

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SUGGESTION SYSTEMS:
Formal methodObtain employee advice on improvements in org effectivenessRewarded on successful application of the idea.

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Gain sharing:
Employees earn bonuses tied to unit-wide performance as measured by a predetermined, gain sharing formula
Commonly used gain sharing plans:

Lincoln Electric Plan

Scanlon Plan

Rucker Plan

ImproShare


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PROFIT SHARING PLANS:
Cash or current distribution plans provide full payment to participants soon after profits have been determinedDeferred plans credit a portion of current profits to employees accounts with cash payments made at the time of retirement, disability, severance, or deathA combination of both incorporates aspects of current and deferred options

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ISSUES OF VARIABLE PAY:
Percentage of an employees paycheck is put at riskIf business goals are not met, the pay rate will not rise above the lower base salaryAnnual raises are not guaranteedHelps manage labor costsDoes not guarantee equitable treatment of employees

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Ownership
Employee stock ownership plan (ESOP) employees receive stock in the companyInvests in the stock of the employer companyTo increase worker commitment & performance

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People based pay
Skill-Based PayKnowledge-Based PayCredential-Based Pay (qualifications)Feedback PayCompetency based pay(skill, knowledge & credential)

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Executive pay
Dramatic growthVariable performance-based pay is emphasized over guaranteesCEOs are encouraged to invest in company stockCEOs are held responsible for the cost of capital

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REWARDS


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WHAT IS A REWARD?
Somethinggivenorreceivedinreturnor recompensefor
service, merit, hardship,etc.


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INTRINSIC VERSUS EXTRINSIC REWARDS

Intrinsic rewards
Satisfactions derived from the job itself, such as pride in ones work, a feeling of accomplishment, or being part of a team.job enrichment

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INTRINSIC VERSUS EXTRINSIC REWARDS

Extrinsic rewards
Benefits provided by the employer, usually money, promotion, or benefitsEg: a salary increase or a write-up in the company magazine

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FINANCIAL VERSUS NONFINANCIAL REWARDS

FINANCIAL REWARDS
through wages, bonuses, or profit sharing
NONFINANCIAL REWARDS
indirectly, through employer-subsidized benefits such as retirement plans, paid vacations, paid sick leaves, and purchase discounts.
One persons food is another persons poison


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PERFORMANCE-BASED VERSUS MEMBERSHIP-BASED REWARDS

MEMBERSHIP-BASED REWARDS
paid on the basis of being a member of an organization. reward goes to all employees irrespective of their performance include salary increases attributable to labor-market conditions, seniority or time in rank

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PERFORMANCE-BASED VERSUS MEMBERSHIP-BASED REWARDS

PERFORMANCE-BASED REWARDS
basis of an employee's job performance ability.use commissions, piecework pay plans, incentive systems, group bonuses, merit pay, or other forms

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What makes people do what they do? Why do some people succeed while others fail?

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MOTIVATION


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MOTIVATION - MEANING
Internal andexternal factorsthat stimulate desire andenergyin people to be continually interested and committed to ajob,roleor subject, or to make an effort to attain agoal.


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TYPES OF MOTIVATION
Positive vs negativeRational vs emotionalIntrinsic vs extrinsicFinancial vs non-financial

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THEORIES OF MOTIVATION


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Maslows

Hierarchy

of Needs

Self-

actualization

Esteem

Social needs

Safety and security needs

Physiological needs


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According to Abraham Maslow, within every human being, the following hierarchy of needs exists. The first three are deficiency needs because they must be satisfied if the individual is to be healthy and secure. The last two are growth needs because they are related to the development and achievement of ones potential. As each of these needs becomes substantially satisfied, the next higher need becomes dominant.

1.Physiological needs. Hunger, thirst, shelter, sex, and other survival needs.

2.Safety needs. Security, stability, and protection from physical or emotional harm.

3.Belongingness needs. Social interaction, affection, companionship, and friendship.

4.Esteem needs. Self-respect, autonomy, achievement, status, recognition, and attention.

5.Self-actualization needs. Growth, self-fulfillment, and achieving ones potential.


McGregors

Theory X & Theory Y

Theory X

Workers

Dislike Work

Avoid Responsibility

Little Ambition

Theory Y

Workers

Enjoy Work

Accept Responsibility

Self-Directed

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Douglas McGregor said that managers hold one of two sets of assumptions about human nature: either Theory X or Theory Y. Seeing people as irresponsible and lazy, managers who follow Theory X assume the following:

1.Employees inherently dislike work and, when they can, will try to avoid it.

2.Since employees dislike work, they must be coerced, controlled, or threatened to achieve goals.

3.Employees avoid responsibilities and seek formal direction, if possible.

4.Most workers place security above all other work-related factors and will display little ambition.

Seeing people as responsible and conscientious, managers who follow Theory Y assume the following:

1.Employees can view work as being as natural as rest or play.

2.When committed to their objectives, people will exercise self-direction and self-control

3.The average person can learn to accept, even seek, responsibility.

4.Many workers besides managers have innovative decision-making skills.

Unfortunately, no hard evidence confirms that either set of assumptions is universally true. It is more likely that the assumptions of Theory X or Theory Y may be situationally appropriate.

Herzbergs Two-Factor Theory
Job dissatisfaction and Job satisfaction are not opposite to each others

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Herzbergs Two-Factor Theory

Hygiene Factors

Motivational Factors
Quality of supervision Rate of pay Company policies Working conditions Relations with others Job security Career Advancement Personal growth Recognition Responsibility Achievement
High

High

Job Dissatisfaction

Job Satisfaction

0


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Frederick Herzberg asked workers to describe situations in which they felt either good or bad about their jobs. His findings are called motivation-hygiene theory. Herzberg asserted that intrinsic factors are related to job satisfaction whereas extrinsic factors are associated with dissatisfaction. So, he called company policy, supervision, interpersonal relations, working conditions, and salary hygiene factors. When these factors are adequate, people will not be dissatisfied; however, they will not be satisfied either. He believed that achievement, recognition, the work itself, growth, and responsibility are motivational because people find them intrinsically rewarding.

McClellands Needs Theory


Need for

Achievement

Need for

Power

Need for

Affiliation

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Specific Goals

Goal-Setting

Theory

Challenging

Goals

Goals and

Participation


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Effective Goal Setting


Specific

Relevant

Challenging

Task

Effort

Task

Performance

Challenging

Participation

Commitment

Area of

Optimal

Goal

Difficulty

High

Task Performance

Low

Moderate

Challenging

Impossible

Effect of Goal Difficulty on Performance

Goal Difficulty


Reinforcement Theory


Consequences

Rewards

No Rewards

Punishment

Behavior

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Perceived

Ratio Comparisona

Employees

Assessment

Outcomes A

Inputs A

Outcomes A

Inputs A

Outcomes A

Inputs A

Outcomes B

Inputs B

Outcomes B

Inputs B

Outcomes B

Inputs B

Inequity (Under-Rewarded)

Equity

Inequity (Over-Rewarded)

aPerson A is the employee, and person B is a relevant other or referent.

Equity Theory

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Negative and Positive Inequity

A. An Equitable Situation

Self

Other


$2

1 hour

= $2 per hour

$4

2 hours

= $2 per hour

Negative and Positive Inequity (cont)


$2

1 hour

= $2 per hour

$3

1 hour

= $3 per hour

B. Negative Inequity

Self

Other

Negative and Positive Inequity (cont)

C. Positive Inequity

Self

Other


$2

1 hours

= $1 per hour

$3

1 hour

= $3 per hour

Expectancy Theory of Motivation

Personal

Goals

Organizational

Rewards

1

2

Outcome 1

+ or -

Outcome 3

+ or -

Outcome 2

+ or -

3


E-to-P

Expectancy

P-to-O

Expectancy

Outcomes
& Valences

Individual

Effort

Individual

Performance

3. Rewards-personal goals relationship

1. Effort-performance relationship

2. Performance-rewards relationship

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Vrooms Expectancy Theory

Expectancy: Belief that effort leads to a specific level of performance

Instrumentality: A performance outcome perception.

Valence: The Value of a reward or outcome

Motivational force = Expectancy * Instrumentality * Valence


ALDERFERS ERG THEORY
Extension & refinement of Maslows model.

Self-

Actualization

Esteem

Belongingness

Safety

Physiological

Growth

Relatedness

Existence

ERG
Theory

Needs Hierarchy
Theory

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PORTER & LAWLER MODEL
Extension Of Vrooms Expectancy Theory

Individual

Effort

Individual

Performance

satisfaction

Organizational

Rewards

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Theory Z
William Ouchi, integrates Japanese and American business practicesTheory Z Type Organization should be
Long-term employment

participative decision-making

Slow evaluation and promotion

informal control measures

Greater workers involvement

Stable work environment


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APPLICATION OF THEORIES OF MOTIVATION


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APPLICATION OF THEORIES OF MOTIVATION
MBOEmployee Recognition ProgramsEmployee Involvement ProgramsVariable Pay Plans/Rewards

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Organizational

Objectives

Divisional

Objectives

Departmental

Objectives

Individual

Objectives

What Is Management by Objectives?


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Linking MBO and
Goal-Setting Theory


Participation

in Goal Setting

Specificity

of Goals

Feedback

on Performance

Difficulty

of Goals

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Employee Recognition Programs

(linking with Herzberg two factor theory)

Recognition and

Reinforcement

Defining

Recognition

Recognition Plans

in Practice


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Employee Involvement
Programs

Participative

Management

Representative

Participation

Employee

Stock Ownership

Quality

Circles


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Piece

Rate

Variable Pay Plans/Rewards

Profit

Sharing

Gainsharing

Bonus

Plans


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CAREER MANAGEMENT


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What comes to your mind when you think of the word
career


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What is a Career?

A career
is a pattern of work-related experiences that span the course of a persons lifereflects any work, paid or unpaidis a broad definition helpful in todays work environment where employees and organizations have diverse needs

Traditional Career Stages

High

Low

Getting first job and being accepted

The elder statesperson

Preparing for retirement

Transition from school to work


Will performance increase or decline?

5

15

10

35

25

20

40

30

50

45

60

55

70

65

75

Age

Exploration

Estblshment

Mid career

Late Career

Decline

Job Performance


this stage is least relevant to HRM because it occurs prior to employment

exploration
includes school and early work experiences, such as internships. involves:trying out different fieldsdiscovering likes and dislikesforming attitudes toward work and social relationship patterns

establishment

includes:searching for workgetting first jobgetting evidence of success or failuretakes time and energy to find a niche and to
make your mark


mid-career

challenged to remain productive at workemployee may:continue to growplateau (stay competent but not ambitious)deteriorate

late career

successful elder states persons can enjoy being respected for their judgment. Good resource for teaching othersthose who have declined may experience job insecurity plateauing is expected; life off the job increases in importance

may be most difficult for those who were most successful at earlier stages todays longer life spans and legal protections for older workers open the possibility for continued work contributions, either paid or volunteer
decline


Enhancing Your Career

You are ultimately responsible for your own career.

manage your

reputation

know yourself

build and maintain

network contacts

keep current

keep your

options open

document your

achievements

balance your

specialist & generalist

competencies

Successful

Career

Tips


Career management
The process for enabling employees to better understand and develop their career skills and interests, and to use these skills and interests more effectively.Career management = career planning + development

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Career planning
The deliberate process through which someone becomes aware of personal skills, interests, knowledge, motivations, and other characteristics; and establishes action plans to attain specific goals.

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Career planning process


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Career development

The lifelong series of activities that contribute to a persons career exploration, establishment, success, and fulfillment.


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Roles in Career Development

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Any questions?

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Documents

Unit IV Sustaining Employee Interest