Chapter 6 - Motivating Workers
Lesson Objective: To understand the different financial and non-financial motivators
After understanding the three different motivational theories is time for us to finally dive in to the different ways companies can use financial and non-financial motivators to boost workers' motivation.
Let's start by looking at the different financial motivators!
Hourly Wage Rate:
When workers paid by the hour;
The longer they work more they earn;
Main advantage to businesses is that payment is only made for the time actually worked;
The main downside, however, is that the pay is not linked to the output;
Salary:
Fixed amount per year paid monthly;
Workers are not usually paid more even if they work longer;
Also not linked to outputs;
Used for managers, supervisors, etc. (non-production workers).
Piece-Rate:
Payment system in which the business pays the worker for each unit produced - linked to output;
Disadvantage: compromised quality because of rush to get products out quickly.
Commission:
Commonly used for sales staff;
Worker gets paid a cut from the sale performed;
Beneficial because pay is linked to value of goods sold;
Disadvantageous because of 'earning insecurity' which can lead to demotivation and all of its consequences.
Bonus Scheme: when workers receive additional payment if the business' target is achieved:
Positive because workers aim towards increased business performance;
It's considered a performance-based pay;
Increases workers' motivation;
Targets need to be realistic or else it can be demotivating;
Another drawback is the 'free-ride' effect.
Profit Sharing: additional payment based on the firm's profitability at the end of the year:
Also attached to the firm's performance, which is positive;
It can be paid in cash or share-options;
Problem with shareholders who do not appreciate it since dividends are diminished;
Another problem has to do with less retained profit for reinvestment.
Fringe Benefits: a type of financial incentive that is not in the form of cash:
Discount on the company's products;
Health insurance;
Good method for attracting and retaining workers.
Job Rotation: enabling workers to perform several different tasks at work:
Reduces boredom;
Increases workers' flexibility which is beneficial to the business too (productivity).
Job Enrichment: giving workers the opportunities to fully use their abilities as well as providing decision-making power:
Workers feel more valued;
It increases their satisfaction as the job becomes more challenging/interesting;
Increases efficiency and motivation.
Quality Circles: encouraging workers to meet regularly to discuss possible quality improvements:
Workers feel like their opinions matter;
It generates several solutions/ideas to improve the business processes.
Team Work: assigning a large task to a group of workers to perform together instead of smaller tasks to individual workers:
Workers are motivated from working together with others;
When several workers work together there are usually better results.
Delegation: giving authority to lower-level managers to make decisions;
Workers performing the job are better at doing it than their managers and therefore are more likely to implement positive changes.
In your opinion, which of all the methods we studied is the most effective way of motivating workers?
There is no right and wrong answer: which method to choose will depend on several factors:
The cost of implementing the motivator and its benefits brought to the business;
The type of worker you are trying to motivate (e.g. piece-rate can only be applied to production workers);
Different methods of motivation work better for different types of people.
To-Do-List:
Exam Practice Questions (p. 87 and p. 88)
Chapter 6 - Motivating Workers
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