MOTIVATION

Employee Motivation and

Compensation
 Motivation
Motivationis the word derived from
the word 'motive' which means
needs, desires, wants or drives within
the individuals.

It is the process of stimulating people

to actions to accomplish the goals. In
the work goal context the
Difference between Motivation
and Morale
Edwin Flippo (1961) defined morale as a mental condition or
attitude of individuals and groups which determines their
willingness to cooperate. Yoder Dale (1972), on the other
hand, explained morale as the overall tone, climate, or
atmosphere of work perhaps regularly sensed by the members.

If workers appear to feel enthusiastic and optimistic about

group activities, if they have a sense of mission about their
jobs, and if they are friendly with each other, they are
described as having a good or high morale. If they seem to be
dissatisfied, irritated, cranky, critical, restless, and pessimistic,
they are described as having poor or low morale. Elton Mayo
defined it as the maintenance of cooperative living, which
means a sense of belongingness.
 On the other hand many authors defined morale as a pursuit of a
common purpose, attitude, individual and group job satisfaction,
participative attitudes, team sprit etc. Whatever may be the way
of defining, it is evident that morale is a cognitive concept,
encompassing feelings, attitudes, and sentiments, which together
contribute to a general feeling of satisfaction in the workplace.

Like morale, motivation is also a cognitive concept, but it is

different from morale on certain important aspects. Motivation
stimulates individuals into action to achieve desired goals. It is,
therefore, a function of needs and drives. It mobilizes energy,
which enhances the potential for morale. Morale on the other
hand is the individual or group attitude towards a particular
subject. It contributes to a general feeling of satisfaction at the
work place.
 Factors which affect morale are, primarily, attitude and
job satisfaction levels of individual employees.From an
organizational point of view, such factors can be
delineated into organizational goals, leadership styles,
co-workers attitude, nature of work, work
environment, and the employee himself.
High morale is conventionally considered as a
contributor to high productivity, but such correlation
may not always be true. This is because high
productivity may be the outcome of many other
organizational initiatives, which may be independent of
employee morale. Hence, even with low employee
morale, high productivity is achievable.
 1. MASLOWS NEED
HIERARCHY
There is a hierarchy of five needs

1. Physiological,
2. Safety,
3. Social,
4. Esteem, and
5. Self-actualization;

As each need is substantially

satisfied, the next need becomes
dominant.
 Physiological Needs
Physiological needs are those required to
sustain life, such as:
air
water
nourishment
sleep
According to Maslow's theory, if such needs
are not satisfied then one's motivation will
arise from the quest to satisfy them. Higher
needs such as social needs and esteem are
not felt until one has met the needs basic to
one's bodily functioning.
 Safety Needs
Once physiological needs are met, one's
attention turns to safety and security in order to
be free from the threat of physical and
emotional harm. Such needs might be fulfilled
by:
Living in a safe area
Medical insurance
Job security
Financial reserves

According to Maslow's hierarchy, if a person

feels that he or she is in harm's way, higher
needs will not receive much attention.
 Social Needs
Once a person has met the lower level
physiological and safety needs, higher
level needs become important, the first
of which are social needs. Social needs
are those related to interaction with
other people and may include:
Need for friends
Need for belonging
Need to give and receive love
 Esteem

Once a person feels a sense of "belonging", the need to feel

important arises. Esteem needs may be classified as internal
or external. Internal esteem needs are those related to self-
esteem such as self respect and achievement. External
esteem needs are those such as social status and
recognition. Some esteem needs are:
Self-respect
Achievement
Attention
Recognition
Reputation

Maslow later refined his model to include a level between

esteem needs and self-actualization: the need for knowledge
and aesthetics.
 Self-Actualization
Self-actualization is the summit of Maslow's hierarchy of
needs. It is the quest of reaching one's full potential as a
person. Unlike lower level needs, this need is never fully
satisfied; as one grows psychologically there are always new
opportunities to continue to grow.
Self-actualized people tend to have needs such as:
Truth
Justice
Wisdom
Meaning

Self-actualized persons have frequent occurrences of peak

experiences, which are energized moments of profound
happiness and harmony. According to Maslow, only a small
percentage of the population reaches the level of self-
actualization.
 2. TWO WAY FACTOR
THEORY
Two-Factor (Motivation-Hygiene) Theory

Intrinsic factors are related to job

satisfaction, while Extrinsic factors are
associated with dissatisfaction.

Hygiene Factors
Factorssuch as company policy and
administration, supervision, and salarythat,
when adequate in a job, placate workers.
When factors are adequate, people will not
be dissatisfied.
 3. MC CLLELANDS THEORY
OF NEEDS
1. Need for Achievement :The drive to excel,
to achieve in relation to a set of standards, to
strive to succeed.
2. Need for Power :The need to make others
behave in a way that they would not have
behaved otherwise.
3. Need for Affiliation :The desire for friendly
and close personal relationships.
 4. EQUITY THEORY- JOHN
STACEY ADAM
Individuals compare their job inputs and
outcomes with those of others and then
respond to eliminate any inequities.

Salary and other benefits

Referent Comparisons:
Self-inside
Self-outside
Other-inside
Other-outside
 EQUITY THEORY
REWARDS AND SATISFACTION: If the
rewards received are equitable, then
they feel satisfied and motivated.
 5. Expectancy Theory
(Victor Vroom)
The strength of a tendency to act in a
certain way depends on the strength of an
expectation that the act will be followed by
a given outcome and on the attractiveness
of that outcome to the individual.
 Vrooms Expectancy
Theory
EffortPerformance Relationship:
Will my efforts lead to high performance?
For this manager must discover- what resources,
training, supervision employee needs.
PerformanceReward Relationship :
Will my performance lead to desired outcome?
Manager must make sure that the employee is
rewarded with what is promised, otherwise it will
lead to dissatisfaction.
RewardsPersonal Goals Relationship:
Do I find the reward desirable?
Manager may discover what employee values.
 Expectancy Theory
EffortPerformance Relationship
*The probability that exerting a given amount of
effort will lead to performance.
PerformanceReward Relationship
*The belief that performing at a particular level
will lead to the attainment of a desired outcome.
RewardsPersonal Goals Relationship
*The degree to which organizational rewards
satisfy an individuals goals or needs and the
attractiveness of potential rewards for the
individual.
 MOTIVATING GENERATION
Y
Employers categorises employees on
following basis-
1. Baby Boomers (1945-1964)
2. Gen X (1965-1975)
3. Gen Y (1976-1996)
 Conti...
Gen Y employees are attitudinally different from Gen X and Baby
Boomers.
Gen Y employees show more interest for career options, which can
meet their job expectations.
They are more demanding from their employers.

WORKPLACES:
- Gen Y employees expect their workplaces should have state-
of-Art technology, with internet access.
- They dont want their workplaces to believe all work and no
play.

The organisation must value their social life.(Official party at

home)
Often companies crave DIFFERENTIATED MOTIVATIONAL
REINFORCEMENTS(stimuli) to motivate gen Y.
 Motivational research and
compensation design
To be able to design an appropriate compensation that
motivates employees, it is important to understand the
motivational research process.

Numerous studies have been conducted on

employee motivation for which several surveys
have been done, using scaled ended
questionnaire.

Primary purpose of the research work is to

identify correct reinforcers for employee
motivation .
 Conti..
RANKED ORDER OF MOTIVATING
FACTORS:

a) Interesting work
b) Good wages
c) Full appreciation of work done
d) Job security
e) Good working conditions
f) Promotions and growth in the organisation.
g) Feeling of being
h) Personal loyalty
i) Tactful discipline
j) Sympathetic help with personal problems.
 Conti..
Three models are primarily used to understand
motivation:
i. Traditional Model
Perceives work as distasteful.

ii. Human Relation Model

Work is perceived as something while doing which
they feel useful and important.

iii. Human resource Model

Employees want to contribute to meaningful work.
 Baby Boomers
Baby Boomers, came of age during the early days of the Cold
War. As they entered the workforce, they combined their parents
work ethic with their own budding idealism in hopes of making
the world a better place. As a group, Baby Boomers are loyal to a
fault. Most are eager to trust their employer and only move to
other companies to escape truly disgraceful conditions. For that
reason, they respect hierarchy and most decide to climb the
corporate ladder from within the company they start with.

Though theyve been around for major advancements in the

workplace, most jumps in business technology occurred after
they had already entered the work force. Widespread computer
use, cell phones, wireless networks, and TheCloud are all
technologies they have adapted to after their formative years. To
Baby Boomers, face to face is still the best way for office
interactions.
 Generation X
Generation X, saw the rise of two income & single parent
families. With their Baby Boomer parents drawn into their work
lives, young Gen Xers became independent at a much younger
age. They possess a natural self-sufficiency and are resourceful
enough to work their way out of any problem. On meaningful
challenges, they will relentlessly work to achieve a solution but
they are not blindly loyal. They consider themselves free agents
and are more than willing to leave a job for a better opportunity.

Unlike the Baby Boomer Generation, most members of

Generation X were introduced to digital technology before
entering into the workforce. They are drawn to new technology
and eagerly pursue any skill that can increase
theirmarketability.
 Generation Y
Gen Y is focused on following their own path. From a young age, the
Millennial generation has been told they can do whatever they want
by their highly supportive and engaged parents. In most cases, their
adolescence was jam packed with scheduled events and
technological distractions, making multitasking second nature. On
the job, they are focused on achievement more than money, and will
only stick around if they feel they are contributing to important
tasks. When they work on projects, they expect to have regular
feedback to make sure that they are going along the right path.
Having played around with technology from a very young age, the
Millennials can instinctively navigate new, high tech equipment
without any major learning curve. They passionately immerse
themselves in new technology, not only to build their professional
skill sets but to enhance every facet of their lives. Generation Y
quickly turns to the internet for knowledge, networking, social
interaction, and entertainment. Technology is ingrained in every part
of their life, so dont expect them to shut off when they get into the
workplace.
COMPENSATION PRACTICES
FOR TALENTED EMPLOYEES
Employee Stock Option
An employee stock option (ESO) is astock
optiongranted to specified employees of a company.

ESOs offer the options holder the right to buy a certain

amount of company shares at a predetermined price for a
specific period of time.

An employee stock option is slightly different from

anexchange-traded option, because it is not traded
between investors on an exchange.
 Examples of Stock Option
Exercising
Using the same example, assume that the stock price
increases to Rs.70 after two years, which is above the exercise
price for the stock options. The manager can exercise by
purchasing the 500 shares that are vested at Rs.50, and selling
those shares at the market price of Rs.70. The transaction
generates a Rs.20 per share gain, or Rs.10,000 in total. The
firm retains an experienced manager for two additional years,
and the employee profits from the stock option exercise. If,
instead, the stock price is not above the Rs.50 exercise price,
the manager does not exercise the stock options. Since the
employee owns the options for 500 shares after two years, the
manager may be able to leave the firm and retain the stock
options until the options expire. This arrangement gives the
manager the opportunity to profit from a stock price increase
down the road.
 How does ESOPs motivate
employees?