PEOPLE

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PEOPLE

• MOTIVATION AND LEADERSHIP

Motivation in Practice Monetary Methods
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Payment Methods
Time Based
Definition and Explanation
Where workers are rewarded according to the time
they spend at work, as opposed to output or
performance.
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Payment Methods
Time Based
Definition and Explanation
Workers paid set amount per hour, week, month or
year. Rates fixed in relation to standard
hours worked per week, written into contract of
employment.
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Payment Methods
Time Based
Overtime
Common to this system is overtime pay where
workers are often paid a higher rate if they work
longer than their contracted / agreed hours.
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Payment Methods
Time Based
Overtime
Overtime payments more common to manual
workers. White collar workers often expected to
put in additional hours without extra pay, but
may receive time off in lieu.
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Payment Methods
Time Based
Overtime
Overtime can be cheaper and more flexible than
recruiting new staff in the short-term, but if
used repeatedly

• may prove less cost-effective in the long-term.

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Payment Methods
Time Based
Overtime
Overtime can be cheaper and more flexible than
recruiting new staff in the short-term, but if
used repeatedly

• workers may depend on it as extra pay and
  conflict may occur if opportunities for overtime
  suddenly withdrawn.

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Payment Methods
Time Based
Relative Disadvantages
Relative Advantages
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Payment Methods
Time Based
Relative Disadvantages
Relative Advantages

• Employees have guaranteed income which may
  promote feelings of job security.

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Payment Methods
Time Based
Relative Disadvantages
Relative Advantages

• Total wage bill for the year (excl. overtime) is
  known in advance - helps budgeting, forecasting,
  decision making.

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Payment Methods
Time Based
Relative Disadvantages
Relative Advantages

• High quality products/services may be more likely
  as workers focus on quality first, quantity
  second.

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Payment Methods
Time Based
Relative Disadvantages
Relative Advantages

• Little incentive to work hard, supervisors may be
  required to ensure workers working at acceptable
  level.

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Payment Methods
Time Based
Relative Disadvantages
Relative Advantages

• Staff who work particularly hard may resent being
  paid at the same rate as those less productive or
  conscientious.

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Payment Methods
Time Based - Appropriateness
Time rate payment systems are most appropriate
when

• It is difficult to measure output or performance
  of individual workers, for example, teachers or
  nurses
• Quality matters rather than quantity.

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Payment Methods
Time Based - Appropriateness
Least appropriate when

• The business is subject to significant changes in
  demand, for example situations where an employee
  may be idle from 2 or 3pm every day but still get
  paid for a full days work.

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Merit Based
Piecework - Definition and Explanation
Where payment is made for each quality good
produced to encourage workers to increase
productivity.
Eg if I make 10 pens I get twice as much as
someone who only makes 5 pens
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Merit Based
Piecework - Definition and Explanation
Relative Disadvantages
Relative Advantages
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Merit Based
Piecework - Definition and Explanation
Relative Disadvantages
Relative Advantages

• Increased incentive to work hard - increased
  productivity.
• Less supervision required to ensure workers work
  at an acceptable rate.
• Group schemes may encourage teamwork and minimise
  potential conflict.

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Merit Based
Piecework - Definition and Explanation
Relative Disadvantages
Relative Advantages

• No basic pay to fall back on if machinery breaks
  down, supplies arent delivered on time, quality
  isnt acceptable - may cause resentment, lead to
  feelings of insecurity, adversely affect
  motivation and productivity.

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Merit Based
Piecework - Definition and Explanation
Relative Disadvantages
Relative Advantages

• More supervision may be required to ensure
  quality and safety does not decline.
• Group schemes may be perceived as unfair if one
  or two members are not seen to put in as much
  effort as others.

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Merit Based
Piecework - Appropriateness

• Where individual or group output can easily be
  measured, such as in the manufacturing industry.

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Performance-related Pay
Definition and Explanation
A payment system whereby staff whose work is
considered above average are rewarded.
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Performance-related Pay
Definition and Explanation

• Used for staff whose work cannot be assessed
  easily numerically (eg volume/value of
  units/products sold).
• Common to white collar workers where annual
  salary is linked to performance during the year.

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Performance-related Pay
Definition and Explanation

• Used widely by banks, in some schools, some Gov.
  workers, hotel industry etc

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Performance-related Pay
Method for Determining PRP
1. Establish targets at an appraisal interview
for employees involved in the scheme. 2. Review
and discuss employees achievements against those
targets over the year.
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Performance-related Pay
Method for Determining PRP
3. Award outstanding achievements with pay rise
or bonus worth perhaps 5 of their salary.
In some cases the entire salary will be reviewed
and may depend upon this process.
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Performance-related Pay
Method for Determining PRP
Relative Disadvantages
Relative Advantages
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Performance-related Pay
Method for Determining PRP
Relative Disadvantages
Relative Advantages

• Chance to earn more money may increase employees
  motivation and thus performance.

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Performance-related Pay
Method for Determining PRP
Relative Disadvantages
Relative Advantages

• Rewards individuals, does little to promote
  teamwork.
• Can cause unhealthy rivalry between those
  involved.

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Performance-related Pay
Method for Determining PRP
Relative Disadvantages
Relative Advantages

• Staff often suspect those awarded maximum bonus /
  pay rise have secured this through favouritism
  may damage relationships and team spirit.

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Financial Incentive Schemes
Profit Share
Can be regarded as an extension of a group
payment by results scheme, where employees
receive a bonus based on the businesss profits.
Can represent a substantial bonus on top of basic
earnings.
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Financial Incentive Schemes
Profit Share
Relative Disadvantages
Relative Advantages
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Financial Incentive Schemes
Profit Share
Relative Disadvantages
Relative Advantages

• May encourage employees to consider whole
  business rather than concentrating on their own
  job
• May encourage cost saving / revenue generating
  ideas.

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Financial Incentive Schemes
Profit Share
Relative Disadvantages
Relative Advantages

• May encourage employees to work harder and
  smarter but not stop them working as a team.
• Focus on profitability may make it easier to
  accept change / lessen resistance to change.

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Financial Incentive Schemes
Profit Share
Relative Disadvantages
Relative Advantages

• May seem meaningless, have no effect at all, if
  only small proportion of profit awarded.
• May create conflict with shareholders and / or
  reduce the amount of capital available for
  long-term investment.

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Financial Incentive Schemes
Profit Share
Relative Disadvantages
Relative Advantages

• Employees may not be motivated by such a scheme
  if they feel their own efforts are not likely to
  have much effect on the organisation as a whole,
  and its profitability.

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Financial Incentive Schemes
Share Ownership
Provide employees with the added incentive of
being part owners of the business in which they
work.
Share Option Schemes
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Financial Incentive Schemes
Share Ownership

• Staff usually save about 50 a month, over 5 year
  period.
• At end of the period can convert savings into
  shares at the price the shares were at the start
  of the 5 year period.

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Financial Incentive Schemes
Share Ownership
Share Option Schemes

• Senior managers are given the opportunity to buy
  a substantial number of company shares at a
  discounted price, at an agreed date in the
  future.

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Financial Incentive Schemes
Share Ownership
Relative Advantages

• May encourage employees to increase work effort
  in order to help the business build up and grow.
• Encourages employees to remain loyal to firm for
  several years, minimising labour turnover and
  associated costs.

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Financial Incentives
Cash Bonus Payments
One-off payments to recognise contribution to
sales/profits. Bonuses to boost pay at certain
times of year, eg Christmas.
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Financial Incentives
Cash Bonus Payments
Relative Disadvantages
Relative Advantages
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Financial Incentives
Cash Bonus Payments
Relative Advantages
Relative Disadvantages

• may lead to a short-term increase in motivation
  or loyalty.

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Financial Incentives
Cash Bonus Payments
Relative Disadvantages
Relative Advantages

• Regular bonuses may simply be accepted as
  employees right and have no motivational
  affect at all.