BUS 610 Organizational Behavior/week 3 discussion 1 and 2

Chapter Five Motivation in the Workplace Jon Feingersh/Iconica/Getty Images Learning Objectives After reading this chapter and studying the materials, you should be able to:

• Apply the job performance model work-context variables to motivational systems. • Use the job design process and the job characteristics model to improve employee motivation and performance.

• Employ goal-setting theory and employee involvement programs to motivate workers. • Utilize the pay and reward system to motivate employees. baa66968_05_c05_125-152.indd 125 6/17/13 11:56 AM Section 5.1 Job Performance, Personal and Organizational Motives 5.1 Job Performance, Personal and Organizational Motives Chapter 4 of this book described a series of motivational theories from the content, operant process, and cognitive process perspectives. The theories concentrate on motivation from an individual’s perspective.

In essence, motivation occurs as a result of our needs, the reinforcements we encounter, our perceptions of equity, or our drive to achieve and receive intrinsic and extrinsic valences. While the theories present some elements of the organizational context, other factors should be considered when analyzing work- place motivation.

A contrast can be drawn between personal motives and organizational motives. At times these are one and the same. At others, they may be in opposition. Consequently, managers can develop successful motiva- tional systems using a more comprehensive approach to motivation that incorporates contextual elements such as the nature of the job and other organizational processes, the two concepts examined in this section.

Learning Objective #1:

How can managers apply the job performance model work-context variables to motivational systems?

OB in Action Julia A. Stewart—People-Centered Motivation Julia A. Stewart has lived the American Dream, or as she put it, “Food server made good” (Mabrey & Rosenberg, 2008). Her career in food service began as a server (“we called it waitress back then,” she notes) in an International House of Pancakes (IHOP) restaurant at the age of 16. She worked her way up through the company to achieve the rank of CEO, after leaving for a time to work for the Applebee’s chain. She returned to IHOP after being passed over for the CEO position at Applebee’s.

When she arrived at IHOP in 2001, the company had struggled. Stewart concentrated in two main areas: (1) making the employment experi - ence better and (2) making the restaurants better. She moved IHOP away from company-owned restaurants to franchisee operations. Con - siderable energy was put into improving the menu. Stewart’s motivational system at IHOP focuses on individual account - ability, core values, regular and timely communication, and demonstra - tions of appreciation. “Employees have the need to be developed and coached on an ongoing basis,” she commented. “The employees in the IHOP system have a strong desire to excel and deliver the best guest service. It is our responsi - bility to provide them with the tools they need for success (Hospitality.net, 2005).” In 2005, Stewart was awarded The Council of Hotel and Restaurant Trainers (CHART) Commitment to People Award. “Beyond personal and professional development, Julia places a tremendous emphasis on the happiness and well-being of IHOP’s employees...Julia’s management style is one of collaboration and inclusion,” noted CHART president Joleen Flory-Lundgren (Hospitality.net, 2005). PRNewsFoto/IHOP Corp./Associated Press IHOP CEO Julia Stewart (center) adopted a people-centered, motivational style of leadership based on accountability, core values, communication, and employee appreciation that created positive results for the company. (continued) baa66968_05_c05_125-152.indd 126 6/17/13 11:56 AM CHAPTER 5 Section 5.1 Job Performance, Personal and Organizational Motives Personal Motives and Organizational Motives What do you want from your job? This seemingly simple question may require and a somewhat compli- cated answer. Early in a career the answer might be, “A paycheck.” Over time, personal motives grow as life circumstances evolve. A young, single employee might remain protective of time away from work to enjoy other activities. A new mother or father may be driven by the desire for health insurance and the flexibility required to care for a child’s needs. Later in life, a challenging job with greater responsibility and the opportunity to mentor others might become a powerful motivationa\ l force, as can being vested in a company’s pension plan without worrying that it will disappear o\ r be reduced.

In the previous chapter, motivation was described from an organization’s perspective, with the nota - tion that it is what starts, maintains, and stops behaviors. The behaviors mentioned were those that are advantageous to the company. Much of the time, they also benefit the employee; however, the worker can be equally driven by motives outside of the company’s interests or influence, and this sometimes results in conflicts between personal and organizational motives. For example, your motive may be to be promoted to a higher rank. The organization’s motive will be to find the person best suited to the job\ , which may or may not be you. A personal motive would be to obtain the highest possible level of com - pensation. The organization, seeking to remain competitive, may need to hold down payroll costs.

The work–life balance dilemma offers another example of a conflict between personal and organizational motives. On the one hand, employees want a reasonable work schedule, one that allows them to start each day fresh and energized, feeling as though they have had enough time with family. On the other, competitive forces and deadlines may drive the manager to demand overtime and travel of\ subordinates.

When seeking to develop a program of motivation in the workplace, it may be helpful to consider Figu\ re 5.1. Management’s goal should be to optimize the overlap between personal and organizational motives.

In the remainder of this chapter, various programs designed to achieve that goal are described. In an ironic twist, Stewart then led the drive for IHOP to acquire Applebee’s in 2008, or, as she called it, “make the min - now swallow the whale” (Mabrey & Rosenberg, 2008). Once again her approach has been to rejuvenate the menu, the dining experience, and the employee environment. At Applebee’s, following her pattern at IHOP, Stewart has been known to leave sealed notes on the chairs of employees at the end of the day. The notes explain how she believes the person has done good work. She also leaves voice mail messages of appreciation. Both efforts provide recognition on an individual basis designed to inspire continuing effort and levels of performance. Stewart hires executives over meals in restaurants. “I want to see your ability to interact with a server,” she reports. She watches for eye contact and whether the meal companion thanks the server. “You wouldn’t be successful with us unless you were really able to interact with a server” (Mabrey & Rosenberg, 2008). Julia Stewart describes herself as a perfectionist. She travels and meets directly with restaurant chain owners on a regular basis. She works hard to balance her work as CEO with being the mother of two daughters. In the coming years, industry watchers will see the results of this people-oriented, motivational style of leadership. Questions for Students 1. What motives do you believe are most important to restaurant servers? 2. Do you think that recognition and participation, which play key roles in Stewart’s leadership style, would succeed in every type of organization? 3. What kind of motivation would you ascribe to Stewart’s decision to acquire Applebee’s? OB in Action (continued ) baa66968_05_c05_125-152.indd 127 6/17/13 11:56 AM CHAPTER 5 Section 5.1 Job Performance, Personal and Organizational Motives Figure 5.1: Personal and organizational goals Personal Goals Shared Goals Organizational Goals While companies and individuals have separate goals that motivate them to accomplish certain tasks, sometimes these goals can overlap.

The Job Performance Model The job performance model provides an example of an integrated approach to conceptualizing motiva - tional processes in the workplace (Mitchell & Daniels, 2003). The approach accounts for individual char - acteristics as well as the organizational context. As displayed in Figure 5.2, the job performance model incorporates the following elements: individual characteristics, job con\ text, motivational processes, moti - vated behaviors, and actual performance.

Figure 5.2: Job performance model Jo b Content Individual Characteristics Motivational Processes Enhancement or limit Skill le vel Motivated Behaviors Ac tual Performance The job performance model suggests that job context contributes to motivational processes and motivated behaviors through enhancement or limit, whereas individual characteristics contribute to these motivations by skill level. All of these factors work together to contribute to actual performance.

Source: Adapted from Mitchell, T. R., & Daniels, D. (2003). Motivation. In Borman, W. C., Ilgen, D. R., & Klimoski, R. J., Handbook of psychology (Vol. 12, p. 226). New York: John Wiley & Sons. baa66968_05_c05_125-152.indd 128 6/17/13 11:56 AM CHAPTER 5 Section 5.1 Job Performance, Personal and Organizational Motives Individual Characteristics Every person possesses a unique set of skills, abilities, and mental functions. Motivated behaviors become more likely when the employee’s skill set and mental disposition match the requirements of the job. Both elements are crucial to per- formance. An individual who does not have the required job knowledge may find the work exciting and challenging but cannot perform at high levels because a key ingredient is missing. At the same time, an individual may have the ability to perform required job tasks, but his or her emo - tions, moods, beliefs, or values may reduce his or her will- ingness to apply those skills. Someone who is depressed, believes the company acts unethically or discriminates, or is mad about an unrelated issue may be less willing to apply his or her work skills. The result will be fewer moti - vated behaviors and a lower level of performance.

The Job Context Just as each person brings a distinct set of attributes to the workplace\ , every work environment will be different from all others. Even in organizations that produce the same products and services and use basi - cally the same building design—such as fast-food restaurant chains, big-box retailers, financial service providers such as Edward Jones, or car maintenance companies such as Jiffy Lube or Goodyear Tire— differences still appear. Although the physical environment may be the same and the jobs are equivalent, supervisory styles and in-house social norms may differ.

A pleasant and positive job context contributes to individual and company\ success by enabling employ - ees to do their best work. Through processes such as mentoring and rewarding, which help to build self- efficacy and self-esteem in individual workers, motivated behaviors can be\ increased. A company with an unpleasant physical environment, poor reward system, unqualified or inept supervisors, or counter - productive cultural norms limits motivated behaviors (Kamdar & Van Dyne, 2007).

Motivational Processes Mitchell and Daniels consider motivational processes to include arousal, attention, direction, intensity, and persistence. These factors constitute cognitive processes, or motivational forces, in the terms of expectancy theory. Arousal points the individual to the task at hand. Attention removes distractions that would prevent the employee from giving full effort to a task. Direction means that the employee focuses on the correct completion of the assignment. Intensity represents the required level of effort needed to achieve a desired outcome. Persistence indicates the employee’s willingness to keep trying or working until the job is done.

Motivated Behaviors Motivated behaviors are the tangible outcomes that result from three factors: individual inputs, the job context, and motivational processes. These combine to produce observable employee effort. In the Mitch - ell and Daniels model, these behaviors are observed through focus, intensity, quality, and duration. Moti - vated behaviors, then, include staying on task, trying hard, producing quality outputs, and continuing to produce over longer periods of time. Lifesize/Thinkstock Employees commonly exhibit motivated behaviors when their skill sets match the requirements of their positions. baa66968_05_c05_125-152.indd 129 6/17/13 11:56 AM CHAPTER 5 Section 5.2 Job Design and the Job Characteristics Model Actual Performance The final outcome, performance, is indicated by organizational measures and goals. Performance in pro- duction will be signaled by the number of units correctly produced. Higher sales reflect improved perfor - mance by a salesperson. Accountants that prepare financial documents on time with complete accuracy perform at high levels. In the job performance model of motivation, impr\ oved performance occurs when all the other variables combine correctly.

In this manner, the job performance model provides an integrated approach to conceptualizing motiva - tional processes in the workplace. The model offers a background that incorporates more than the vari - ables explained in content, operant process, and cognitive process theories of motivation. Among the key factors to be included are the nature of the job, goals and goal-setting processes, social factors at work, and the organization’s pay system and reward structure. The job performance model opens the door to discussion of the impact of contextual variables on employee motivation.\ Comprehension Exercise 1. Which is not an organizational motive? a. improved productivity b. fewer defects c. receiving a promotion d. reduced tardiness 2. In the job performance model, arousal, attention, direction, intensity, and persistence are part of a. individual characteristics. b. the job context. c. motivational processes. d. motivated behaviors. Answers: 1) c 2) c 5.2 Job Design and the Job Characteristics Model For years, the process of job design largely took place in the human resources department, where per - sonnel specialists worked with management to assign tasks to individual \ jobs. Table 5.1 displays three standard steps of job design.

Learning Objective #2:

How can the job design process and the job characteristics model improve employee motivation and performance? baa66968_05_c05_125-152.indd 130 6/17/13 11:56 AM CHAPTER 5 Section 5.2 Job Design and the Job Characteristics Model Table 5.1: Standard steps of job design StepDescription Job analysis Assigning specific tasks to specific jobs Job description A formal list of tasks and duties placed in the company manual, handbook, or website Job specification A listing of eligibility requirements or job qualifications, used in recruiting and selection processes Over time, it has become apparent that job descriptions and job specifications produce expectations regarding the types of tasks to be performed and the skills needed to complet\ e those tasks, both in appli - cants and in those who are actually hired. When such expectations are met, the employee will likely report higher levels of satisfaction with the job and commitment to the organization (Irving & Montes, 2010). Conversely, unmet expectations (“This isn’t what I expected when I took thi\ s job”) result in dissat - isfaction, decreased motivation, and at times a job search and/or the intention to quit (Bridges, Johnston, & Sager, 2007). Other authors and theories have suggested that job design impa\ cts levels of motivation and levels of performance in the workforce.

The Job Characteristics Model The nature of a job influences several personal and organizational outcomes. The job characteristics model offers insights into the interaction between a person and a job (Hackman \ & Oldham, 1980). As displayed in Figure 5.3, a progression takes place in which core job characteristics lead to various organi - zational outcomes. Table 5.2 provides the elements involved in each of the key variables.

Core Job Characteristics The five core job characteristics are the first element of Figure 5.3. These contribute to the critical psy - chological states experienced by employees that are necessary to improve personal and work outcomes.

Each characteristic can be applied to any form of employment.

Figure 5.3: Job characteristics model Core Job Dimensions Critical Psyc hological States Emplo yee Growth Need Strength Emplo yee Knowledge and Skill Pe rsonal and Work Outcomes The job characteristics model describes the interaction between a person and a job. Core job dimensions lead to critical psychological states, which in turn lead to personal and work outcomes. Variables such as employee growth and need strength, combined with employee knowledge and skill, influence both perceptions of the core job dimensions as well as personal and work outcomes.

Adapted from Hackman, J. R., & Oldham, G. R. (1980). Work redesign, pp. 78–80. Upper Saddle River, NJ: Pearson. baa66968_05_c05_125-152.indd 131 6/17/13 11:56 AM CHAPTER 5 Section 5.2 Job Design and the Job Characteristics Model Skill variety refers to the number of skills needed to be able to successfully perform \ a given job. For example, pressing shirts in a dry cleaning operation requires far fewer skills than performing surgery or working as an auto mechanic.

Task identity refers to the extent to which a job includes the completion of an identif\ iable piece of work.

A musician composing a song possesses a strong level of task identity. In contrast, a lathe operator who makes legs for tables, alongside three other lathe operators, has little or no task identity.

Task significance, or human interaction, reflects the degree to which a job has a beneficial impact on other people. Is the work helpful and meaningful to others? Someone who works \ as a nurse or psychologist has a job with high task significance. A person tabulating information to be entered into a computer database may not.

Autonomy is the amount of freedom an employee has to perform a job in a manner in which he or she sees fit. A mechanic who decides which car to repair first, chooses the parts needed to make the repair, and completes the job without asking a supervisor ’s opinion or permission holds a high level of auton - omy. The holder of an outbound telemarketing job in which phone numbers are dialed by a computer and the employee follows a prompted script to make presentations while being carefully supervised does not have autonomy.

Feedback is the degree to which the employee receives immediate information about how well a job has been performed. Such information often results from the job itself. The individual can see the result of his or her efforts when the output is complete and identifiable. For instance, making\ a sale or successfully installing a computer program and seeing that it works creates job-generated feedback. Many retail sales positions offer high degrees of feedback, as the sale is either made or not made. Individuals tha\ t provide support services, such as clerical employees, often receive little feedback on a routine basis.

Table 5.2: Variables in the job characteristics model Core job dimensions Critical psychological states Personal and work outcomes Skill variety Task identity Task significance Experienced meaningfulness of the work High internal work motivation High-quality work performance High satisfaction with the work Low absenteeism and turnover AutonomyExperienced responsibility for the outcomes of the work Feedback Knowledge of the actual results Critical Psychological States The extent to which a particular job fulfills each of the core job characteristics contributes to an employ - ee’s perceptions of the job itself. These perceptions, or critical psychological states, are associated with employee motivation, performance, and job satisfaction as positive outco\ mes and withdrawal behaviors such as absenteeism and intentions to turnover as negative outcomes (Ha\ ckman & Oldham, 1976). baa66968_05_c05_125-152.indd 132 6/17/13 11:56 AM CHAPTER 5 Section 5.2 Job Design and the Job Characteristics Model A job with a high level of skill variety, task identity, and task significance provides the employee with the feel- ing that the work he or she performs is meaningful. A meaningful job makes the workplace more palatable, as the employee uses his or her skills in completing tasks.

Meaningfulness also emerges from helping others.

A job with a high level of autonomy creates feelings of greater responsibility regarding the outcomes of the work. This critical psychological state involves receiv - ing credit when tasks are accomplished and being held accountable when they are not. Abraham Maslow was among the first to note the craving for esteem as a motive, which was reinforced by David McClelland in the need theory of motivation, as discussed in Chapter 4.

Finally, a job that provides a high level of feedback gives the employee knowledge of the actu\ al results of work activities. Intrinsic motives are associated with both experienced responsibility and knowledge of results. An employee who succeeds gains additional valence from the actual achievement, in terms of self-efficacy and positive self-regard. Personal and Work Outcomes The five core job characteristics directly impact critical psychological states, which collectively influence\ four personal and work outcomes. Higher levels of core job characteristics lead to improved psychologi - cal states and therefore improved outcomes. Lower degrees of core job characteristics negatively influ - ence psychological states and result in reductions in these valued outcomes.

High internal work motivation, the first outcome, represents the individual’s desire to perform at a high level. This motivation occurs without the presence of extrinsic rewards such as pay and benefits. The same holds true for the other three outcomes. High-quality work performance, the second outcome, refers to the worker ’s ability to produce a greater quantity as well as better quality, of goods or services.

High satisfaction with the work means that employees will be less likely to damage organizational prop - erty or file grievances against supervisors and may be more likely to make positive statements about the company. Low absenteeism and turnover are indicators of satisfaction with work.

These outcomes create value for the person and the company. A motivated individual who produces high quality work and expresses satisfaction with that work will likely show up to work each day and will be less inclined to look for another job. From the organization’s perspective, companies offering jobs with high values in the core dimensions receive the benefits of motivated employee efforts, including improved performance in terms of quantity and quality, and spend less time filling positions for workers who do not arrive and those who quit (Griffin, 1991).

Motivating Potential Score (MPS) The relationship among the variables shown in Figure 5.3 results in a predictive index, which allows for calculation of the strength of the core job characteristics as motivating factors (Nadler, Hackman, & Lawler, 1979). The motivating potential score (MPS) formula is calculated as follows: Digital Vision/Thinkstock Feedback is the knowledge an employee receives regarding the results of work-related activities. baa66968_05_c05_125-152.indd 133 6/17/13 11:57 AM CHAPTER 5 Section 5.2 Job Design and the Job Characteristics Model MPS = skill variety + task identity + task significance × autonomy × feedback 3 To achieve a high motivating potential score, a job must be high on at least one of the first factors that lead to experienced meaningfulness at work. Then both autonomy and feedb\ ack must be present. A high motivating potential score indicates that the personal and work outcomes displayed in Figure 5.3 and Table 5.2 will result. A substantial amount of research indicates support for the job characteristics model using the motivating potential score and other measures (Fried & Ferris, 2006). Moderating Variables In organizational research terminology, employee growth need strength and employee knowledge and skill are moderating variables that influence the conditions under which relationships hold (see Figure 5.3). In the job characteristics model, the variables either strengthen or weaken the predicted relationships. Any calculation of a motivating potential score would be influenced by the moderating variables (Johns, Xie, & Fang, 1992).

Employee growth need strength refers to an individual’s degree of self-esteem and desire for self-actual - ization. The job characteristics model posits that the five core job dimensions will be more important to and valued by individuals with high growth need strength. On the outcome side, employees with higher levels of growth needs are those who will be most motivated by the core job characteristics and subse - quent critical psychological states. In other words, high growth need strength connects to the degree of internal motivation, the desire to provide high-quality work, satisfaction with the job, and lower levels of absenteeism and turnover. The relationships among the other variables are weaker when employees exhibit low levels of growth need strength.

The same pattern takes place for employees with higher (and lower) lev\ els of knowledge and skill. The job characteristics model will be more predictive of positive employee and company outcomes when employees are skilled and have high knowledge levels. Companies employing individual\ s with low lev - els of knowledge and skill are less likely to receive the benefits of offering challenging and exciting jobs.

In summary, the job characteristics model offers insights into the interaction between a person and a job.

A progression takes places in which core job characteristics contribute to the critical psychological states necessary to improve personal and work outcomes.

Comprehension Exercise 1. Skill variety, task identity, and task significance lead to a. experienced meaningfulness of the work. b. experienced responsibility for the outcomes of the work. c. knowledge of the actual results of work activities. d. the moderating variable growth need strength. Answers: 1) a Learning Objective #3:

How do goal-setting and employee involvement programs motivate workers? baa66968_05_c05_125-152.indd 134 6/17/13 11:57 AM CHAPTER 5 Section 5.3 Goal-Setting and Employee Involvement Programs 5.3 Goal-Setting and Employee Involvement Programs As has been noted, at the personal level motivation may be derived from unmet needs, reinforcements, the desire for equity, or intrinsic and extrinsic rewards. Another important element of motivation in the workplace can be the role played by individual goals. Goal-setting theory offers the tools to design per- formance targets that motivate employees to achieve personal and organizational objectives.

Goal-Setting Theory Goal-setting theory, as originally developed by Edwin Locke (1968), suggests that individ\ uals with well- established goals are likely to perform at higher levels than those without such goals. As displayed in Figure 5.4, goals are related to values and value judgments even prior to effort being given and before the consequences of goal achievement have been realized. Emotions and intentions play major roles in determining behavior. These in turn become efforts: activities (goal-oriented behaviors) leading to sub- sequent results.

Goal-Setting Components The goal-setting approach further establishes the conditions under which goals are linked to perfor - mance. To optimize the benefits of goal setting, effective goals should have the characteristics shown in Table 5.3.

Figure 5.4: Goal setting and motivation Values Emotions Intentions Goal- Oriented Bahavior Results Goal-setting theory posits that values determine emotions and intentions, which in turn influence goal-oriented behavior; these factors work together to achieve end results.

Table 5.3: Characteristics of effective goals Characteristic Description Difficult but attainable Must not overwhelm the employee but is challenging to achieve Measureable Clearly stated so that the employee and manager both know if the goal was achieved Flexible Adjusted when conditions change MPS = skill variety + task identity + task significance × autonomy × feedback 3 To achieve a high motivating potential score, a job must be high on at least one of the first factors that lead to experienced meaningfulness at work. Then both autonomy and feedb\ ack must be present. A high motivating potential score indicates that the personal and work outcomes displayed in Figure 5.3 and Table 5.2 will result. A substantial amount of research indicates support for the job characteristics model using the motivating potential score and other measures (Fried & Ferris, 2006). Moderating Variables In organizational research terminology, employee growth need strength and employee knowledge and skill are moderating variables that influence the conditions under which relationships hold (see Figure 5.3). In the job characteristics model, the variables either strengthen or weaken the predicted relationships. Any calculation of a motivating potential score would be influenced by the moderating variables (Johns, Xie, & Fang, 1992).

Employee growth need strength refers to an individual’s degree of self-esteem and desire for self-actual - ization. The job characteristics model posits that the five core job dimensions will be more important to and valued by individuals with high growth need strength. On the outcome side, employees with higher levels of growth needs are those who will be most motivated by the core job characteristics and subse - quent critical psychological states. In other words, high growth need strength connects to the degree of internal motivation, the desire to provide high-quality work, satisfaction with the job, and lower levels of absenteeism and turnover. The relationships among the other variables are weaker when employees exhibit low levels of growth need strength.

The same pattern takes place for employees with higher (and lower) lev\ els of knowledge and skill. The job characteristics model will be more predictive of positive employee and company outcomes when employees are skilled and have high knowledge levels. Companies employing individual\ s with low lev - els of knowledge and skill are less likely to receive the benefits of offering challenging and exciting jobs.

In summary, the job characteristics model offers insights into the interaction between a person and a job.

A progression takes places in which core job characteristics contribute to the critical psychological states necessary to improve personal and work outcomes.

Comprehension Exercise 1. Skill variety, task identity, and task significance lead to a. experienced meaningfulness of the work.

b. experienced responsibility for the outcomes of the work.

c. knowledge of the actual results of work activities.

d. the moderating variable growth need strength. Answers: 1) a Learning Objective #3:

How do goal-setting and employee involvement programs motivate workers? baa66968_05_c05_125-152.indd 135 6/17/13 11:57 AM CHAPTER 5 Section 5.3 Goal-Setting and Employee Involvement Programs Goals should be difficult enough that employees must try hard to reach them. Consistent research indicates the relationship between goal difficulty and performance (Wright, 1990). Unattainable goals often cause workers to simply give up, because they lead to frustration and sub- sequent lower levels of effort. This means that a quality goal is achievable.

Clearly stated, measureable goals reflect goal specificity, which conveys whether a goal has been defined using quantifiable outcomes. Higher levels of goal specific - ity have been linked to performance increases (Mento, Steele, & Karren, 1987).

Two additional factors contribute to the success of any goal-setting program: feedback and goal commitment.

Employees who receive feedback, or statements regarding progress toward their goals, have a better idea when they are on course and when corrections need to be made. Strong relationships exist between feedback, difficult goals, and subsequent performance (Langeland, Johnson, & Mawhinn\ ey, 1998).

Goal commitment expresses the degree to which an employee feels personally involved in achieving a goal, either because the person helped set the goal or because the person strongly agrees with the goal’s intent.

Research suggests goal commitment constitutes a moderating variable. That is, \ difficult goals are related to performance only when higher degrees of goal commitment are present (Donovan & Radosevich, 1998).

Goal Setting and Motivational Mechanisms Locke’s goal-setting program incorporates four motivational mechanisms. First, goals direct attention toward key activities and away from less important activities. Clearly stated goals provide a sense of direction. Second, goals regulate effort. An employee who knows what he or she should accomplish in a given time period can dedicate sufficient effort to the task. Third, goals increase persistence, or the will - ingness to keep working on a task over time. Fourth, goal setting is related to conceptual and strategic thinking. In other words, goals spur strategy development. Pondering over how to reach a goal enables the individual to succeed (Locke & Latham, 2002).

Management by Objectives Management by objectives (MBO) is a participative goal-setting program that takes advantage of the bene- fits and principles present in goal-setting theory (Drucker, 1954). Several versions of the program have been used in organizational settings (Caroll & Tosi, 1973). The essential ingredients of the programs are (1) the actual steps involved and (2) meeting the MBO prerequisites (such as commitment from top management and an environment where faculty feel supported). The steps involved in MBO are job analysis, employee goal preparation, manager goal preparation, the meeting, and follow-up.

The job analysis phase constitutes a key element in the MBO process. Before any goals are written, the key functions of the job should be enumerated. In essence, job analysis \ answers this question: “Why was I hired?” The answer to that question points to areas in which goals should be set.

The next phase involves employee goal preparation. In most MBO programs, employees prepare goal lists on an annual basis. In some organizations they are written in late December or early January. Other com - panies prefer to set goals in the off-season or at the end of the fiscal year, because they are slower times. Justin Lewis/Iconica/Getty Images Employees perform at higher levels and are more engaged when they are committed to achieving certain goals. baa66968_05_c05_125-152.indd 136 6/17/13 11:57 AM CHAPTER 5 Section 5.3 Goal-Setting and Employee Involvement Programs In the manager goal preparation phase, the manager writes two separate goal lists. The first i\ s a personal list of the manager ’s objectives for the coming year. The second is the list that the manager prepares for each employee on his or her team. At the completion of this step, the employee has a self-prepared list and the manager ’s prepared goal list for that employee.

In the meeting phase, the manager and employee convene to discuss the two goal lists, which are then blended into a single document. Managers and their employees negotiate the final set of objectives. The meeting strengthens the element of participation in the process.

The follow-up stage identifies specific times for goals to be assessed i\ n terms of actual performance.

Follow-ups can be annual, semiannual, or quarterly, depending on company preference.

MBO Prerequisites Many companies have adopted MBO programs, with results ranging from grand success stories to poi- gnant failures (Batten, 2003; Ford, 1979). The lessons learned from these applications include the conclu - sion that MBO is not for every company. Instances have occurred in which an MBO program created more problems than it solved. Consequently, the best approach seems to be to seek out conditions in which the system can succeed (McConkie, 1979; Thompson, Luthans, & Terpening, 1981). Successful MBO programs meet seven prerequisite conditions.

First, top management must be committed and involved.

Employees are “signal readers,” meaning they observe managers to see which issues are treated as important.

If top management just pays lip service to a program, workers quickly catch on. When company leaders treat an issue with care and sincerity, employees follow. For an MBO program to work, managers at all levels should set goals and participate in meetings with those of higher and lower ranks (Rogers, Hunter, & Rogers, 1993). Second, the proper environment, in which employees feel empowered and supported by managers, should be in place. An organization’s climate and culture determine whether managers will feel threat- ened or invigorated by worker participation and involvement. Authoritarian environments are poor can - didates for MBO programs.

Third, the company should have sufficient resources and the willingness to tie rewards to performance.

The linkage of rewards to performance will be crucial to the long-range success of the program. Compa - nies in financial crisis will likely experience problems if it is not possible to provide tangible rewards for improved performance.

Fourth, an MBO program works best using a systematic approach. Goal-setting time frames and the fol - low-up stage should be built into the calendar. When the process feels random or disorganized, employ - ees may have less confidence in the program.

Fifth, successful MBO programs rely on quality objectives. From the goal-setting literature, we know that effective objectives are difficult but attainable, clearly stated, and measureable. In addition, due to the vola - tility of the business world, goals should be flexible. If a standard becomes unreasonable, it can be changed. Photos.com/Thinkstock The proper environment should be in place prior to implementation of an MBO program. baa66968_05_c05_125-152.indd 137 6/17/13 11:57 AM CHAPTER 5 Section 5.3 Goal-Setting and Employee Involvement Programs Sixth, employees can prepare two kinds of objectives. One set, which may be labeled “for the company,” includes important organizational outcomes, such as increasing sales, reducing defects, turning paper- work in on time, and so forth. The second set would be labeled “for y\ ourself.” As part of the process, an employee can aspire to lose weight, cut down on caffeine, learn a foreign language, adapt to updated software or technology, or engage in some other form of self-improvement. Ideally, the best systems tie “for the company” goals with “for yourself” goals. In other \ words, success in one area leads to success in the other. An individual who raises sales for the company should enjoy the rewards. An employee who learns Spanish for herself has become more valuable to the company.

Finally, MBO programs require patience. Installing the system takes time. The process may need to be fine-tuned for several years before it operates without any glitches.

Implications The management by objectives approach was designed to take advantage of two organizational pro - cesses: goal setting and participation. The second process, participation, invites some scrutiny. It can help build lines of communication and trust between employers and employees as well as lead to other valuable outcomes such as organizational commitment.

Management by objectives programs can create value in one other key way. A well-designed program links goals together at all levels. These goals, in turn, help the organization achieve its ultimate mission or purpose (see Figure 5.5). A quality MBO program keeps managers and the overall company on track, working on the same larger objectives, and creates a situation in which individual goals support depart - mental goals, departmental goals support organizational goals, and those goals are based on the organi - zation’s mission. The program can therefore provide individual workers with a strong sense of direction and purpose as they carry out their jobs.

Figure 5.5: Goals by level Company Goals Organizational Goals Company Purpose Functional Area Goals IndividualGoals IndividualGoals IndividualGoals IndividualGoals Departmental Goals By linking goals together at all levels, an organization can effectively achieve its ultimate mission or purpose. baa66968_05_c05_125-152.indd 138 6/17/13 11:57 AM CHAPTER 5 Section 5.3 Goal-Setting and Employee Involvement Programs Employee Involvement Management by objectives is one aspect of a more general concept in organizational behavior: employee involvement. In general, employee involvement describes any organizational process that seeks to uti - lize the full capacities of employees while encouraging increased commitment to the organization’s suc - cess (Cotton, 1993). The two primary aspects of employee involvement a\ re participative management and representative management.

Participative Management Participative management includes methods designed to share decision making and other aspects of organizational direction with employees at lower levels. The participation aspect of MBO c\ onnects it to employee involvement. The advantages of participative management include\ the ability to solicit ideas and creative approaches from all organizational members. Also, participative management in decision making often leads to increased commitment to the decision after it has been made. Companies engag\ ed in participative management tend to offer jobs that are more interesting and meaningful.

As was noted regarding management by objectives programs, participation may or may not be linked to increased productivity. This suggests that participation programs generate the greatest value when employees have the skills and knowledge required to make meaningful contributions (Heller et al., 1998).

Under that condition, trust and confidence can be built between managers and employees.

Representative Management In a representative management approach, employees do not participate directly in organizational deci - sion making but instead choose a small group who actually participate and represent them. This system tends to redistribute power within companies by placing labor on a more equal standing with manage - ment and stockholders. Two of the more common forms of representative management are work councils and board representatives (Keller, 2002).

A work council is a group created to link employees with management. The council consults with management when decisions are made regarding personnel issues and concerns. Members are elected to serve on the council.

Board representatives are employees who are part of the company’s board of directors. They represent employee interests. Board representative arrangements are com- mon in Europe and are even required by law in some European Union nations.

Representative management applies more to larger orga- nizational issues than to day-to-day operations. It may be for this reason that the impact on employee performance and motivation appears to be minimal (Cotton, 1993, pp.

129–130, 139–140).

Employee Involvement Techniques In addition to the more general participative management and representative management systems, two other programs encourage employee involvement: quality circles and employee stock ownership plans. iStockphoto/Thinkstock Two of the more common forms of representative management are work councils and board representatives. baa66968_05_c05_125-152.indd 139 6/17/13 11:57 AM CHAPTER 5 Section 5.3 Goal-Setting and Employee Involvement Programs A quality circle is a group of 7 to 10 employees that meets regularly to discuss company quality problems.

The group holds responsibility for investigating the causes of the problem, making recommendations on how to solve the problem, and, in some instances, leading the implementation of solutions. \ Effective quality circles generate feedback regarding the successes of various actions taken, with management maintaining final control (Cotton, 1993). The use of this technique has largely waned due to a lack of both strategic oversight and full integration into the organiza - tion’s operations (Hammersley & Pinnington, 1999).

Employee stock ownership programs have met with suc - cess in many organizations (Pierce & Furo, 1990; McDon - ald, 2000). The actual programs take many forms, from employees buying stock in the company where they work to individuals in a company purchasing and operating the organization. Opportunities to purchase shares of stock in an employer company are part of many company benefit packages. Normally, a trust will be established for owner - ship of employee shares. Companies either buy stock or allocate stock to the trust, and employees can only take physical possession when leaving the organization.

The strongest benefit of employee stock plans tends to be improved worker satisfaction (Buchko, 1993). Evidence that stock plans lead to heightened levels of motivation is less compelling, with some companies experiencing growth in share values but others not achieving the same results (Davidson & Worrell, 1994). To achieve positive results, company leaders are advised to pro - vide consistent feedback about organizational performance and employees should be able to voice opin - ions about the direction of the company (Stamps, 1996).

In summary, goal-setting theory suggests that individuals with well-established goals are likely to per - form at higher levels. Employee involvement is any organizational process that seeks to utilize the entire capacities of employees while encouraging increased commitment to the organization’s success.

Comprehension Exercise 1. Which is not a prerequisite for successful MBO programs? a. a simple system b. company and personal objectives c. employee autonomy d. patience 2. Which type of employee involvement program uses groups to represent workers in organiza- tional decision-making processes?

a. participative management b. quality management c. representative management d. employee stock ownership management Answers: 1) c 2) c Paul Sakuma/Associated Press Apple CEO Tim Cook announced a new employee stock option program in March 2012. Employee stock programs often contribute to greater employee satisfaction and higher levels of motivation. baa66968_05_c05_125-152.indd 140 6/17/13 11:57 AM CHAPTER 5 Section 5.4 Pay Structures and Reward Systems 5.4 Pay Structures and Reward Systems The 2008 economic downturn in the United States and other countries chan\ ged the workplace environ- ment in many companies. Instead of pay increases and monetary incentives to improve performance, managers turned to cost-cutting measures such as layoffs, wage freezes, and hiring freezes. The evolving landscape produced a series of repercussions.

Layoffs and hiring freezes often result in increased workloads for employees wishing to keep their jobs.

On the one hand, many feel fortunate to still be on the payroll. On the other, being asked to increase out - put for the same amount of wages feels inequitable. Second, watching fri\ ends and coworkers lose their jobs, especially due to outsourcing and relocation strategies, damages morale.

As the economy slowly recovers, the future may be clouded by distrust and even resentment of manage- ment, especially in light of the exorbitant salaries and pay packages gi\ ven to CEOs, even in companies that have struggled (Culpepper & Hurst, 2010). These factors create substantial challenges for numerous companies going forward. Specifically, the complications will involve perceptions of equity and distribu - tive justice; employee trust of management; and perceptions of reward systems. Consequently, a review of the relationships between pay and motivation may help you more effectively manage and motivate employees.

Pay and Reward Philosophies Individual companies employ one of two philosophies regarding pay and rewards. The first, an equity pay philosophy, results from the belief that employees should view the pay system as being fair. The phi - losophy often leads to more uniform pay systems, including pay rate cards, whereby employees know the level of pay to expect based on organizational rank and years of experience. A clear example of this approach may be found in compensation systems in many primary and secondary \ education settings.

Teachers are paid based on personal levels of education (undergraduate, master ’s, Ph.D., or Ed.D.) and years of experience.

The second method, an exchange pay philosophy, emphasizes the idea that some individuals and skills are more valuable than others and the company is willing to pay accordingly. Two factors influence pay under the exchange philosophy: market forces and skill values.

Market Forces Market forces drive wages when shortages are present or when higher competition for skill sets exists.

For example, most colleges and universities pay faculty members in some \ areas at lower levels than oth - ers. Faculty in English, sociology, philosophy, history, education, and the arts tend to earn less money, due to the large number of individuals seeking employment with a terminal degree (Ph.D., Ed.D.). Other disciplines, including the sciences and business, pay faculty members at\ higher rates, due to fewer indi - viduals holding the terminal degree and the availability of a second employer set—industry.

Learning Objective #4:

What are the linkages among pay structures, reward systems, and motivation? baa66968_05_c05_125-152.indd 141 6/17/13 11:57 AM CHAPTER 5 Section 5.4 Pay Structures and Reward Systems Skill Values Skill values constitute the second force in the exchange philosophy. Skill-based pay, which is also known as competency-based or knowledge-based pay, establishes pay levels based on the number of skills an employee holds or how many jobs that person can perform (Ledford, 1995). The approach is particu - larly useful for organizations that seek to hire “generalists” who can complete greater numbers of tasks, such as retail salespersons who can also stock shelves, count inventory, and sell a variety of products. In an era of downsizing and layoffs, generalists have become more valuable. Some evidence suggests that the skill-based approach improves communication between workers who work cooperatively across job assignments, which leads to fewer “turf wars” over job assignments\ (Lawler, Ledford, & Chang, 1993).

Skill-based pay has linkages to motivational concepts. When employees ar\ e able to expand skill sets through cross-training or outside learning programs, the need for achievement can be satisfied and intrinsic motivation may rise. More important, skill-based pay offers the potential to integrate equity and exchange concepts. Individuals with a greater numbers of job skills receive higher compensation (exchange), but the pay differential may be perceived as being fair (equity) when other employees can observe the differences in skill sets and jobs performed (Lee, Law, & Bobko, 1999).

A few potential problem areas are associated with skill- based pay. First, skills that once were valuable to an orga - nization may become obsolete, forcing management to value them in new ways. Second, employees may reach the point at which no new skills may be accumulated, which would level out any new pay increases and poten - tially impact motivational levels. Third, employees may gain skills that the organization does not value. In spite of these issues, company leaders may conclude that the approach is useful.

Pay-for-Performance Systems The pay philosophies used by organizations normally apply to pay systems based on periods of time, such as hourly wages or an annual salary. In contrast, pay-for-performance systems are designed to enhance employee effort through the use of incentives. As a group, performance-based reward and pay systems are sometimes referred to as variable-pay programs. Table 5.4 outlines several types of variable- pay plans, or programs, which are tied to either individual or company performance levels.

Table 5.4: Types of variable-pay plans Individual Organizational Piece-rate pay Profit-sharing plan Task-and-bonus plan Gainsharing plan Modified piece-rate pay Commissions Bonuses Hemera/Thinkstock Individual variable pay programs include piece-rate pay, task-and-bonus plans, and modified piece-rate programs. baa66968_05_c05_125-152.indd 142 6/17/13 11:57 AM CHAPTER 5 Section 5.4 Pay Structures and Reward Systems Individual Variable-Pay Plans Individual pay incentives date back to the Industrial Revolution. The ea\ rliest version, piece-rate pay, assigned a fixed amount to each unit produced (Taylor, 1903) in manufacturing operations. At the time, distrust between companies and employees often disrupted the system, as workers would fear that pro - ducing too many units would result in the piece rate being cut to a lower level. To help overcome the problem, task-and-bonus pay systems established set numbers of units for which the regular piece rate would be paid (Gantt, 1919/1973). Any employee who exceeded the quota would earn an additional amount per unit. Consequently, pure piece-rate plans have become rare in the United States.

Some companies employ modified piece-rate pay systems that pay per time period plus an incentive. In those systems, a standard daily or hourly rate for pay is established, meaning the worker knows the low- est amount he or she will earn for an hour or day. Then, a piece-rate differential will be established for those that exceed a specified quota or simply by the unit. For example, \ a medical transcriber may be paid $9.00 per hour plus 25 cents per page completed. The modified piece-rate\ approach attempts to combine a sense of security with financial incentives to perform at higher levels.

In sales positions, a straight commission approach resem- bles a piece rate per sale. Salespersons can be paid by the unit or as a percentage of sales over a time period, nor - mally one month. The straight commission method can motivate the salesperson—or cause him or her to “push too hard” to finalize deals. An alternative method, sal - ary plus commission, resembles the task-and-bonus sys - tem. The salesperson gains a sense of security from a base pay amount and can be motivated through commission incentives. Additional incentives can be added for tend - ing to other aspects of the job, such as following up on orders and maintaining accounts in other ways.

Bonuses can be paid to individual employees, often on an annual basis for achieving various goals or outcomes.

The majority of bonus plans are geared to sales positions.

The primary problem associated with annual bonuses is that when they become routine, employees begin to expect them. Failure to pay a bonus in a given year often leads to morale problems.

Organizational Variable-Pay Plans To create motives for sets of employees, two organizational variable-pay plans have been established:

profit sharing and gainsharing. Profit-sharing plans distribute funds based on an established formula related to company profitability. The funds may be paid as shares of stock or as bonus payments. When these incentives are clearly made known, company employees can be encouraged to work togeth\ er to increase profits through better efficiency and improved productivity. Profit-sharing plans have resulted in improved profitability in organizations, when compared to companies without such plans (Magnan & St. Onge, 1998).

Gainsharing plans are company incentive funds that are divided between employees and managers, often as a 50-50 split. The difference between gainsharing and profit sharing is that gainsharing will be based on productivity rather than profits. Profits are often affected by factors beyond the control of employ - ees, such as shifting interest rates or losses in operations in other countries. Gainsharing programs have become increasingly common in the United States. Digital Vision/Thinkstock Sales positions often employ a straight commission approach or the salary-plus-commission option. baa66968_05_c05_125-152.indd 143 6/17/13 11:57 AM CHAPTER 5 Section 5.4 Pay Structures and Reward Systems The future of profit-sharing and gainsharing programs may be influenced by economic circumstances.

Because many companies faced declining revenues during the 2008 recession, their ability to pay such bonuses has been lessened. Companies facing international competition mi\ ght be less able to earn the level of income that would make such programs viable.

Benefits Benefit packages represent an expensive component of a compensation program. Providing health insur- ance, paid vacation days, holiday pay, purchase discounts, in-house child care, plus government-required disability insurance and unemployment insurance fees takes time and ofte\ n makes it more difficult for a U.S. company to compete with foreign firms. The question becomes, “Do benefit programs motivate workers?” In some ways, the answer would be “yes”; however, not in terms of performance. Instead, benefits have been linked to recruiting and retention.

In terms of recruiting, applicants being strongly considered for positions at some point will be asked about compensation. The basic pay package will be one primary factor in \ their decision to take a job.

Most applicants then inquire about benefits. When the base pay is the same but one company pays health insurance premiums while another does not, the company that offers benefits has a recruiting advantage.

Applicants also compare vacation days as part of this process.

In the area of retention, companies that provide health insurance often hold on to employees longer.

You have probably heard someone say that they would like to change jobs, but cannot afford to lose health insurance benefits. Once again, whether this represents a positive motivational force is debat - able. Employees may also decide to stay with a company because of the pe\ nsion plan. When someone becomes vested in a pension system but might lose benefits for leaving, the plan becomes the “golden fetters” that retain senior workers.

Flexible Benefits As the workforce becomes increasingly diverse, employee needs in terms of benefits expand. Greater numbers of employees remain unmarried and an increasing component of the workforce consists of two- income families with no children. Flexible benefit programs allow employees to choose the benefits that best suit their needs (Barringer & Milkovich, 1998).

Three primary versions of flexible benefit plans are found in the United States. A modular plan establishes sets of benefit packages from which employees can choose. Young employees might pick one package emphasizing health care benefits for children with little or no contribution to a pension plan, while older workers might select another that features larger contributions to a pension plan plus an insurance plan to cover the costs of nursing home care in the future. A core-plus plan offers a standard set of benefits, as well as a series of additional options that employees can select. For instance, an older worker may use any funds provided to augment a pension package, whereas a younger worker might use the funds to purchase additional term life insurance.

Flexible spending plans, the third option, have become popular in many U.S. companies. Employees set aside funds to pay for specific items, and the funds are withdrawn on a pretax basis, essentially turning them into a tax deduction. The most prevalent plans are monies held for health care, dental services, and child care expenses. baa66968_05_c05_125-152.indd 144 6/17/13 11:57 AM CHAPTER 5 Section 5.4 Pay Structures and Reward Systems Flexible benefit plans may take advantage of the concept found in expect\ ancy theory that organizational rewards should be tied to individual goals. Flexible benefit packages also assist in the same areas, recruit- ing and retention, as standard benefit programs.

Employee Recognition Programs Compliments are free. In a tough economy in which companies seek to lower costs in as many ways as possible, offering financial inducements to improve performance are often not feasible. Some would argue that employee recognition programs are a cynical attempt to entice workers to try harder for the same amount of pay (Dunham, 2002). Others would counter that recognition, when managed properly, serves as a method to help employees attain intrinsic rewards for doing good work as a variable-ratio form of positive reinforcement (Glasscock & Gram, 1999).

Both formal and informal elements of employee recognition exist. Informally, compliments and expressions of gratitude for performance can be delivered by managers at all ranks. Savvy CEOs are aware of the impact of a personal “thank you” from top managers. Formal employee recognition programs may involve several methods. Employee of the Month awards are common, as are specially designated parking spaces for winners. Many com - panies post employee accomplishments on physical and digital bulletin boards that are strategically placed for everyone to see.

What would seem apparent is that employee recognition can- not provide an all-encompassing solution to motivational prob - lems. However, it can offer a viable method to supplement other efforts to motivate employees and create job satisfaction at the same time.

Ethics and Motivation Criticisms of managerial tactics abound and have been in existence for centuries. At the crux of many debates over management actions is the basic assumption that employee–\ management relationships are essentially adversarial. In many ways, U.S. laws regarding union–management arrangements subscribe to that point of view. From that vantage point, any attempt to inspire higher levels of performance could be construed to simply be a form of manipulation.

Ethical debates over motivational programs should account for more than a mere money-for-output for - mulation. Examples abound where professional athletes have been willing to settle for lower remunera - tion in exchange for a better chance to win a championship. The 2010 mov\ e by LeBron James to the Miami Heat in the NBA serves as an example. While extreme, these cases indicate that employees work for more than a paycheck, and psychic income enters the picture. Recognition, accomplishments, working with friends, and a variety of additional non-pay elements are all strong motivators. With that caveat in mind, ethical challenges remain. Employees are often acutely aware of distributive and procedural justice issues in the workplace. A motivational system can be perceived as being fair, unfair, unethical, or illegal. Creatas Images/Thinkstock An Employee of the Month award is an example of formal recognition. baa66968_05_c05_125-152.indd 145 6/17/13 11:57 AM CHAPTER 5 Chapter Summary Pay discrimination based on gender and race continues. Even with new law\ s designed to level pay struc- tures, the problem has not gone away. In the 2008 recession, African American workers suffered dispro - portionate job losses compared to Caucasians (Cawthorne, 2009). These injustices represent ethical, legal, and workplace morale issues.

Also, many employees and unions argue that jobs are lost in the United States to companies in other countries in which pay systems do not provide a quality standard of living. Further, many of these orga - nizations do not provide protections for workers and operate in unsafe work facilities that pollute\ water and land. The counterargument would be that, from the perspective of employees in those foreign countries, the wages constitute the best they can achieve, and these workers are highly motivated as a result, even in poor working conditions.

Executive pay remains a contentious ethical problem.

CEO salaries as compared to employee wages have reached extremely disproportionate levels (Saez, 2010).

Is it ethical for top managers, even in struggling compa - nies, to receive these large payments? The Dodd–Frank Wall Street Reform and Consumer Protection Act seeks to make the CEO pay process more transparent.

When money is involved, people tend to pay atten - tion. Debates regarding fair payment and treatment of employees undoubtedly will persist as ethical and moral questions. Also, as the job performance model suggests, the organizational context adds a series of variables into a company’s moti\ vational environ - ment. Workplace issues in that context, such as discrimination in promotion decisions, constitute both motivational and ethical areas of concern.

Chapter Summary Personal motives and organizational motives are connected to each other at times and are disparate at others. One managerial goal should be to optimize the overlap between pe\ rsonal and organizational motives. The job performance model integrates various motivational processes in the workplace. It com- bines individual characteristics with job context, motivational processes, motivated behaviors, and levels of performance.

The job characteristics model includes skill variety, task identity, task significance (or human interac - tion), autonomy, and feedback. These connect to the critical psychological states that \ are associated with employee motivation, including experienced meaningfulness of the work, e\ xperienced responsibility for outcomes, and knowledge of actual results. These critical psychological states, as a group, collectively influence personal and work outcomes.

The relationships between the variables in the job characteristics model can be used to create a predictive index, which allows for calculation of the motivating potential score of the job. Growth need strength and employee knowledge and skill can moderate or alter the calculation of th\ e motivating potential score. Ingram Publishing/Thinkstock Excessive executive pay creates a contentious ethical debate as CEO salaries continue to rise. baa66968_05_c05_125-152.indd 146 6/17/13 11:57 AM CHAPTER 5 Chapter Summary The keys to effective goal-setting programs include setting difficult but attainable performance targets that are both measurable and flexible when needed. Goal specificity conveys whether a goal can be stated using quantifiable outcomes. Goal commitment expresses the degree to which an employee feels personally engaged in achieving a goal. Locke’s goal-setting program incorporates four motivational mechanisms into the workplace, including direct attention to key activities, regulating effort, increasing persistence, and inspiring conceptual and strategic thinking.

Management by objectives (MBO) is a participative goal-setting program. The steps of MBO include job analysis, employee goal preparation, manager goal preparation, a meeting, and follow-up. The prereq - uisites of effective MBO programs include top management commitment and involvement, the proper environment, sufficient resources, the willingness to tie rewards to performance, a simple system, quality objectives for the company and for oneself, and patience. Management by \ objectives takes advantage of two organizational processes: goal setting and participation. They create value by instilling a sense of direction for workers.

Employee involvement describes any process that utilizes the full capacities of employees while encour - aging increased commitment to the organization’s success. The two primary aspects of employee involve - ment are participative management and representative management. Involvement programs include quality circles and employee stock ownership programs.

Pay philosophies guide many reward system decisions. An equity pay philosophy represents the belief that employees should view the pay system as being fair. The exchange pay philosophy is founded on the premise that some individuals and some skills are more valuable than others and the company pays accordingly. Skill-based pay, which is also known as competency-based or knowledge-based pay, estab - lishes pay levels based on the number of skills an employee holds or how\ many jobs that person can perform.

Performance-based reward and pay systems are referred to as variable-pay programs. Individual variable pay plans include piece-rate pay, task-and-bonus plans, modified piece rate, commissions, and bonuses.

Organizational variable plans comprise profit-sharing and gainsharing programs.

Benefit plans are only tangentially related to employee motivation. They exhibit the greatest influence in the areas of employee recruiting and retention. Flexible benefit plans allow workers greater choice in the benefits they will receive.

Employee recognition programs may have some impact on motivation. Informal plans include compli\ - ments and expressions of gratitude. Formal systems use a variety of formats to note em\ ployee accom - plishments. While they do not offer all-encompassing motivation solutions, they can supplement other company efforts.

Ethical challenges in the area of motivation include concerns regarding pay discrimination based on gen - der and race. U.S. companies often lose jobs to countries where companies offer subsistence pay and poor working conditions, which affect motivational levels in both countries. Exorbitant executive pay remains a contentious problem in today’s workplace environment. baa66968_05_c05_125-152.indd 147 6/17/13 11:57 AM CHAPTER 5 Chapter Summary Comprehension Exercise 1. Profit-sharing and gainsharing are examples of a. the equity pay philosophy. b. the exchange pay philosophy. c. individual variable pay. d. organizational variable pay. 2. An Employee of the Month award is an example of a. pay for performance. b. organizational variable recognition. c. formal employee recognition. d. informal employee recognition. Answers: 1) d 2) c Case Study: Say what? Molly Wistrom experienced a dilemma she could not have expected. Her position as a customer service coordinator for a major shipping company had been a source of pride for several years. After working for the inbound customer and cli- ent call desk for three years, she had been promoted to her current position. She served as the primary liaison between the company and several clients. Her primary responsibilities included ensuring clear communications between compa - nies shipping packages and those receiving the packages that were handled by her company, and troubleshooting when that did not occur. She thought of herself and her company as a “linking pin” between vendors and customers. For years, Molly’s immediate supervisor was Stephanie Rouse. Stephanie took pride in her department and the func - tion that it served. Five years earlier, she had been asked to help implement a management by objectives program in the company. Stephanie viewed the program as an opportunity to create even better lines of communication between all ranks in the company. She carefully followed all protocols as the program was put into place and worked diligently to make sure management by objectives was perceived as a fair pathway to increase access to rewards. Molly had carefully marked her calendar for June. Each year, she was asked to set three yearlong company goals and one personal objective. The company preferred June, because it is a much slower shipping season than December and January. Molly would then meet with Stephanie and they would finalize the goal list for the next year. Her performance review for the previous year would take place each July. Stephanie had announced her retirement at the company Christmas party. Tears were shed by long-time friends and coworkers. A new manager, Craig Johanssen, began duties in January. In early February, Craig burst into Molly’s office. “It’s time to put together a goal list for this year,” he announced. “I’m sorry,” Molly replied, “but we have always written those in June.” “I heard,” Craig replied, “but that doesn’t really work for our area. And besides, I’m not all that convinced management cares about this anyway.” Not wishing to create an immediate confrontation, Molly agreed to prepare her list. Her first goal was to complete a customer satisfaction survey for package recipients to make sure they were happy with delivery times and practices. Her second company-based goal was to request an upgrade to the tracking system, which had fallen (continued) baa66968_05_c05_125-152.indd 148 6/17/13 11:57 AM CHAPTER 5 Review Questions Review Questions 1. What are the components of the job performance model of motivation? 2. Name and define the five core job characteristics of the job characteristics model. 3. Identify the sources of the three critical psychological states identified by the job characteristics model. 4. Name and explain the role of the two moderating variables that are part of the job characteris - tics model. 5. Define goal specificity and goal commitment. 6. What five steps are involved in management by objectives programs? 7. What are the seven major prerequisites for management by objectives programs? 8. Explain participative management and representative management, and name two employee involvement techniques. 9. Explain the difference between the equity and exchange pay and reward philosophies. 10. Briefly describe a skill-based pay program and a pay-for-performance variable-pay program. behind the technologies used in other companies. Her third company-related goal was to make a personal contact with each company that shipped items to thank them for their business. Her personal goal was to begin to learn Spanish. Again without notice, Craig walked into Molly’s office with the list in hand. “I can go along with your second and third goals, but I think a customer satisfaction survey would be a waste of time,” he said firmly. Molly responded, “The survey was Stephanie’s idea. We both thought it might help improve our service, and I was just waiting until June to make it official.” Craig replied, “Well, think of something else. I know, do the same thing as your third goal. Just make a call to each com - pany that receives packages and thank them.” He paused, “And this Spanish goal has got to go.” “Why?” Molly asked. “We have more Latino companies as clients each year. I think it would be great to be able to say a few words in their first language.” “I’d rather they learn how to speak English,” Craig retorted. “Think of something else, like maybe working out a couple of times a week.” “And when do you want this?” she inquired. “Whenever,” he answered. “When will I be evaluated on these goals?” Molly asked. “Who knows? When we get to it I guess.” Still wishing to avoid conflict, Molly agreed. She also carefully documented the entire conversation, in case it would be needed at some future point. She included her original goal list in the file. Case Questions 1. Which of the prerequisites of effective MBO programs had Craig violated? 2. What would you expect in terms of performance from Molly and her peers, given Craig’s approach? 3. How should Molly respond to these changes? 4. If you were Craig’s manager and found out what he had done, what would be your response? Case Study: Say what? (continued) baa66968_05_c05_125-152.indd 149 6/17/13 11:57 AM CHAPTER 5 Review Questions Answers to Review Questions 1. What are the components of the job performance model of motivation? The job performance model incorporates the following elements: individual characteristics, the job con - text, motivational processes, motivated behaviors, and levels of performance. 2. Name and define the five core job characteristics of the job characteristics model. Core job characteristics include five factors. Skill variety refers to the number of skills needed to be able to successfully perform a given job. Task identity indicates whether the job includes a complete, iden - tifiable piece of work. Task significance, or human interaction, reflects the degree to which a job has an impact on other people or whether the work is helpful and meaningful to others. Autonomy implies working without supervision and being free to perform a job in the manner in which the employee sees fit. Feedback is the degree to which the employee receives immediate information about how well a job has been performed. 3. Identify the sources of the three critical psychological states identified by the job characteristics model. Critical psychological states are associated with employee motivation. Skill variety, task identity, and task significance lead to experienced meaningfulness of the work. Autonomy leads to experienced responsibility for the outcomes of the work. Feedback results in knowledge of the actual results of work activities. 4. Name and explain the role of the two moderating variables that are part of the job\ characteristics model. In organizational research terminology, employee growth need strength and employee knowledge and skill are the moderating variables that influence conditions under which relationships hold. Employee growth need strength consists of an individual’s degree of self-esteem and desire for self- actualization. The job characteristics model will be more predictive of positive employee and company outcomes when employees are skilled and have higher knowledge levels. 5. Define goal specificity and goal commitment. Goal specificity conveys whether a goal can be stated using quantifiable outcomes. Goal commitment expresses the degree to which an employee feels personally involved in achieving a goal, either because the person help set the goal or because the person strongly agrees with the goal’s intent. 6. What five steps are involved in management by objectives programs? The steps of MBO are job analysis, employee goal preparation, manager goal preparation, the meeting, and follow-up. 7. What are the seven major prerequisites for management by objectives programs? The prerequisites of effective MBO programs include top management commitment and involvement, the proper environment, sufficient resources, the willingness to tie rewards to performance, a simple system, quality objectives for the company and for oneself, and patience. 8. Explain participative management and representative management, and name two employee involve - ment techniques. Employee involvement is any organizational process that seeks to utilize the entire capacities of employ - ees while encouraging increased commitment to the organization’s success. The two primary aspects of employee involvement are participative management and representative management. Participative management includes methods designed to share decision making and other aspects of organizational direction with employees at lower levels. Representative management means that instead of participating directly, employees are represented by a small group who actually participate. baa66968_05_c05_125-152.indd 150 6/17/13 11:57 AM CHAPTER 5 Analytical Exercises 9. Explain the difference between the equity and exchange pay and reward philosophies. Pay philosophies guide many reward system decisions. An equity pay philosophy represents the belief that employees should view the pay system as being fair. The exchange pay philosophy is founded on the premise that some individuals and some skills are more valuable than others and the company is willing to pay accordingly. 10. Briefly describe a skill-based pay program and a pay-for-performance variable-pay program. Skill-based pay, which is also known as competency-based or knowledge-based pay, establishes pay levels based on the number of skills an employee holds or how many jobs that person can perform. Performance-based reward and pay systems are referred to as variable-pay programs. Individual variable pay plans include piece-rate pay, task-and-bonus plans, modified piece rate, commissions, and bonuses. Organizational variable plans comprise profit-sharing and gainsharing programs. Analytical Exercises 1. Using Figure 5.1, explain the how personal and organizational motives would interact with the elements of Figure 5.2, the job performance model. 2. The motivating potential score for a job is MPS = skill variety + task identity + task significance × autonomy × feedback 3 Using a scale of 1 (little or none) to 7 (the greatest amount for each variable), calculate the moti - vating potential scores of the following jobs and explain the implications of those scores. • janitor in a high school • assembly-line worker • car salesman • psychologist • CEO of a corporation 3. Some writers have suggested that in today’s workplace environment younger employees view themselves as free agents who will work for the organization that pays the most and offers the best opportunities. They are not loyal to any given employer. Assuming this is true, how would this phenomenon affect the following? • perceptions of personal and organizational motives • the three critical psychological states identified in the job characteristics m\ odel • the impact of goal-setting programs • the impact of employee involvement programs • perceptions of equity and exchange pay and reward philosophies 4. Identify five companies or professions that you believe would be best suited to employee involvement programs. Explain your reasoning. Identify five companies or professions that would be least suited to employee involvement programs. Explain your reasoning. 5. Explain the impact of CEO pay disparities versus regular employees in terms of • the impact on employee involvement programs. • perceptions of formal and informal employee recognition programs. • perceptions of equity. baa66968_05_c05_125-152.indd 151 6/17/13 11:57 AM CHAPTER 5 Key Terms Key Terms autonomy Working without supervision; being free to perform a job in the manner that one sees fit. board representatives Employees who are part of the company’s board of directors. employee involvement Any organizational process that seeks to utilize the full capacities of employees while encouraging increased commit- ment to the organization’s success. equity pay philosophy The belief that employees should view the pay system as being fair, in terms of both distributive and procedural justice. exchange pay philosophy The premise that some individuals and some skills are more valuable than others and are paid accordingly. feedback The degree to which the employee receives immediate information about how well a job has been performed. goal commitment The degree to which an employee feels personally engaged in achieving a goal. goal specificity The concept that a goal can be stated using quantifiable outcomes. participative management Methods designed to share decision making and other aspects of organizational direction with employees at lower levels. representative management Instead of partici- pating directly in workplace decisions, employees are represented by a small group that actually participate. skill-based pay Establishes pay levels based on the number of skills an employee holds or how many jobs that person can perform (also known as competency-based or knowledge-based pay). skill variety The number of skills needed to be able to successfully perform a given job. task identity A term that indicates whether the job includes a complete, identifiable piece of work.

task significance (human interaction ) The degree to which a job has an impact on other people. variable-pay programs Performance-based reward and pay systems. work council A group of employees created to liaise with management. baa66968_05_c05_125-152.indd 152 6/17/13 11:57 AM CHAPTER 5