Motivating Employees
This chapter explains why employees work, how motivation affects productivity, the main motivation theories, and the financial and non-financial methods businesses use to encourage employees to work hard and effectively.
Topic 1: Motivation and Why People Work
Start by understanding what motivation means and why it matters to a business.
1. Motivation
A motivated workforce is important because employees are more likely to work efficiently and contribute towards the success of the business.
2. Why People Work
People work for different reasons. The main ones are:
💰Money
Employees work to pay for necessities and luxuries.
🔒Security
Employees value having a secure job and regular income.
🤝Social needs
Work allows people to meet others and feel part of a group.
😊Job satisfaction
People may enjoy the work and feel that a good job has been done.
🏅Esteem
Employees may want recognition and to feel that their work is important.
3. Benefits of a Well-Motivated Workforce
A well-motivated workforce can lead to:
1. Higher productivity
Employees work more effectively and produce more output.
2. Lower labour turnover
Fewer workers leave, so the business spends less on recruiting and training replacements.
3. Lower absenteeism
Employees are less likely to be absent from work, reducing disruption to production.
Topic 2: Motivation Theories
Different theories explain employee motivation in different ways. Students should know the main ideas and limitations.
4. Maslow's Hierarchy of Needs
Abraham Maslow suggested that employees have different levels of needs. From the lowest to the highest, they are:
1. Physiological needs
Basic needs such as food, shelter and rest. At work, these are mainly satisfied by earning enough wages to live.
2. Safety and Security Needs
Employees want job security, safe working conditions and protection from poverty.
3. Social Needs
Employees want friendship, teamwork and a sense of belonging.
4. Esteem Needs
Employees want recognition, status, respect and achievement.
5. Self-actualisation
The highest level means employees want to achieve their full potential. This may be achieved through promotion, greater responsibility and challenging work.
Money alone therefore may not be enough to motivate employees.
5. Taylor's Theory of Motivation
Frederick Taylor believed that workers are mainly motivated by money.
Taylor suggested that:
- jobs should be divided into simple tasks
- workers' output should be measured
- workers who produce more should receive higher pay.
This idea is particularly suitable where employee output can easily be measured.
6. Herzberg's Theory
Frederick Herzberg divided factors affecting employees into hygiene factors and motivators.
Hygiene Factors
These prevent workers from becoming dissatisfied.
Examples:
- salary
- job security
- working conditions
- relationships with managers
- company policies.
If hygiene factors are poor, workers may become dissatisfied. However, improving them does not necessarily provide long-term motivation.
Motivators
These can provide genuine job satisfaction.
Important motivators include:
- achievement
- recognition
- responsibility and personal development
- promotion
- interesting work.
Herzberg therefore believed that businesses should make jobs more interesting and rewarding rather than relying only on money.
7. Comparing the Motivation Theories
| Theory | Main Idea |
|---|---|
| Taylor | Money is the main motivator |
| Maslow | People are motivated by different levels of needs |
| Herzberg | Hygiene factors prevent dissatisfaction, while motivators create job satisfaction |
Topic 3: Financial Methods of Motivation
Financial methods reward employees with money or financial benefits.
8. Financial Methods of Motivation
Businesses can use financial rewards to encourage employees to work harder.
The main methods are:
wagessalariesbonusescommissionprofit sharing
9. Wages
Wages can be calculated using time rate or piece rate.
Time Rate
Time rate means employees are paid according to the number of hours worked.
It is suitable when individual output is difficult to measure.
Piece Rate
Piece rate means workers are paid according to the number of units they produce.
Benefit: it encourages workers to produce more.
Limitation: workers may concentrate on quantity and reduce the quality of the product.
10. Salary
A salary is payment for work, usually paid monthly.
It is commonly used for:
- office employees
- professional workers
- managers.
The annual salary is normally divided into 12 monthly payments.
11. Bonus
A bonus is an additional payment given on top of normal wages or salary as a reward for good performance.
For example, an employee might receive a bonus for:
- meeting a target
- performing particularly well
- helping the business achieve good results.
12. Commission
Commission is payment related to the number or value of sales made.
It is mainly used for sales employees. The more they sell, the more they earn.
13. Profit Sharing
Profit sharing means employees receive a proportion of the business's profits in addition to their normal pay.
It can motivate employees because they benefit when the business becomes more profitable. However, little or no payment may be received if the business makes low profits or a loss.
14. Fringe Benefits
Fringe benefits are additional benefits provided to employees apart from their normal pay.
Examples include:
- company car
- healthcare
- product discounts
- accommodation
- pension contributions.
These can make a job more attractive and improve employee motivation.
Topic 4: Non-Financial Methods of Motivation
Money is not the only method. Businesses can also improve motivation by making work more interesting, varied and rewarding.
15. Non-Financial Methods of Motivation
Money is not the only way to motivate employees. Businesses can increase job satisfaction through non-financial methods.
Important methods include:
job rotationjob enrichmentteamworkingtrainingopportunities for promotion
16. Job Rotation
Job rotation involves workers changing between different tasks after a certain period of time.
For example, a factory worker may move between filling, labelling and packing. This gives employees more variety and can reduce boredom.
17. Job Enrichment
Job enrichment means adding tasks to a job that require greater skill and responsibility.
For example, a receptionist might also:
- answer customer enquiries
- take orders
- prepare documents.
Job enrichment can increase motivation because employees gain greater responsibility and achievement.
18. Teamworking
Teamworking involves employees working in groups and being given responsibility for particular tasks.
Teams may be allowed to decide how work should be organised.
This can:
- increase employees' involvement
- give them responsibility
- create a sense of belonging.
19. Training
Training is the process of improving an employee's skills.
Training can motivate employees because:
- they gain new skills
- they may be given more challenging work
- they may feel that the business values them.
20. Promotion
Promotion is the advancement of an employee to a higher position in the organisation.
Promotion can provide:
- higher status
- recognition
- greater responsibility
- more challenging work.
Topic 5: Choosing the Right Method of Motivation
The best method depends on the employee, the job and the business situation.
21. Choosing the Right Method of Motivation
There is no single best method for every employee.
The most suitable method depends on:
Type of job
The work being done affects which method is suitable.
Measurable output
Whether output can be measured affects whether piece rate or commission is useful.
Employee needs
Different employees may be motivated by different needs.
Cost to the business
Some methods are more expensive than others.
For example:
- Factory production worker → piece rate may be appropriate if output can easily be measured.
- Salesperson → commission may encourage higher sales.
- Manager → salary, bonus, promotion and greater responsibility may be more appropriate.
- Employee doing repetitive work → job rotation or job enrichment may improve motivation.
Topic 6: Key Definitions and Examination Checklist
Use this final section to revise the key terms and exam skills from the chapter.
Key Definitions
| Term | Meaning |
|---|---|
| Motivation | Reason why employees want to work hard and effectively |
| Job satisfaction | Enjoyment gained from feeling that a good job has been done |
| Wage | Payment for work, usually paid weekly |
| Time rate | Payment according to hours worked |
| Piece rate | Payment according to units of output produced |
| Salary | Payment for work, usually paid monthly |
| Bonus | Additional payment for good performance |
| Commission | Payment related to sales made |
| Profit sharing | Part of a company's profit paid to employees |
| Job rotation | Workers move between different tasks |
| Job enrichment | Adding more skilled or responsible tasks to a job |
| Teamworking | Employees work in groups with specific responsibilities |
| Training | Process of improving employees' skills |
| Promotion | Moving an employee to a higher position |
What Students Must Know for the Examination
Students should be able to:
- explain why people work
- explain benefits of having a motivated workforce
- explain Maslow's hierarchy of needs
- explain the main ideas of Taylor and Herzberg
- distinguish between the three motivation theories
- explain the main financial methods of motivation
- distinguish between time rate and piece rate
- explain important non-financial methods of motivation
- select and justify an appropriate method of motivation for a particular employee or business.