Theories of Motivation and their relation to Performance Related Pay
During 1990’s, the employees from private and public sector did put a strong significance on the rewards paying for the good performance. For improving individualism and organizational culture, incentives were also given. Armstrong once suggested that pay is always linked to the performance measured by many particular objectives. For example: Target for sales or the satisfaction of the customers. For these objectives, rewards are introduced by using quantitative judgment (Suff et al., 2007). Performance related pay is extensively used in public sectors like government or to the teachers etc. There are huge benefits of performance related pay that were introduced by Armstrong. He also realized that PRP can be very helpful in motivating the employees and eventually will help in giving success to the organization. It gives a push to the managers for examining the progress of the goal of the department. This also helps to retain the resources by rewarding them financially and in the reduction of the golden handcuff effect too. Marchington said that it is usually difficult to find proof for determining success of the performance related pay, however, it is broadly supported and practitioners have seen huge amount of loyalty within resources. Its’ since few years, there has been an assessment of the new ideas behind PRP (Bryson et al., 2012). There are new studies that say that PRP contributes a lot to the organization and the performance of any individual. Lewis in 1998 found that in case if the employees are in the agreement of the PRP and practice, they will get motivated in the much better way in terms of the performance output. This essay focuses on performance related pay and the benefits of it in terms of motivating the employees and retaining them. It also focuses on the effectiveness that retail and manufacturing industry got by using performance related pay.
Employees always seek some rewards for their work done in the organization. Performance related pay when is introduced with the any type of job, it makes the job much more attractive for the employee as this helps the employee to perform better in order to achieve that pay which is related to his performance. Recently, there has been this concept of involving performance related pay to the private sector on the massively. Hence, compensation is tied to the performance. In many countries which are developed in terms of the economies, there had been a renewal of the PRP policies which are entertained by the government (Mensah & Dogbe, 2011). With new view of the organizations of linking incentives to the performance, this process is consistent. Compensation can be seen in various different perspectives by resources, society and the managers. Society’s perspective about the compensation is the measurement of the equity or the equal work for equal pay. For employees it is a return of the services they have done for the organization. Manager view compensation in two ways: as a huge expense and a possibility of influencing the employee’s behavior and motivating them.
Effectiveness of Performance Related Pay in the Manufacturing Industry
Compensation can be divided into two groups: intrinsic and extrinsic rewards. Direct rewards consists of the protection programs, Pay for the time a resource has not worked such as leaves, illness etc and perquisites. While the direct rewards include basic wages, performance based pay and the living expenses. Armstrong observed that there started a trend towards PRP in the manufacturing firms (Tonge et al., 2010). A manager’s biggest challenge is t o motivate his employees. The success key of the organization is to only motivate the employees. Jones defined motivation as the external force which determines the way of the person’s attitude and behavior in the organization. He considered efforts, attitude and persistence as the important factors for the motivation. Behavior of t he resource chooses the way for behavior, efforts scales up as to how hard the resource is working and persistence happens when the resource continue to face the difficulties rather than giving up (Bajorek & Bevan, 2015).
Theory of motivation’s usage revolves around the number of assumption and general ideas shared in the theories. The main focus goes on the cognitive theory of the motivation which is very valuable for the managers as compared to the need theories as cognitive theory provides the real guidance on the methods of motivation.
Maslow’s theory of motivation: The Maslow’s theory suggests that human beings are motivated by the requirements which are hierarchical in the order starting from the basic needs till the higher order of needs (Jerome, 2013). These needs are sequenced by the humans starting with affiliation, physiological, self-actualization and security. Once the needs are completed then the motivation of the individual automatically comes down. It is said that someone’s frame of reference is determined by the order of significance of their needs and culture of the society which influences that reference frame. Hence, the application of Maslow needs comes to the conclusion that the needs are not the same when it comes to different people of various ethnicities and cultures (Kaur, 2013). Basically the conclusion that could be taken out is that this theory only helps in providing general framework to categorize needs of various types.
Two-factor Theory by Herzberg’s: Herzberg’s two factors are motivation and hygiene. Herzberg stated that if the hygiene factors like job security, work conditions and pay are absent, then there would lay dissatisfaction always and if they are present then they will not lead to motivation as well. Motivation factor includes nature of work, responsibility and recognition among others and if they are present then they would be helpful in motivating the resources but in case of their absence, it leads to the state of neutrality i.e. neither satisfied nor dissatisfied (Tan & Waheed, 2011). Herzberg also realized that being repetitive will not lead to dissatisfaction. For applying this theory in the organization, there should be a two-stage process followed.
Conclusion
Firstly, the management must achieve the state of no dissatisfaction through addressing hygiene factors and all this should include the improving of work conditions and fostering of impersonal relation at work.
Secondly, when the stage of dissatisfaction occurs with the help of hygiene factors, motivation of the employees can be achieved with introducing the motivators such as new opportunities for the advancement of the resources and job redesigning for taking more responsibilities (Baah & Amoako, 2011).
The most important strength of this theory is that the theorist made the clear path for the managers so that they are able to apply this in practice using this two stage process.
Equity Theory: Stacy Adams stated that the most important factor for achieving motivation is to strive for the fairness or equity. The starting point of this theory is the exchange place where the resources give something such as skills or labor as their inputs and in return they get something for it such as appreciation or pay. The centre point of this theory is that the person uses it to test one self’s output balance (Aggarwal et al., 2014). Inequity occurs where one becomes aware of the discrepancy with the reference of the other one. Equity theory given by Adams is hugely regarded for it being simple and it stands up to the accuracy of the empirical tests. Rollinson stated that all the tests have usually supported theorist Adam’s prepositions in the predictions and Equity theory. Although, a few proofs have suggested that this theory even being deprived economically when it comes to employee satisfaction, some resources proved to be very productive. A conclusion can be taken out that the motivation economically can be greater that the equity in organizations in which individuals were able to work better despite equity (Truong & Khalifa, 2010).
Goal-Setting Theory: Locke’s theory of goal setting is a proven theory in which there are assertive proofs that the particular challenges and the specific goals always will improve the work performance of the individual. Further explanation of this theory is that the effort which is goal directed will always a function of the acceptance of the goal and the commitment which will eventually lead to the performance of the individual. This theory sates that when the goal is achieved by the individuals then intrinsic and the extrinsic rewards are always expected by the resources and at least those rewards determine the level of the particular person’s satisfaction (Bakar et al., 2014). A theorist pointed out that workplaces that are modern are usually organized in terms of work and the theory does not address the goal setting theory when it comes to the workplace. One more shortcoming of the theory is that it makes the employees drive towards unethical practices in order to make them achieve their goals. Joint goal setting has shown assertive response in the performance of the resources though (Lunenburg, 2011).
Effectiveness of performance related pay in Manufacturing Industry: Most firms offer resources remuneration packages which directly link to performance related pay in terms of incentives and motivation. Remuneration works within the workers of the manufacturing industry and it has become a norm since a long time in this industry (Chet et al., 2014). There are various types of payment incentives which include performance pay for the individual and the performance pay for the group too. Each resource is worried about improving the efficiency and the productivity of the firm. When an apt compensation which consists of the fixed payment and the variable payment element is provided, it directly links to the productivity of the firm and its performance. This process has proved to be very helpful in improving the productivity of the manufacturing organizations. For the increment in the performance of the worker, pay is directly linked with the hard work the worker does. This improves motivation within the workers and they work loyally for the company and give their best for that reward. Incentives are also introduced which are based on the performance of the worker. The more they work above their target, the more incentive they will be getting at the end for their hard work. This will improve the productivity of the company immensely. Performance related pay can easily improve performance in terms of macro economy and gives the flexibility of employment to economic shocks. When the incentive schemes are introduced, it automatically helps the company in understanding the allocation of the high quality workers to productivity of firms which is high. Better organization performance for longer term is directly associated with the share ownership schemes. PRP can be explained by the flow of the “high involvement management” practices in which the resources have the power of decision making, in which they deserve incentives and compensation. Performance is effective when the direct effect of the incentive occurs for the employees. The empirical proofs support the PRP process as they indeed help in producing the high productivity and a better firm and worker match (Lucifora, 2015).
Effectiveness of performance related pay in Retail Sector: When it comes to the retail sector of organizations, there is always a need to motivate and retaining the employees because of the demand of the manpower in this industry and for the employees in order to make them work well. It is always important to give the reward package to the employees in order to expect good performance from them. There is still a need to find more out about what exactly performance and rewards in reality entails for having a good understanding of the whole process as to how it works. To examine the performance and rewards, there are challenges faced by the companies for fulfilling psychological contracts in between the employees who have very good performance. Armstrong stated that PRP is a high motivator in term of the reward management but also stressed as it should not just only be about money but also for the non financial rewards that provides intrinsic and extrinsic motivation like involvement of the employee, trust and partnership, transparency and mutuality etc. These both are the factors in the success of the organization; hence, they should be in depth evaluation in retail industry. In case if the employee is working in the retail sector, the output of the resource is always less as it is clearly dependent on the customers who come in the shop (Ray, 2016). The firm should always try and give performance related pay for the benefit of the shop and the productivity. In retail sector, the performance related pay provides the managers and the workers great incentive efficiency and the productivity. This eventually leads to the costs getting lower and helps the organization to remain in the profitable and dynamic state. It also gives the workers a good feeling as they are tied to a good fortune of the company which eventually helps the organization in making it easier to put focus on the cost cutting. It will also boost the morale of the resources which will alow them to be loyal with the company they are working for and will always work hard for themselves as well as the organization (Pettinger, 2016).
This essay focusses on the Performance related pay that it is fair and always helps in motivating the employees and other resources in the organization and has not bad effect on the team or the system. Organizations those are eager to adopt to the process of the performance related pay, should have a clear objective for using it. They should be able to achieve trust and positivity from the employees(Gilbreath & Harris , 2002). Attempts can be made via involvement of the employees to allay fears if any and in case if they have any suspicion or mistrust towards the company or the domain. Ample amount of preparations should be done before all this process. Payment for the performance should be done as much possible and it should be based on the amount of incentives instead of the rating. With the study of the theories of motivation in this essay, the conclusion can be drawn that there are several factors which influence an employee’s motivation: Work environment, supervision, responsibilities and feedback(Ball, 2012). To conclude it can also be said that the use of PRP scheme can provide specific benefits when it linked with the environment which is open and supported by equality(Jackson, et al., 2013). Motivation is necessary for the organization to get more productivity out of the employees and to bring the motivation, it is necessary to have something luring by the resource’s side so that they can push themselves to work hard to get that reward. Performance related pay is one of the best schemes which not only helps the organization but also the employees by giving both a very good result in the end. At last it can be said that it is always a win-win situation for the company and the employees.
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