1. Tournaments are competitions between employees where the winner receives a promotion and higher pay. 2. Tournaments tend to result in a "winner take all" outcome where one employee receives all of the benefits. 3. Employees who enter tournaments must forgo other career opportunities and alternatives to compete in the tournament.

2. Tournament Theory
1. Tournaments are competitions
between peers to achieve a
promotion to a higher rank along with
the pay and perks that go with it.
2. Tournaments are likely to result in a
“winner take all” outcome.
3. Managers who enter the tournament
must forego other alternatives (such
as jobs with other firms, start own
business, receive more pay with an
alternative opportunity) to compete
in the tournament.

3. 4. A high pay differential (such as
the CEO receiving much greater
pay than any subordinates)
attracts more “players” to the
tournament.
5. Players must “invest” (work long
hours, accept less pay, show
loyalty to their boss) to enter the
tournament – firm captures value
from these players, more than
what it gives up to the “winner”
for the prize.

4. Advantages of
Tournaments
 Easier to observe relative
performance
 saves on measurement costs
 Relative compensation
eliminates the effect of luck
when everyone has the same
luck (e.g., bad economy)
 Variation in luck (e.g., getting
good supervisor) must be
considered

5. Disadvantages of
Tournaments
 Workers could collude to shirk &
split winner’s prize. Reduced by
 having more workers in competition
 hiring externally
 Reduces worker cooperation
 Uneven distribution of ability
causes workers to shirk
(expectancy)

6. Victor Vroom’s
Expectancy Theory
The theory proposes that a persons
behavior occurs because of
expectations as to the outcomes of that
behavior.
The key elements to this theory are
referred to as following-
1. Valence (V)
2. Instrumentality (I)
3. Expectancy (E)

7. Valence
 The term valence refers to the strength of an individual’s
performance for receiving a reward . It is an expression of the
value he places on a outcome or reward.
 Valence is negative if the individual prefers not attaining an
outcome compared with attaining it.
 Valence is zero if the individual is indifferent to the outcome.
 Valence is positive if the individual has the strong preference to
the outcome.
 The Valence of the individual must be positive if motivation were
to take place.

8. Instrumentality
 The Instrumentality refers to the
belief that the first level outcome will
lead to the second level outcome .
 The value of Instrumentality varies
from 0 to 1. If an employee sees that
promotions are based on
performance, instrumentality will be
rated high.

9. Expectancy
 Expectancy refers to the belief that an effort will
lead to completion of a task.
 The value of Expectancy varies between 0 to 1.
 If an employee sees no chance that effort will lead
to the desired performance, the expectancy is zero.
 On the other hand if the employee is confident
that the task will be completed , the expectancy
has a value of 1.

10. Motivational Force

11. Managerial Implications of
Expectancy theory
According to Expectancy theory-
Motivation= Valence x
Instrumentality x Expectancy