Figure 9.1. Employee Incentives-Gifts Versus Cash.
Money has symbolic meaning for employees, and it represents nonmonetary aspects of life such as achievement, success, competence, autonomy, security, and power. Some people feel that money may even bring many friends. Employees pay attention to money and compare what they make to their peers. Perceived pay inequity motivates employees to take action, and compensation is often the focus of employee grievances and lawsuits regarding fairness.
Nobel laureate George Akerlof, a pioneer in the field of behavioral economics, found that “gifts” are viewed as acts of kindness by an employer, which carries more meaning than cash.
Learning Objective 9.1: Demonstrate understanding of OB Mod by providing an example.
Reinforcement theory is based upon the law of effect, which states that past actions that lead to positive outcomes tend to be repeated, whereas past actions that lead to negative outcomes will diminish. The law of effect led to the development of operant conditioning (sometimes referred to as reinforcement theory).
In this approach to motivation, individual personality, thoughts, and attitudes don’t motivate behavior. Instead, the emphasis in operant condition is on the environment.
The goal of reinforcement theory is to explain learned behavior. B. F. Skinner is the psychologist most associated with this approach, and he conducted experiments with animals to understand how behavior could be shaped by setting up systems of rewards and punishments. These rewards (or punishments) were contingent on the response of the animals he studied (probably the most well-recognized studies are those of rats who were taught to run mazes through the shaping of their behavior with pellets of food as rewards).
Learning Objective 9.1: Demonstrate understanding of OB Mod by providing an example.
Reinforcement is any event that strengthens or increases the behavior it follows. Skinner’s research found there are “reinforcers” that increase behavior and those that decrease behavior. The two kinds of reinforcement that increase behavior are as follows:
Positive reinforcement is a favorable event or outcome presented after the behavior (e.g., praise or a bonus).
Negative reinforcement is the removal of an unpleasant event or outcome after the display of a behavior (e.g., ending the daily criticism when an employee shows up for work on time).
Learning Objective 9.1: Demonstrate understanding of OB Mod by providing an example.
Punishment is the presentation of an adverse event or outcome that causes a decrease in the behavior it follows. There are two kinds of punishment:
Punishment by application is the presentation of an unpleasant event or outcome to weaken the response it follows (e.g., writing a letter to an employee’s file for failing to meet a deadline).
Punishment by removal (also called extinction) is when a pleasant event or outcome is removed after a behavior occurs (e.g., withholding praise when an employee does not perform well).
Learning Objective 9.1: Demonstrate understanding of OB Mod by providing an example.
Figure 9.1. Contingencies of Reinforcement.
A summary table of these contingencies of reinforcement is shown in Figure 9.2; it is important to consider whether the reward is applied or withheld and whether the event is pleasant or unpleasant. Figure 9.2 and the previously given definitions and examples refer to the type of reward or punishment that is applied or removed. For example, a pleasant event that is applied would be a managing praising an employee when then complete an excellent project report (a positive reinforcement).
Learning Objective 9.1: Demonstrate understanding of OB Mod by providing an example.
The first schedule is continuous--a specified behavior is rewarded or punished every time it occurs. This is not seen often in organizations; however, it is useful during the learning process (e.g., when an employee is learning to use a new computer program). In this example, the employee would be allowed to leave work one half hour early (a positive event) each time he completes a module of a computer training program successfully.
Once the employee has attained an acceptable level of mastery, they are moved to a partial reinforcement schedule. For example, the employee is no longer rewarded or punished every time, but they are rewarded (punished) on a more random basis as described next.
Learning Objective 9.1: Demonstrate understanding of OB Mod by providing an example.
Figure 9.2. Schedules of Partial Reinforcement.
As illustrated in Figure 9.3, the schedules of partial reinforcement are based on time (interval) or the number of times the response is given by the employee (ratio). Also, the schedule can be fixed or variable (random). These two dimensions result in four possible schedules of partial reinforcement as shown in the figure:
Fixed-interval schedules are those where the first response is rewarded only after a specified amount of time has elapsed. This schedule causes high amounts of responding near the end of the interval. An example of this in a work setting is the way pay is typically disbursed--every 2 weeks or every month, for example. After a fixed amount of time, the employee receives a paycheck.
Variable-interval schedules occur when a response is rewarded after an unpredictable amount of time has passed. This schedule produces a slow, steady rate of response. An example of this would be bringing in bagels for breakfast once a week for employees but varying which day they are brought in (e.g., sometimes on Monday and sometimes Wednesday). The employees never know when they will be treated to bagels, so the element of surprise is motivating and they may come to work on time regularly so they don’t miss out.
Fixed-ratio schedules are those where a response is reinforced only after a specific number of responses. This schedule produces a high, steady rate of responding. An example of a fixed-ratio schedule would be payment to employees based upon the number of items they produce (a piece-rate pay system). In piece-rate systems, the employee is paid for each article produced; for example, a worker sewing zippers into jeans is paid for each zipper correctly sewn in.
Variable-ratio schedules occur when a response is reinforced after an unpredictable number of responses. This schedule creates a high steady rate of responding. Gambling and lottery games are good examples of a reward based on a variable ratio schedule. This is why gambling results in such long-term and persistent behavior (it’s the element of chance that motivates the behavior). In a work setting, this might be offering praise to an employee for good performance after one time and then again after four times and then another time after two times.
Learning Objective 9.1: Demonstrate understanding of OB Mod by providing an example.
OB mod has been employed to increase performance and reduce absenteeism
Learning Objective 9.1: Demonstrate understanding of OB Mod by providing an example.
Figure 9.3. Applied Behavior Modification.
Figure 9.4 shows how to apply OB mod using the principles of reinforcement theory. As shown in the figure,
First step is to pinpoint the specific behavior that needs to be changed. For example, coming to work on time every day is an example of a behavior that needs intervention if an employee is not doing it.
Second, measure the baseline: How many days per month is the employee on time?
Third, perform an A-B-C analysis. This stands for antecedents, behavior, and consequences: Antecedents: What is causing the behavior? Consider both internal and external factors. Behavior: What is the current behavior? What is the desired behavior? Consequences: What is currently reinforcing the behavior? What needs to be changed?
Fourth, develop an action plan based on reinforcement theory strategies to apply (using the contingencies of reinforcement and the schedules). Implement the plan and then evaluate the plan comparing the behavior to the baseline (after compared to before). This will provide feedback, and the plan may need to be changed or another behavior targeted for the future.
Learning Objective 9.1: Demonstrate understanding of OB Mod by providing an example.
Figure 9.4. Applied Behavior Modification Example.
An example of applied OB mod for an employee who is late to work frequently is shown in Figure 9.5.
As this example shows, the specific behavior targeted is that the employee arrives at work on time (say, 8:30 a.m. each day). If the employee is on time, the supervisor can praise them (positive reinforcement) or withhold criticism (this only works if the supervisor has consistently criticized the employee’s tardiness prior to the day they arrives on time, of course). If the employee is late, the objective is to decrease the behavior so the supervisor can withhold praise to produce extinction of the behavior (punishment by removal), or write a reprimand and put it in the employee’s file, which is unpleasant (punishment). Of course, the supervisor can use more than one behavior change strategy and should eventually move the employee to a variable interval or ratio schedule (i.e., apply or remove the reinforcement more randomly) once the employee is coming to work consistently on time.
Learning Objective 9.2: Describe the four steps in the modeling process articulated in social learning theory.
Social learning theory introduced the social element into how people acquire new skills and described the ways that people learn by watching other people.
Known as observational learning (or modeling), this form of learning explains much behavior in organizations. Second, external reinforcements are not the only factors that influence motivation. Intrinsic reinforcement is related to pride, satisfaction, and a sense of accomplishment in learning something new. Social learning theory considers people’s thoughts as well as their perceptions of others (a social cognitive theory).
While reinforcement theorists maintained external rewards create permanent behavioral changes, social learning theory proposes that people can learn things but not necessarily change their behavior.
Learning Objective 9.2: Describe the four steps in the modeling process articulated in social learning theory.
The modeling process has four steps:
Attention. To learn, a person has to be paying attention to another’s behavior. People pay attention to things that are either interesting or new.
Retention. The information must be stored for access in the future. This is important to observational learning since a person must remember what they have observed.
Reproduction. Once information is noted and retained, the next step is that the person imitates (i.e., performs) the behavior that they recall. Repeating the behavior (i.e., practicing) leads to improved performance.
Motivation. For observational learning to work, the person needs motivation to imitate. Thus, social learning theory discusses the roles of reinforcement and punishment. For example, if you see another student rewarded with extra credit points for participating in class every day, you might begin to do the same.
Learning Objective 9.3: Compare and contrast intrinsic and extrinsic rewards.
Intrinsic motivation is when someone works on a task because they find it interesting and gain satisfaction from the task itself.
Extrinsic motivation involves the performance to outcome instrumentality between the task and a tangible reward. Satisfaction does not come from the task itself but rather from the extrinsic outcome to which the activity leads (e.g., working extra hours to earn a bonus).
Work should be set up in a manner so effective performance leads to both intrinsic and extrinsic rewards to produce job satisfaction. There are other sources of motivation in addition to intrinsic and extrinsic such as the enhancement of self-concept and the degree to which a person internalizes the goals of the organization.
Learning Objective 9.3: Compare and contrast intrinsic and extrinsic rewards.
There can be synergistic effects between intrinsic and extrinsic motivation, and there are two psychological mechanisms that illustrate this.
First, “extrinsics in service of intrinsics” refers to how extrinsic rewards may support an employee’s sense of competence if they don’t undermine autonomy (self-determination). For example, a reward can be more time to work on creativity projects. This has been implemented at Google, where engineers and project managers are given 20% of their work time to work on something that they are passionate about. In other words, one day per week they can work on anything they like, even if it falls outside of the scope of their job or is unrelated to the mission of the company.
A second mechanism is the motivation–work cycle match. This is the understanding that innovation occurs in phases and intrinsic motivation may be more important during the idea generation phase. However, when the project is being implemented, extrinsic rewards may be needed to ensure that deliverables are produced on time and within the budget. A longitudinal study found support for this idea in study of project teams. Team members reported higher levels of radical creativity in early phases of a project compared to incremental creativity at later phases. Thus, one type of motivation may not suit all types of project work.
Learning Objective 9.3: Compare and contrast intrinsic and extrinsic rewards.
Intrinsic motivation is a function of a person’s needs for autonomy and competence in the theory of self-determination (also known as cognitive evaluation theory). Autonomy is the need to work alone without constant surveillance. Competence is the sense of mastery an employee has over their job.
The effects of a reward depend on how the person views the reward’s effect on their autonomy and competence. Rewards that diminish these perceptions tend to decrease intrinsic motivation. The issue with extrinsic rewards like money is that such rewards might be interpreted by employees as controlling by the boss rather than indicators of their competence. If the reward is seen as controlling, then the individual’s need for autonomy is challenged, and this undermines intrinsic motivation. If a reward is seen as useful feedback and informational, then it increases motivation.
For example, setting limits for employees could be seen as either informational or controlling depending on the relationship with the boss. Managers can create a climate of trust that alters whether a person views their rewards as controlling or good feedback.
For example, a leader can communicate a pay raise without compromising motivation by emphasizing the informational aspect of the raise as valuable feedback rather than just money.
Learning Objective 9.3: Compare and contrast intrinsic and extrinsic rewards.
Figure 9.5. The Self-Determination Continuum of Rewards.
Self-determination theory views rewards as a continuum from the lack of motivation to intrinsic motivation as shown in Figure 9.6 above.
Extrinsic motivation is seen as complex and ranges from external regulation (rewards and punishments) to feelings of self-worth derived from job performance (introjected regulation). At the higher end of extrinsic motivation, identified regulation means that employees realize that the goals of the organization are important. At the highest level for extrinsic motivation, the employee identifies with the values, and integrates them into automatic performance (integrated regulation).
This continuum helps the manager understand that extrinsic motivation can play an important role in encouraging employee performance. However, as shown in the figure, intrinsic motivation reflects the enjoyment of work and extrinsic rewards may not be needed to maintain high levels of performance. Therefore, with respect to performance, incentives and intrinsic motivation are not necessarily antagonistic and are best considered simultaneously. So it’s important to keep in mind that extrinsic rewards can motivate but they also have limitations.
Learning Objective 9.4: Discuss the guidelines for using monetary rewards effectively.
There are pros and cons of using money as a motivational tool.
On the one hand, organizations that appropriately tie pay to performance and pay more have higher rates of return. A study of hospitals showed that pay level practices and pay structures combined to affect resource efficiency, patient care outcomes, and financial performance.
On the other hand, tying pay directly to performance can have dysfunctional or even unethical consequences. For example, Green Giant, a producer of frozen and canned vegetables, implemented a pay system that rewarded employees for removing insects from vegetables. It was later discovered that employees were bringing insects from home and putting them into the vegetables to receive the monetary rewards.
Learning Objective 9.4: Discuss the guidelines for using monetary rewards effectively.
Another caveat regarding money as a motivational tool is that care must be taken when implementing systems in which employees receive different levels of rewards for individual efforts. This results in pay dispersion, which can cause jealously among employees or harm team performance. If pay dispersion creates pay inequity due to discrimination, it may result in litigation under the Equal Pay Act of 1963.
Learning Objective 9.4: Discuss the guidelines for using monetary rewards effectively.
Table 9.1. Research-Based Recommendations on How to Use Monetary Rewards Effectively.
There are five evidence-based guidelines for money as a motivator: (1) define and measure performance accurately, (2) make rewards contingent on performance, (3) reward employees in a timely manner, (4) maintain justice in the reward system, and (5) use monetary and nonmonetary rewards. These evidence-based guidelines are summarized in Table 9.1 above.
Learning Objective 9.4: Discuss the guidelines for using monetary rewards effectively.
Table 9.1. Research-Based Recommendations on How to Use Monetary Rewards Effectively.
There are five evidence-based guidelines for money as a motivator: (1) define and measure performance accurately, (2) make rewards contingent on performance, (3) reward employees in a timely manner, (4) maintain justice in the reward system, and (5) use monetary and nonmonetary rewards. These evidence-based guidelines are summarized in Table 9.1 above.
Learning Objective 9.5: Illustrate the methods of performance management with examples.
Performance management is essential for the determination of compensation and other outcomes such as promotions. But there are other objectives that are equally important.
The performance management session is an opportunity to regularly discuss an employee’s performance and results. The leader can identify the follower’s strengths, weaknesses, and areas for improvement.
The process supports pay equity in which followers are paid according to their inputs and results, and it supports a climate of organizational justice.
Performance management, thus, provides essential feedback for followers. Importantly, it can recognize exceptional performance and document weak performance. Also, it can lead to effective goal setting for future performance and identify training that may be needed to improve skills.
Most organizations use the performance management process for compensation decisions, and performance improvement as well as to provide feedback to employees.
Learning Objective 9.5: Illustrate the methods of performance management with examples.
In most organizations, the immediate supervisor is involved in the performance appraisal and often is the only person conducting the review. This appraisal is often reviewed by the human resources department. In some cases, the process is reviewed by a manager one level above the supervisor. However, recent trends have included ratings from higher management, peers (coworkers), the employee’s followers, and customers. Performance appraisal may also include self-ratings in which the employee rates his own performance, and this becomes a part of the file. However, self-ratings are typically used for development purposes and not for compensation or promotion decisions because they suffer from self-interest bias, and they don’t agree well with supervisor ratings.
Learning Objective 9.5: Illustrate the methods of performance management with examples.
In a 360 degree performance appraisal, the input from a number of these sources is included to provide a more comprehensive view of an employee’s performance. The research evidence on 360 degree suggests it increases the perspectives that provide input into the review process., The challenge with 360 degree reviews is that organizations don’t often provide necessary training for peers to provide constructive feedback. Peers, for example, tend to be more lenient than supervisors in rating their coworkers., Despite these challenges, 360-degree feedback has been implemented successfully in numerous organizations.
Learning Objective 9.5: Illustrate the methods of performance management with examples.
It is best to avoid rating traits such as having a positive attitude since they may not relate to actual performance. Most organizations use a standard form to evaluate employee performance. There may be an overall global rating for performance, but there are also specific dimensions that are rated. These ratings are typically on a graphic rating scale having multiple points along a continuum.
Another approach is to use behaviorally anchored rating scales (BARS) in which a vertical scale is presented with specific examples of performance provided.
Some organizations use a forced-ranking method in which all employees in the work group are ranked relative to one another. This approach was made famous by Jack Welch at GE, where he committed to firing the bottom 10% of the workforce each year. Even if the bottom 10% is not fired, such forced ranking systems may make managers uncomfortable and create a culture of competition.
Learning Objective 9.6: Critique the performance review process.
There are issues related to performance appraisals that a leader needs to know about. Some employees view the appraisal process as unfair and showing favoritism. Others may fear the appraisal process and view it as punitive. There are perceptual biases that may affect the rater’s ability to accurately rate follower performance. These errors have been shown by research to affect the performance rating process. In addition, there may be a tendency for a rater to be too lenient (or too strict) in their ratings. They might have a central tendency error in which they rate all dimensions of performance as average (e.g., rating every dimension as 3 on a 5-point scale). Cultural values such as power distance and collectivism may influence how a rater assesses the performance of another person. Performance appraisals should be supported by training for those making the ratings to avoid these errors and increase sensitivity to the perspectives of employees from different cultural backgrounds.
Learning Objective 9.6: Critique the performance review process.
These perceptual biases may be avoided by rewarding for results rather than behaviors.
For example, in profit-sharing plans, employee bonuses are based upon reaching a financial target such as return on assets or net income. Stock options are a variation of profit sharing where employees are given stock options as part of their compensation package. Gain-sharing plans are another alternative, in which compensation is tied to unit-level performance (e.g., the employees receive a percentage of the sales increase or cost savings for efficiency improvements). These plans tend to increase performance.
Other benefits that employees may value as rewards include flexible working hours, job sharing, remote working, and sabbaticals from work.
Learning Objective 9.7: Explain how feedback seeking by employees relates to more accurate perceptions of performance.
Learning Objective 9.7: Explain how feedback seeking by employees relates to more accurate perceptions of performance.
Figure 9.6. Antecedents and Consequences of Feedback Seeking.
As shown in Figure 9.7 above, the situation affects the person’s motives for feedback seeking. People may either want to defend their self-perception or image (ego or image defense). Alternatively, their goal may be to enhance their self-perception (or image) in the eyes of others (by asking for feedback on something they knew they did a good job on, for example).
There are five patterns of feedback seeking that matter: (1) how frequently people seek feedback, (2) how they seek it (observing, comparing, or asking for it), (3) the timing, (4) who they ask for feedback from (i.e., the target), and (5) what they ask for feedback about (e.g., success on an task assignment). Outcomes from feedback seeking are a more accurate perception of one’s own performance and progress on goal attainment by gaining feedback when needed. Also, one’s self-perception and image may be enhanced through the five strategies of feedback seeking.
Research on feedback seeking suggests seeking negative feedback does improve an employee’s image (unless the feedback seeker is a poor performer). However, seeking positive feedback can be detrimental to a leader’s image as seen by subordinates.
Leaders play an important role in managing follower motivation and performance.
Research has shown that the relationship between and leader and follower (i.e., LMX) is an important factor in the performance appraisal process.
Leaders need to pay close attention to the extent to which followers perceive that the performance appraisal process is procedurally fair.
Leaders should ask their followers how they feel about the organization’s performance appraisal procedures and practices on an informal basis. Suggestions for improving the process should be taken seriously.
Knowing reinforcement and social learning basics is essential to understanding how reward systems operate in organizations
