Motivation, Wage and Incentive Plans

1. Motivation,
Wage and
Incentive Plans

2. What is Motivation?
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3. What is Motivation?
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4. What is Motivation?
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5. What is Motivation?
• Motivation
– Motivation is a human psychological characteristic
that contributes to a person’s degree of
commitment.
• Motivation in management
– Motivating is a management process of
influencing other people’s behavior
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Reflex
Influenceable
zone
Habits
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7. Common assumptions about Motivation
• Motivation is commonly assumed to be a
good thing.
• Motivation is in short supply and in need of
periodic replenishment
• Motivation is one of several factors that goes
into a person’s performance
• Motivation is a tool with which managers can
design job relations in an organization
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8. Early views of motivation
• The Traditional model
– is associated with F. Taylor. Here manager
determine the most efficient way to perform a
task and then motivate the worker with a system
of wage incentives.
– The underlying assumption is that, managers
understand the work better than the workers who
are actually lazy and can be motivated only by
money.
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9. Early views of motivation
• The Human Relations Model
– They found that the boredom and repetition of a
task actually reduce motivation. While social
contacts help to create and sustain motivation.
– The underlying assumption is that, managers can
motivate workers by acknowledging their social
needs and by making them feel important and
useful.
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10. Early views of motivation
• The Human Relations Model
– They found that the boredom and repetition of a
task actually reduce motivation. While social
contacts help to create and sustain motivation.
– The underlying assumption is that, managers can
motivate workers by acknowledging their social
needs and by making them feel important and
useful.
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11. Early views of motivation
• Human Resource Model
– Associated with Doglas McGregor (Theory X and
theory Y: Google them).
– The underlying assumption is that, in modern
industrial life, to take advantage of the employee’s
innate willingness and ability to work, managers
should provide a climate that gives employee
scope for personal improvement.
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12. Maslow’s need theory
• Physiological needs - air, food, drink, shelter, warmth,
sleep, etc.
• Safety needs - protection from elements, security,
order, law, limits, stability, etc.
• Social needs - work group, family, affection,
relationships, etc.
• Esteem needs - self-esteem, achievement, mastery,
independence, status, dominance, prestige, managerial
responsibility, etc.
• Self-Actualization needs - realizing personal potential,
self-fulfillment, seeking personal growth and peak
experiences
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13. Maslow’s need theory
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14. ERG theory
• The letters ERG stand for three levels of needs:
Existence, Relatedness, and Growth.
• Similarities to Maslow's Hierarchy
• Like Maslow's model, the ERG theory is hierarchical -
existence needs have priority over relatedness needs,
which have priority over growth.
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15. ERG theory
• Differences from Maslow's Hierarchy
– Unlike Maslow's hierarchy, the ERG theory allows
for different levels of needs to be pursued
simultaneously.
– The ERG theory allows the order of the needs be
different for different people.
– The ERG theory acknowledges that if a higher
level need remains unfulfilled, the person may
regress to lower level needs that appear easier to
satisfy.
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16. The two-factor theory
Fredrich Herzberg and his associates conducted a study of the
job attitude of 200 engineers and accountants.
• The hygiene factors do little contribution to
provide job satisfaction. He called them
"dissatisfiers' as their absence cause
dissatisfaction but their presence is not motivating
but only prevent dissatisfaction. Ex.
• Motivating factors act as forces of job satisfaction.
They create positive and a longer lasting effect on
employee’s performance and are related to work
itself. Ex.
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17. The two factor theory
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18. The two factor theory
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19. Equity Theory
• People develop beliefs about what is a fair
reward for one’ job contribution - an exchange
• People compare their exchanges with their
employer to exchanges with others-insiders
and outsiders called referents
• If an employee believes his treatment is
inequitable, compared to others, he or she
will be motivated to do something about it --
that is, seek justice.
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20. Dept. of IPE, BUET 1-20
Equity Theory

21. Equity Theory
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22. Expectancy theory of motivation
• When deciding among behavioral options,
individuals select the option with the greatest
motivation forces (MF).
• The motivational force for a behavior, action, or
task is a function of three distinct perceptions:
Expectancy, Instrumentality, and Valance. The
motivational force is the product of the three
perceptions:
• MF = Expectancy x Instrumentality x Valence
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23. Expectancy theory of motivation
– Expectancy probability: based on the perceived
effort-performance relationship. If I work harder than
everyone else in the plant will I produce more?
– Instrumentality probability: based on the perceived
performance-reward relationship. If I produce more
than anyone else in the plant, will I get a bigger raise
or a faster promotion?
– Valence: refers to the value the individual personally
places on the rewards. Do I want a bigger raise? Is it
worth the extra effort? Do I want a promotion?
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24. Expectancy theory of motivation
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25. Expectancy theory of motivation
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26. Intrinsic and Extrinsic reward
• Intrinsic reward: eg. Increased self-esteem,
satisfaction of developing new skills.
• Extrinsic reward: eg. Bonuses, Promotions
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Expectancy theory of motivation

27. Application of Expectancy Theory
• Determine the reward valued by each
employee
• Determine the performance you desire
• Make the performance level attainable
• Link reward to performance
• Analyze what factors might counteract the
effectiveness of the reward
• Make sure the reward is adequate
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28. Reinforcement Theory(B. F. Skinner)
• Reinforcement theory is the process of shaping
behavior by controlling the consequences of the
behavior. In reinforcement theory a combination of
rewards and/or punishments is used to reinforce
desired behavior or extinguish unwanted behavior.
– Positive Reinforcement
– Negative Reinforcement
– Punishment
– Extinction
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Stimulus
Response
Consequences
Future Response

29. Hamner’s rules for behavior modification
• Don’t reward all individuals equally
• Be aware that failures to respond can also
modify behavior
• Be sure to tell individuals what they can do to
get reinforcement
• Be sure to tell individuals what they are
doing wrong
• Don’t punish in front of others
• Be fair
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30. • Establishment of a standard to be attained
• Evaluation of whether the standard can be
achieved
• Evaluation of whether the standard matches
personal goals
• The standard is accepted, the goal is thereby
set, and behavior proceeds toward the goal.
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Goal setting theory of motivation

31. Goal leads to Performance
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32. Wage &
Incentive
Plans

33. Straight Day-Work
Under this Scheme, the employer buys the time of the
worker.
Earnings E = T × R
T = Time in hours available for work in a day
R = Rate of pay, per hour in Taka
As the specialization began, the management felt that
the day work method become less and less applicable
because it was very difficult to know the individual
qualities and so more difficult to reward for his
ability.
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34. Piece Work
A uniform rate is paid to the workers for the amount
of work performed and not for the time he spends.
Earning E = n × R
n = output in number
R = Piece rate in Taka
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35. Differential Piece Work
✓ A standard task n1 (units) is carefully established.
This standard task is called as “High Task”.
✓ First of all, Taylor proposed that the workers
producing more than the standard unit will be paid at
high rate R2. The worker, who would fail to achieve
the standard task, will be paid at low piece rate R1.
✓ This Method is named as Taylor’s Differential Piece
Work.
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36. Dept. of IPE, BUET 1-36
Differential Piece Work

37. Multiple Differential or Merrick
Differential Piece Work:
Merrick pointed out that in Taylor System the inferior man cannot
survive because of penalty of sub-standard performance. Therefore,
Merrick proposed the following changes.
➢That there should not be any penalty on the workers and they should
be assured of minimum wages (fair days work = R3)
➢He proposed number of differentials in piece rate e.g.
• upto 70% of the standard task …………..Tk R3 (piece rate)
• upto 100% of the standard task ………….Tk R4 (increased piece rate)
• upto 120% and above the standard task…..Tk R5 (increased rate)
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38. Dept. of IPE, BUET 1-38
Multiple Differential or Merrick
Differential Piece Work:

39. Halsey Plan:
Three important characteristics of Halsey plan:
1) Minimum wages are guaranteed
2) There is an additional pay for the output if it is in excess
of established standard.
3) It can be applied at all the levels of workers.
Actually Halsey modified the Taylor plan. Major
changes are,
1) The standard task is based on recorded experience
2) For output above the task level, the worker is paid a bonus
for only a fixed percentage of time saved.
3) The bonus point is set on 60% to 90% of the standard task.
This new mark is known as Low Task or Halsey Task.
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40. Dept. of IPE, BUET 1-40
Halsey Plan:

41. If, R = Base rate guaranteed on hourly basis
N = Total pieces are to be produced
N2 = Low task in pieces per hour
T = Time required for making N pieces
P = Percentage of the workers share in gain of above
task.
It is generally varying from 25% to 50%
S = Standard time for the job on the basis of data =
(S-T) = Time saved by the worker
E = Wages for the job = RT + p (S-T) R
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Halsey Plan:

42. For worker, working in a machine shop, the following data is given. Guaranteed
base rate = Tk 25 per hour. Total piece to be produced = 300 pieces. Standard
Task= 100 pieces/hour, Low task would be 75% of the standard task. The
worker took 2 hours to complete the job. Percentage of the workers’ share in the
gain of above task is 40%. Hence calculate the rate of incentive per hour for the
worker.
Solution:
R = 25 Tk/hour, N = 300, N2 = 100× 75% = 75, T = 2 hours, p = 40% =
0.4
S = hours
Therefore, E = = RT + p (S-T) R= 2×25+ 0.4 (4-2) ×25 = 70 Taka
Per hour basis wage = 70/2 = 35 Taka per hour.
So, an incentive of (35-25)=10 Taka per hour should be paid.
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Halsey Plan: An Example

43. Rowan Plan
• Mr. James Rowan proposed that the bonus should be
paid on the percentage of time worked rather than
time saved. The minimum wage was guaranteed. The
wage was calculated as below:
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Find E for the previous example! And Compare.

44. • Suppose, a worker should produce 50 units in
8 hours and he is paid at the rate of Rs 3 per
hour. If he produces 100 units in 8 hours, his
total earnings for the day would be –
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Rowan Plan

45. Fringe Benefit
➢ Any contribution (except regular financial
contribution such as bonus, commission, salary) by
the employer for the benefit of employees is known
as Fringe Benefit.
➢ For example, Social security, pension, insurance
compensation etc.
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46. • I don’t own the copyright of the contents of
this presentation.
• The images are collected from different
sources.
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