Chapter 6: Financial incentives

Intrinsic Motivation Study: Cameron and Pierce - Metaanalysis

Metaanalysis of 96 studies. Many of Pink’s claims do not align with the findings:

• Financial incentives positively impact performance.

• Cerasoli: Intrinsic motivation doesn't predict performance as well as extrinsic motivators.

• Giles et al: Health behaviors improve when incentives are offered.

• Byron & Khazanchi: Creative performance is higher with incentives.

Problems with Incentive Implementation and Design

• Incomplete performance measures (incentivizing only a subset of tasks).

• Uninfluential performance measures.

• - Incentive size issues.

Variable Pay

A pay system where part of an employee’s compensation is based on performance.

Piece-rate Pay System

A system where workers are paid a set sum for each unit of production completed.

Wage incentive plans

schemes to link pay to performance on production jobs.

Problems with Wage Incentive Plans

• Lowered quality of work

• Differential opportunity; varying from workplace to workplace

• Reduced cooperation; competition.

• Incompatible job design; not all jobs have an obvious action to incentivise

• Restriction of productivity - an artificial limitation of work output under a wage incentive plans.

Merit Pay Plans in White-Collar Jobs

Linking pay to performance in white-collar jobs. Issues include:

• Low discrimination; hard to tell between good and bad performance

• Small increases: the pay increases are too small to motivate effectively.

  • Lump-sum bonus

• Pay secrecy; employees cant compare their merit pay to others.

Lump-Sum Bonus

A bonus paid out all at once, not added to base pay, as an alternative to conventional merit pay.

Profit Sharing

Distributing company profits to employees in the form of bonuses, cash, or retirement contributions. Works best for small, profitable organizations.

Employee Stock Ownership Plans (ESOP)

Plans allowing employees to own shares in the company at a fixed rate. Works best for small, profitable organizations.

Gainsharing

Group-based incentive plans tied to improved productivity or performance. Focuses on factors like labor and material cost reduction.

Skill-Based Pay

Pay system that rewards employees for acquiring new skills, regardless of the tasks they perform at a given time.

Job Design

The structure, content, and configuration of a person’s work tasks and roles. Traditionally, it focused on specialization and simplification.

Job Scope

The breadth (variety of tasks) and depth (degree of discretion/control) of a job. High-scope jobs involve a variety of activities and require a high level of control; low-scope jobs are repetitive tasks.

Stretch assignments

challending assignments and projects that offer employees opportunities to broaden their skills.

Job rotation

rotating employees to different tasks and jobs in an organization.

Job characteristics model

5 core job characteristics that have particularly strong potential to affect worker motication: skill variety, task identity, task significance, autonomy and job feedback.

Job diagnosis survey

a questionnaire to measure the core characteristics of jobs; we can measure the motivating potential of a job with this formula:

• Motivating potential score = skill variety + task identity + task significance /3 x autonomy x job feedback

Jon enrichment

the design of jobs to enhance intrinsic motivation, the quality of working life, and job inolvement.

Job involvement

a cognitive state of psychological identification with one’s job and the importance of work to one’s total self-image.

Work design characteristics

the attributes of the task, job, and social and organizational environment with 3 categories: motivational , social, and work context characteristics. .

• Motivational: task, knowledge, task and skill variety.

• Social: interpersonal and social aspects

• Work context: the context in which work is performed and consists of ergonomics, physical, work and equipment.

Relational architecture of jobs

focuses on the structural properties of work that shape employees’ opportunities to connect and interact with other people.

Prosocial motivation

the desire to expend effort to benefit other people.

Job crafting

self-initiated changes that employees make in their job demads and resources to improve the fit or match.

Management by objectives (MBO)

an elaborate systematic ongoing management program designed to facilitate goal establishment, goal accomplishment, and employee development.

Flexible work arrangements

work options that permit flexibility in terms of where and/or when work is completed.

Flex time

providing flexibility in terms of when employees work; given a number of hours but they can leave and arrive whenever they want.

Compressed workweek

compresses the hours worked each week into fewer days.

Telecommuting

work at remote locations.