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Lt Cd 59 0 B )
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Motivation & Reward

Management
 n g G oa l s
Learni
1 Explain the importance of human 4 Reward Management
resource management.

5 Objectives of Reward
2 Motivation Management

6 Objectives & Element of Reward

3 Explain how Maslow’s hierarchy- Strategy
of-needs theory, goal setting, job
design, and managers’ attitudes
7 Management Approach to
relate to employee motivation
Rewards, Types & Categories of
Reward
 V it al t o A ll
Org a n i za ti o ns
Human resource management - function of
attracting, developing, and retaining enough
qualified employees to perform the activities
necessary to accomplish organizational
objectives. Three main objectives:

1) Providing qualified, well-trained

employees for the organization.
2) Maximizing employee effectiveness in
the organization.
3) Satisfying individual employee needs
through monetary compensation,
benefits, opportunities to advance, and
job satisfaction.
 R e so u r c e
Human
n si b il it i e s
Respo
 M ot i va tion
The force within us that activates our
behavior. It is a function of three
distinct components, Intensity,
Direction, and Persistence.

Motivation
Motivation

Intens Directi Persisten

ity on ce
 n - In t en s i ty
Moti v a tio
Intensity refers to the amount of
mental and physical effort put forth
by the salesperson.

Motivation
Motivation

Intens Directi Persisten

ity on ce
 - D ir e cti on
Motiv a tio n
The extent to which an individual
determines and chooses efforts
focused on a particular goal.

Motivation
Motivation

Intens Directi Persisten

ity on ce
 rs is t enc e
i va tion -Pe
M ot
The extent to which the goal-directed
effort is put forth over time.

Motivation
Motivation

Intens Directi Persisten

ity on ce
 s . Ex tr insi c
Intr in s ic v
tiv a tio n :
Mo
Motivation
Intrins Extrinsi
ic doing
When c
When rewards
the job is such as pay
inherently and formal
motivating recognition
act as
motivators
 ng E m p l oyees
Mot iv a t i

• Motivation starts with good employee morale, the mental

attitude of employees toward their employer and jobs.
• High morale = sign of a well-managed organization
• Poor morale shows up through absenteeism,
employee turnover, strikes, falling productivity, and
rising employee grievances
 H i era r c h y o f
Mas l ow ’ s
Ne e d s T h e o r y
• Maslow’s hierarchy of needs: people have five levels of needs
that they seek to satisfy.
• A satisfied need is not a motivator; only needs that remain
unsatisfied can influence behavior.
• People’s needs are arranged in a hierarchy of importance; once
they satisfy one need, at least partially, another emerges and
demands satisfaction.
– Physiological needs
– Safety needs
– Social (belongingness) needs
– Esteem needs
– Self-actualization needs
 wo-F act or
er g ’ s T
Herzb
Theory
Hygiene Factors Motivator Factors
• Job Environment • Achievement
• Salary • Recognition
• Job Security • Advancement
• Personal Life • The job itself
• Working Conditions • Growth Opportunities
• Status • Responsibility
• Interpersonal Relations
• Supervision
• Company Policies
 T h eo ry a n d
Ex pec ta n cy
y T he or y
Equit
Expectancy Theory – the process Equity
people
Theory
use to– evaluate
individual’s
the likelihood their effort will yieldperception
the desiredof outcome
fair and and
how much they want the outcome. equitable treatment.
 c y Theo ry
Expectan
 Expectation
 Effort  Outcome
 Instrumentality
 Outcome  Reward
 Valence
 Reward has Value
 Must have all 3 to be motivated!
 ett in g The ory
Go al- S

• Goal: target, objective, or

result that someone tries to
accomplish.
• Goal-setting theory - people
will be motivated to the extent
to which they accept specific,
challenging goals and receive
feedback that indicates their
progress toward goal
achievement.
 gem en t b y
Mana
Objective
• Systematic and organized approach that allows
managers to focus on attainable goals and achieve the
best results.
• MBO helps motivate individuals by aligning their
objectives with the goals of the organization.
• MBO Principals:
– A series of related organizations, goals, and objectives
– Specific objectives for each individual
– Participative decision making
– Set time period to accomplish goals
– Performance evaluation and feedback
 Job D es i g n &
Motivation
Job enlargement: job design that expands an employee’s
responsibilities by increasing the number and variety
of tasks assigned to the worker.

Job enrichment: change in job duties to increase

employees’ authority in planning their work, deciding how
it should be done, and learning new skills.
 s’ A t t i t u d e s
Manager
o t i v a t i o n
and M
• Two assumptions manager make about employees,
according to psychologist Douglas McGregor:
• Theory X: employees dislike work and try to avoid it
whenever possible; managers must coerce or control them
or threaten punishment to achieve the organization’s goals.
• Theory Y: typical person likes work and learns to accept
and seek responsibilities; managers assume creative people
solve work-related problems.
• A third theory from management professor William Ouchi:
• Theory Z: worker involvement is key to increased productivity
for the company and improved quality of work life for
employees.
>>>>>>>>
THE OBJECTIVES OF A REWARD STRATEGY
THE ELEMENTS OF REWARD STRATEGY
MANAGEMENT APPRAOCH TO REWARD
REASONS TO LINK PAY TO PERFORMANCE
DEVELOPING A REWARD STRATEGY
TYPES OF REWARD
GLAXCO WELLCOME & HALIFAX PLC
 a g emen t
Ma n
Reward
• Employee Reward is about how people are rewarded in
accordance with their value to an organisation.
• Torrington & Hall note hat our attitude to pay is bound up
in historical views on pay and attitudes towards
capitalism. The concept of `fair day's pay for a fair day's
work` is generally accepted but few people can define
the term `fair`.
• It involves both financial and non-financial reward which
consists of an organisation's integrated policies,
processes and practices for rewarding its employees in
accordance with their contribution, skill and competence
framework of an organisation strategies (Armstrong,
20
2004).
 of Re w a rd
Obje ctiv es
Strategy
Armstrong and Mullins (1994) suggest that reward
management strategies must:
• Be congruent with and support corporate values and
beliefs.
• Be linked to organisational performance
• Drive and support desired behaviour at all levels.
• Fit desired management styles
• Provide the competitive edge needed to attract and
retain the level of skills the organisation needs.

21
 of Re w ar d
Elem en ts
Strategy
1. BASE PAY
2. ADDITIONAL TO BASE PAY
• Individual performance related pay
• Bonuses-lump-sums paid for successful performance
• Incentives-target related pay to motivate people
• Commissions-Percentage on sales value
• Service related pay-increasing pay scale
• Skill based pay-knowledge based
• Allowances
3. EMPLOYEE BENEFITS
• Pension
• Company car
• Annual holidays, Insurance cover and sick pays
22
 g e me n t
Mana a rd
ch To Re w
Approa
Generally, the approach to reward adopted by employers
takes one of three forms:
• Focus on service -is characterised by open-ended
agreements about continuity of employment, incremental
pay scales ad annual reviews.
• Focus on skills – produces higher rates of pay with
greater skills.
• Focus on performance –emphasises target setting,
adapting to change and a close relationship between
what the employee achieves and what the employee is
paid.
23
 L in k P a y To
Reasons To
rm a n ce
Perfo
• MOTIVATION
• RETENTION
• PRODUCTIVITY
• COST-SAVINS
• EMPLOYEECOMMITMENT

24
 A Rewa rd
p in g
Develo y
St ra te g
Reward strategies deal with issues
concerning:
• Pay structures
• The use of job evaluation
• The approach to keeping with market rates
• Paying for individual performance, competence or skills.
• Team pay
• Relating bonuses to organisational performance
• The provision of pensions and benefits.

25
 of Rewa rd
Typ e s
Type of reward Type of effort
Individual Basic Wage
Reward Over time Time: maintaining work attendance
Commissions
Bonuses
Merit Competence: completing task without error
paid leave
Benefits
Team Reward Team Bonuses Co-operation with co-workers
Gain sharing
Organisational profit sharing
Reward Share ownership
Gain sharing
Source: Bratton and Gold, Human Resource Management: Theory and Practice

26
 C a te g or ie s
Two Ba s ic
of R e wa r d s

Compensation Rewards:
Those given in return for acceptable
performance or effort. They can
include nonfinancial compensation.

Non-Compensation Rewards:
Those beneficial factors related to the
work situation and well-being of each
salesperson.
 al e s F o r c e
Optim a l S
d S y s t em
Rewar
1. Provides an acceptable ratio of costs and sales
force output in volume, profit, or other objectives
2. Encourages specific activities consistent with the
firm's overall, marketing, and sales force objectives
and strategies
3. Attracts and retains competent salespeople, thereby
enhancing long-term customer relationships
4. Allows the kind of adjustments that facilitate
administration of the reward system.
 Sa l es F or c e
Types of
R ew a r d s

Motivation
Intrins Extrinsi
ic c
Sense of Pay
Accomplishmen
Job Promotion
t
Personal security
Recognitio
Growth
n
Opportunities
 e n s at i on
Comp
Com p on e n t s
• Salary
• Commission
• Incentive/Bonus
• Benefits
• Sales Contests
 tion : Sa la ry
Compens a

 Fixed sum of money paid at set intervals

 How most of the country is paid
 Function of experience, competence,
tenure, past performance
 Motivate effort on non-sales activities
 Adjust for differences in territory potential
 Motivate investment in long-term sale
 p e n s a tion :
a l Co m
Financi l ar y
Straigh t S a
Advantages
- Salaries are simple to administer
- Planned earnings are easy to project.
- Salaries can provide control over salespeople’s
activities, and reassignments are less of a
problem.
- Salaries are useful when substantial
development work is required.
Disadvantages
- Salaries offer little incentive for better
performance.
- Salary compression could cause perceptions of
inequity among experiences salespeople.
- Salaries represent fixed overhead.
 o mm i s s i on
ens a ti on : C
Com p

 Payment based on short-term results

 Usually a % of $ sales, or $/volume
 Direct link between performance and
payment
 Motivates high level of selling effort
 Encourages sales success
 p en s a t io n :
l C o m
Financia i s s io n
t r a igh t Co m m
S
Advantages
- Income is linked directly to desired results.
- Straight commission plans offer cost-control
benefits.
Disadvantages
- Straight commission plans contribute little to
company loyalty.
- Problems may also arise if commissions are not
limited by an earnings cap.
 m m is s ion :
Strai ght C o
r i a ti on s
Plan Va
1. Commission base — volume or profitability

2. Commission rate — constant, progressive,

or a combination

3. Commission splits — between two or more

salespeople or between salespeople and the
employer

4. Commission payout event — when the order

is confirmed, shipped, billed, paid for, or
some combination of these events
 m m is s i on:
Straig h t Co
Rates
Constant rates:
– Rates that remain unchanged over the pay period.
Pay is linked directly to performance.

Progressive rates:
– Rates that increase as salespeople reach pre-
specified targets.

Regressive rates:
– Rates that decline at some predetermined point.
 s a t io n:
Compen
v e/ B on u s
Incenti
 Additional commission tied to sales or
profitability (e.g. + 1% after
$2,000,000)
 Bonus for meeting or exceeding target
 Direct effort to strategic objectives
 Provide additional rewards to top
performers
 Encourage sales success
 en s a tio n :
n ci a l C om p
Fi na nu s e s
r m an ce B o
Perfo
Advantages
- Organization can direct emphasis to what it
considers important in the sales area.
- Bonuses are particularly useful for tying rewards
to accomplishment of objectives.
Disadvantages
- It may be difficult to determine a formula for
calculating bonus achievement if the objective is
expressed in subjective terms.
- If salespeople do not fully support the
established objective, they may not exert
additional effort to accomplish the goal.
 en s a ti o n:
n c i a l C o m p
Fin a la n s
b i na ti on P
Co m
Advantages
- Combination pay plans are flexible.
- They are also useful when the skill levels of the
salesforce vary.
- Combination pay plans are attractive to high-
potential but unproven candidates for sales jobs.
Disadvantages
- Combination pay plans are more complex and
difficult to administer.
- A common criticism of combination pay plans is
that they tend to produce too many salesforce
objectives.
 l Re wa r ds
a ncia
Non-Fin
 Promotion
 Career Development
 Valence declines with age
 Add perquisites (perks) with position:
 Car
 Better working conditions (hours, facility)

 Compensation, Profit-sharing
 pens a ti on
na n ci al Com
Nonf i
Opportunity for Promotion:
– The ability to move up in an organization along one
or more career paths

Sense of Accomplishment:
– The internal sense of satisfaction from successful
performance
– Sales managers should facilitate salespeople’s
ability to feel this a sense of accomplishment
 p e nsa tion
a ncia l Co m
Nonfi n
Opportunity for Personal Growth:
– Access to programs that allow for personal
development (e.g., tuition reimbursement,
leadership development seminars)

Recognition:
– The informal or formal acknowledgement of a
desired accomplishment

Job Security:
– A sense of being a desired employee that comes
from consistent exceptional performance