Ob m5,m6,m7

ORGANISATION BEHAVIOUR – MODULE-5, 6, 7…………

Prepared by Dr. Pradip Kumar Das

Introduction to Sensation and Perception

Although intimately related, sensation and perception play two complimentary but different roles in how
we interpret our world. Sensation refers to the process of sensing our environment through touch, taste,
sight, sound, and smell. This information is sent to our brains in raw form where perception comes into
play. Perception is the way we interpret these sensations and therefore make sense of everything around
us.

Sensation

Sensation is the process by which our senses gather information and send it to the brain. A large amount
of information is being sensed at any one time such as room temperature, brightness of the lights,
someone talking, a distant train, or the smell of perfume. With all this information coming into our
senses, the majority of our world never gets recognized. We don't notice radio waves, x-rays, or the
microscopic parasites crawling on our skin. We don't sense all the odors around us or taste every
individual spice in our gourmet dinner. We only sense those things we are able too since we don't have
the sense of smell like a bloodhound or the sense of sight like a hawk; our thresholds are different from
these animals and often even from each other.

Absolute Threshold

The absolute threshold is the point where something becomes noticeable to our senses. It is the softest
sound we can hear or the slightest touch we can feel. Anything less than this goes unnoticed. The
absolute threshold is therefore the point at which a stimuli goes from undetectable to detectable to our
senses.

Difference Threshold

Once a stimulus becomes detectable to us, how do we recognize if this stimulus changes. When we
notice the sound of the radio in the other room, how do we notice when it becomes louder. It's
conceivable that someone could be turning it up so slightly that the difference is undetectable. The
difference threshold is the amount of change needed for us to recognize that a change has occurred. This
change is referred to as the Just Noticeable Difference.

This difference is not absolute, however. Imagine holding a five pound weight and one pound was
added. Most of us would notice this difference. But what if we were holding a fifty pound weight?
Would we notice if another pound were added? The reason many of us would not is because the change
required to detect a difference has to represent a percentage. In the first scenario, one pound would
increase the weight by 20%, in the second, that same weight would add only an additional 2%. This
theory, named after its original observer, is referred to as Weber's Law.

Signal Detection Theory

Have you ever been in a crowded room with lots of people talking? Situations like that can make it
difficult to focus on any particular stimulus, like the conversation we are having with a friend. We are

often faced with the daunting task of focusing our attention on certain things while at the same time
attempting to ignore the flood of information entering our senses. When we do this, we are making a
determination as to what is important to sense and what is background noise. This concept is referred to
as signal detection because we attempt detect what we want to focus on and ignore or minimize
everything else.

Sensory Adaptation

The last concept refers to stimuli which has become redundant or remains unchanged for an extended
period of time. Ever wonder why we notice certain smells or sounds right away and then after a while
they fade into the background? Once we adapt to the perfume or the ticking of the clock, we stop
recognizing it. This process of becoming less sensitive to unchanging stimulus is referred to as sensory
adaptation, after all, if it doesn't change, why do we need to constantly sense it?

Perception

As mentioned in the introduction, perception refers to interpretation of what we take in through our
senses. The way we perceive our environment is what makes us different from other animals and
different from each other. In this section, we will discuss the various theories on how our sensation are
organized and interpreted, and therefore, how we make sense of what we see, hear, taste, touch, and
smell.

Gestalt Principles of Grouping

The German word "Gestalt" roughly translates to "whole" or "form," and the Gestalt psychologist's
sincerely believed that the whole is greater than the sum of its parts. In order to interpret what we receive
through our senses, they theorized that we attempt to organize this information into certain groups. This
allows us to interpret the information completely without unneeded repetition. For example, when you
see one dot, you perceive it as such, but when you see five dots together, you group them together by
saying a "row of dots." Without this tendency to group our perceptions, that same row would be seen as
"dot, dot, dot, dot, dot," taking both longer to process and reducing our perceptive ability. The Gestalt
principles of grouping include four types: similarity, proximity, continuity, and closure.

Similarity refers to our tendency to group things together based upon how similar to each other they are.
In the first figure above, we tend to see two rows of red dots and two rows of black dots. The dots are
grouped according to similar color. In the next figure, we tend to perceive three columns of two lines
each rather than six different lines. The lines are grouped together because of how close they are to each
other, or their proximity to one another. Continuity refers to our tendency to see patterns and therefore
perceive things as belonging together if they form some type of continuous pattern. In the third figure,
although merely a series of dots, it begins to look like an "X" as we perceive the upper left side as
continuing all the way to the lower right and the lower left all the way to the upper right. Finally, in the

fourth figure, we demonstrate closure, or our tendency to complete familiar objects that have gaps in
them. Even at first glance, we perceive a circle and a square.

Maintaining Perceptual Constancy

Imagine if every time an object changed we had to completely reprocess it. The next time you walk
toward a building, you would have to re-evaluate the size of the building with each step, because we all
know as we get closer, everything gets bigger. The building which once stood only several inches is now
somehow more than 50 feet tall.

Luckily, this doesn't happen. Due to our ability to maintain constancy in our perceptions, we see that
building as the same height no matter what distance it is. Perceptual constancy refers to our ability to see
things differently without having to reinterpret the object's properties. There are typically three
constancies discussed, including size, shape, brightness.

Size constancy refers to our ability to see objects as maintaining the same size even when our distance
from them makes things appear larger or smaller. This holds true for all of our senses. As we walk away
from our radio, the song appears to get softer. We understand, and perceive it as being just as loud as
before. The difference being our distance from what we are sensing.

Everybody has seen a plate shaped in the form of a circle. When we see that same plate from an angle,
however, it looks more like an ellipse. Shape constancy allows us to perceive that plate as still being a
circle even though the angle from which we view it appears to distort the shape.

Brightness constancy refers to our ability to recognize that color remains the same regardless of how it
looks under different levels of light. That deep blue shirt you wore to the beach suddenly looks black
when you walk indoors. Without color constancy, we would be constantly re-interpreting color and
would be amazed at the miraculous conversion our clothes undertake.

Perceiving Distance

We determine distance using two different cues: monocular and binocular. Monocular cues are those
cues which can be seen using only one eye. They include size; texture, overlap, shading, height, and
clarity.

Size refers to the fact that larger images are perceived as closer to us, especially if the two images are of
the same object. The texture of objects tend to become smoother as the object gets farther away,
suggesting that more detailed textured objects are closer. Due to overlap, those objects covering part of
another object is perceived as closer. The shading or shadows of objects can give a clue to their distance,
allowing closer objects to cast longer shadows which will overlap objects which are farther away.
Objects which are closer to the bottom of our visual field are seen as closer to us due to our perception of
the horizon, where higher (height) means farther away. Similar to texture, objects tend to get blurry as
they get farther away, therefore, clearer or more crisp images tend to be perceived as closer (clarity).

Binocular cues refer to those depth cues in which both eyes are needed to perceive. There are two
important binocular cues; convergence and retinal disparity. Convergence refers to the fact that the closer
an object, the more inward our eyes need to turn in order to focus. The farther our eyes converge, the
closer an object appears to be. Since our eyes see two images which are then sent to our brains for
interpretation, the distance between these two images, or their retinal disparity, provides another cue
regarding the distance of the object.

Sensations and Perceptions

Sensations can be defined as the passive process of bringing information from the outside world into the
body and to the brain. The process is passive in the sense that we do not have to be consciously engaging
in a "sensing" process.Perception can be defined as the active process of selecting, organizing, and
interpreting the information brought to the brain by the senses.A) HOW THEY WORK TOGETHER:

1) Sensation occurs:

a) sensory organs absorb energy from a physical stimulus in the environment.

b) sensory receptors convert this energy into neural impulses and send them to the brain.

2) Perception follows:

a) the brain organizes the information and translates it into something meaningful.

B) But what does "meaningful" mean? How do we know what information is important and should be
focused on?

1) Selective Attention - process of discriminating between what is important & is irrelevant (Seems
redundant: selective-attention?), and is influenced by motivation.

For example - students in class should focus on what the teachers are saying and the overheads being
presented. Students walking by the classroom may focus on people in the room, who is the teacher, etc.,
and not the same thing the students in the class.

2) Perceptual Expectancy - how we perceive the world is a function of our past experiences, culture, and
biological makeup.For example, as an American, when I look at a highway, I expect to see cars, trucks,
etc, NOT airplanes. But someone from a different country with different experiences and history may not
have any idea what to expect and thus be surprised when they see cars go driving by.

Another example - you may look at a painting and not really understand the message the artist is trying to
convey. But, if someone tells you about it, you might begin to see things in the painting that you were
unable to see before.

I. The Nature of Perception

A. Perception is a subjective, active, and creative process
B. A mental process through which we interpret what we sense
1. The process of assigning meaning to sensory information
2. The process by which we understand ourselves and others
C. Perceptions of others affect ways we communicate with them
1. “I understand your feelings” is based on perception
2. There is no way we can actually feel what another feels

3. So to understand, we select, organize, and interpret cues
II. How does perception influence how we relate to others?
A. Interpersonal perception involves sensing, organizing, & interpreting information
about people & their messages
B. Instantaneous evaluations create automatic judgments that predisposes positive or
negative reactions toward others
1. Automatic judgments occur outside of awareness
2. We trust them the way we trust our senses not realizing they are already
biased
C. Messages we send can shape others’ self-concept & behavior
D. Differing perceptions cause challenges for communication

III. Three Stages of Perception
A. Selection
1. To experience a stimulus through the senses & attend to it
a) Stimulus: anything prompting action, feeling, thought
b) Senses
(i) sight
(ii) sound
(iii) smell
(iv) taste
(v) touch
2. Selective Perception
a) Actively select some stimuli & ignore (filter) others
(i) We don’t perceive everything
(ii) 10,000 bits of sensory information available/sec
b) Physiological & psychological states influence what the senses pick
up and the meaning you give it
c) Factors that Affect Perceptions
(i) Physiology
Height, weight, hearing, vision, physical well-being,
mood
(ii) Age
Experience teaches lessons; wealth of experience vs.
naiveté
(iii) Culture as a filter
Conditions us to perceive in similar ways
Develop shared attitudes, beliefs, values, etc.
Standpoint theory explains our perceptions are
influenced by the subgroups or subcultures to which we
belong, such as age, gender, sexual preference, ethnicity,
religion, marital status, occupation, etc.

(iv) Social Roles
How would a physician’s training vs. a lawyer’s training
cause them to notice different things at the scene of an
automobile accident?
(v) Ourselves
Implicit Personality Theory: Unspoken, unconscious
assumptions about how various qualities fit together in
human personalities (outgoing = friendly, confident, and
fun
Attachment Styles: We perceive & approach
relationships differently b/c of how we were parented

B. Organization
1. To sort stimuli into groups and categories
2. Constructivism theory states we organize and interpret experience by
applying cognitive structures
3. Schemata (organizational structures to make sense of what we have noticed)
a) Prototypes: knowledge structures that define the clearest or most
representative examples of some category
U.S. prototype of romantic relationships emphasizes trust, caring,
honesty, friendship, and respect. Passion is less central to prototype than
companionship and caring. (p. 76)
b) Personal constructs: bipolar mental yardsticks that allow us to
measure people and situations along specific dimensions of judgment
(physical characs, mental qualities, psychological features, interpersonal/
social qualities)
Dilbert Cartoon: smart & beautiful; smart & ugly; stupid & beautiful;
stupid & ugly
c) Scripts: define expected or appropriate sequences of action in
particular settings; guides to action
Greeting acquaintances; dating, managing conflict, talking with
professors, dealing with clerks, etc.
d) Stereotypes: predictive generalizations about people and situations
(i) categorize others on basis of easily recognized characteristics
(race, blondes, frat/sorority, jocks, ethnicity)
(ii) Base judgments about people on categories they fit instead of on
individuality
(iii) Prevent us from seeing individual as unique
(iv) "Them": prejudiced, biased, discriminatory word
(v) Stereotypes of groups we don't belong to are more negative &
inaccurate than of own groups

C. Interpretation
1. Subjective process of explaining our perceptions in ways that make sense to
us: Construct an explanation

2. Factors that cause us to interpret differently
a) Degree of involvement with other
b) Relational satisfaction
c) Past experiences
d) Assumptions about human behavior
e) Expectations
f) Knowledge of others
g) Personal moods
h) Gender
i) Occupation
j) Culture (Standpoint theory explains our perceptions are influenced by the
subgroups or subcultures to which we belong, such as age, gender, sexual
preference, ethnicity, religion, marital status, occupation, etc.)
k) Self-concept
3. Attribution
a) Causal accounts that explain why things happen and people act the
way they do
b) Attributions are based on Dimensions of Interpersonal Attributions
i) Locus of control: Internal vs external
ii) Stability: Stable vs unstable
iii) Scope: Global vs specific
iv) Responsibility: Within personal personal control vs beyond personal
control
c) Attribution Errors occur when we attach distorted meanings to what
happens around us
i) Self-serving bias: Take credit for positive outcomes, deny
responsibility & control over negative outcomes; attribute
negative behaviors to uncontrollable factors (test was hard);
attribute positive behaviors to controllable factors, your strength,
intelligence, or personality (got an A b/c I worked hard or I’m
smart). Why? B/c we KNOW the situation surrounding our
behaviors we naturally focus on the influence of these factors.
ii) Fundamental Attribution Error: Occurs when we assume other
people’s behavior is due more to internal characteristics such as
their personality, whereas we view our own behavior as more a
result of external factors, e.g. context or situation:
Overestimating the internal causes of others behavior and
underestimating the external causes

DEFINITIONS

DAccording to NORMAN MUNN,

“Learning can be defined as the process of being modified more or less permanently by what happens in
the world around us, by what we do or what we observe”.

According to FRED LUTHANS “Learning can be defined as relatively permanent change in behaviour
that occurs as a result of experience or reinforced practice.”

PRICIPLES OF LEARNING

P Principles of learning are very useful in order to impart maximum knowledge and skills.

P Each principle should be interpreted and applied carefully in full consideration of the particular task
being learned and the context in which the learning takes place.

All human beings can learn.

AAn individual must be motivated to learn.

ALearning is active but not passive.

ALearners need reinforcement of correct behaviour.

ATime must be provided to practice learning.

ALearning is closely related to attention and concentration.

AStandards of performance should be set for the learner.

ALearners may acquire knowledge more rapidly with guidance.

Feedback ensures improvement in speed and accuracy of learning

Accuracy deserves generally more emphasis than speed.

ALearning is a cumulative process.

ALearning is an adjustment on the part of an individual.

ALearning should be relatively based and.

ALearning should be a goal oriented.

Learning Theory is rooted in the work of Ivan Pavlov, the famous scientist who discovered and
documented the principles governing how animals (humans included) learn. Two basic kinds of learning
or conditioning occur:

Classical and Operant Conditioning

Classical Conditioning. One important type of learning, Classical Conditioning, was actually discovered
accidentally by Ivan Pavlov (1849-1936). Pavlov was a Russian physiologist who discovered this
phenomenon while doing research on digestion. His research was aimed at better understanding the
digestive patterns in dogs.

During his experiments, he would put meat powder in the mouths of dogs who had tubes inserted into
various organs to measure bodily responses. What he discovered was that the dogs began to salivate
before the meat powder was presented to them. Then, the dogs began to salivate as soon as the person
feeding them would enter the room. He soon began to gain interest in this phenomenon and abandoned
his digestion research in favor of his now famous Classical Conditioning study.

Basically, the findings support the idea that we develop responses to certain stimuli that are not naturally
occurring. When we touch a hot stove, our reflex pulls our hand back. It does this instinctually, no
learning involved. It is merely a survival instinct. But why now do some people, after getting burned, pull
their hands back even when the stove is not turned on? Pavlov discovered that we make associations
which cause us to generalize our response to one stimuli onto a neutral stimuli it is paired with. In other
words, hot burner = ouch, stove = burner, therefore, stove = ouch.

Pavlov began pairing a bell sound with the meat powder and found that even when the meat powder was
not presented, the dog would eventually begin to salivate after hearing the bell. Since the meat powder
naturally results in salivation, these two variables are called the unconditioned stimulus (UCS) and the
unconditioned response (UCR), respectively. The bell and salivation are not naturally occurring; the dog
was conditioned to respond to the bell. Therefore, the bell is considered the conditioned stimulus (CS),
and the salivation to the bell, the conditioned response (CR).

Many of our behaviors today are shaped by the pairing of stimuli. Have you ever noticed that certain
stimuli, such as the smell of a cologne or perfume, a certain song, a specific day of the year, results in
fairly intense emotions? It's not that the smell or the song are the cause of the emotion, but rather what
that smell or song has been paired with...perhaps an ex-boyfriend or ex-girlfriend, the death of a loved
one, or maybe the day you met you current husband or wife. We make these associations all the time and
often don’t realize the power that these connections or pairings have on us. But, in fact, we have been
classically conditioned.

Operant Conditioning. Another type of learning, very similar to that discussed above, is called Operant
Conditioning. The term "Operant" refers to how an organism operates on the environment, and hence,
operant conditioning comes from how we respond to what is presented to us in our environment. It can be
thought of as learning due to the natural consequences of our actions.

Let's explain that a little further. The classic study of Operant Conditioning involved a cat who was
placed in a box with only one way out; a specific area of the box had to be pressed in order for the door to
open. The cat initially tries to get out of the box because freedom is reinforcing. In its attempt to escape,
the area of the box is triggered and the door opens. The cat is now free. Once placed in the box again, the
cat will naturally try to remember what it did to escape the previous time and will once again find the area
to press. The more the cat is placed back in the box, the quicker it will press that area for its freedom. It
has learned, through natural consequences, how to gain the reinforcing freedom.

We learn this way every day in our lives. Imagine the last time you made a mistake; you most likely
remember that mistake and do things differently when the situation comes up again. In that sense, you’ve

learned to act differently based on the natural consequences of your previous actions. The same holds true
for positive actions. If something you did results in a positive outcome, you are likely to do that same
activity again.
Reinforcement

The term reinforce means to strengthen, and is used in psychology to refer to anything stimulus which
strengthens or increases the probability of a specific response. For example, if you want your dog to sit on
command, you may give him a treat every time he sits for you. The dog will eventually come to
understand that sitting when told to will result in a treat. This treat is reinforcing because he likes it and
will result in him sitting when instructed to do so.

This is a simple description of a reinforcer (Skinner, 1938), the treat, which increases the response,
sitting. We all apply reinforcers everyday, most of the time without even realizing we are doing it. You
may tell your child "good job" after he or she cleans their room; perhaps you tell your partner how good
he or she look when they dress up; or maybe you got a raise at work after doing a great job on a project.
All of these things increase the probability that the same response will be repeated.

There are four types of reinforcement: positive, negative, punishment, and extinction. We’ll discuss each
of these and give examples.

Positive Reinforcement. The examples above describe what is referred to as positive reinforcement. Think
of it as adding something in order to increase a response. For example, adding a treat will increase the
response of sitting; adding praise will increase the chances of your child cleaning his or her room. The
most common types of positive reinforcement or praise and rewards, and most of us have experienced this
as both the giver and receiver.

Negative Reinforcement. Think of negative reinforcement as taking something negative away in order to
increase a response. Imagine a teenager who is nagged by his mother to take out the garbage week after
week. After complaining to his friends about the nagging, he finally one day performs the task and to his
amazement, the nagging stops. The elimination of this negative stimulus is reinforcing and will likely
increase the chances that he will take out the garbage next week.

Punishment. Punishment refers to adding something aversive in order to decrease a behavior. The most
common example of this is disciplining (e.g. spanking) a child for misbehaving. The reason we do this is
because the child begins to associate being punished with the negative behavior. The punishment is not
liked and therefore to avoid it, he or she will stop behaving in that manner.

Extinction. When you remove something in order to decrease a behavior, this is called extinction. You are
taking something away so that a response is decreased.

Research has found positive reinforcement is the most powerful of any of these. Adding a positive to
increase a response not only works better, but allows both parties to focus on the positive aspects of the
situation. Punishment, when applied immediately following the negative behavior can be effective, but
results in extinction when it is not applied consistently. Punishment can also invoke other negative
responses such as anger and resentment.

Reinforcement Schedules

Know that we understand the four types of reinforcement, we need to understand how and when these are
applied (Ferster & Skinner, 1957). For example, do we apply the positive reinforcement every time a
child does something positive? Do we punish a child every time he does something negative? To answer
these questions, you need to understand the schedules of reinforcement.

Applying one of the four types of reinforcement every time the behavior occurs (getting a raise after
every successful project or getting spanked after every negative behavior) is called a Continuous
Schedule. Its continuous because the application occurs after every project, behavior, etc. This is the best
approach when using punishment. Inconsistencies in the punishment of children often results in confusion
and resentment. A problem with this schedule is that we are not always present when a behavior occurs or
may not be able to apply the punishment.

There are two types of continuous schedules:

Fixed Ratio. A fixed ratio schedule refers to applying the reinforcement after a specific number of
behaviors. Spanking a child if you have to ask him three times to clean his room is an example. The
problem is that the child (or anyone for that matter) will begin to realize that he can get away with two
requests before he has to act. Therefore, the behavior does not tend to change until right before the preset
number.

Fixed Interval. Applying the reinforcer after a specific amount of time is referred to as a fixed interval
schedule. An example might be getting a raise every year and not in between. A major problem with this
schedule is that people tend to improve their performance right before the time period expires so as to
"look good" when the review comes around.

When reinforcement is applied on an irregular basis, they are called variable schedules.

Variable Ratio. This refers to applying a reinforcer after a variable number of responses. Variable ratio
schedules have been found to work best under many circumstances and knowing an example will explain
why. Imagine walking into a casino and heading for the slot machines. After the third coin you put in, you
get two back. Two more and you get three back. Another five coins and you receive two more back. How
difficult is it to stop playing?

Variable Interval. Reinforcing someone after a variable amount of time is the final schedule. If you have a
boss who checks your work periodically, you understand the power of this schedule. Because you don’t
know when the next ‘check-up’ might come, you have to be working hard at all times in order to be
ready.

In this sense, the variable schedules are more powerful and result in more consistent behaviors. This may
not be as true for punishment since consistency in the application is so important, but for all other types of
reinforcement they tend to result in stronger responses.

Reward system and Organisation

The design and management of reward systems present the general manager with one of the most difficult
HRM tasks. This HRM policy area contains the greatest contradictions between the promise of theory and
the reality of implementation. Consequently, organizations sometimes go through cycles of innovation

and hope as reward systems are developed, followed by disillusionment as these reward systems fail to
deliver.

Rewards and employee satisfaction

Gaining an employee’s satisfaction with the rewards given is not a simple matter. Rather, it is a function
of several factors that organizations must learn to manage:

1. The individual’s satisfaction with rewards is, in part, related to what is expected and how much is
received. Feelings of satisfaction or dissatisfaction arise when individuals compare their input - job skills,
education, effort, and performance - to output - the mix of extrinsic and intrinsic rewards they receive.

2. Employee satisfaction is also affected by comparisons with other people in similar jobs and
organizations. In effect, employees compare their own input/output ratio with that of others. People vary
considerably in how they weigh various inputs in that comparison. They tend to weigh their strong points
more heavily, such as certain skills or a recent incident of effective performance. Individuals also tend to
overrate their own performance compared with the rating they receive from their supervisors. The
problem of unrealistic self-rating exists partly because supervisors in most organizations do not
communicate a candid evaluation of their subordinates’ performance to them. Such candid
communication to subordinates, unless done skillfully, seriously risks damaging their self-esteem. The
bigger dilemma, however, is that failure by managers to communicate a candid appraisal of performance
makes it difficult for employees to develop a realistic view of their own performance, thus increasing the
possibility of dissatisfaction with the pay they are receiving.

3. Employees often misperceive the rewards of others; their misperception can cause the employees to
become dissatisfied. Evidence shows that individuals tend to overestimate the pay of fellow workers
doing similar jobs and to underestimate their performance (a defense of self-esteem-building mechanism).
Misperceptions of the performance and rewards of others also occur because organizations do not
generally make available accurate information about the salary or performance of others.

4. Finally, overall satisfaction results from a mix of rewards rather than from any single reward. The
evidence suggests that intrinsic rewards and extrinsic rewards are both important and that they cannot be
directly substituted for each other. Employees who are paid well for repetitious, boring work will be
dissatisfied with the lack of intrinsic rewards, just as employees paid poorly for interesting, challenging
work may be dissatisfied with extrinsic rewards.

Rewards and motivation

From the organization’s point of view, rewards are intended to motivate certain behaviors. But under
what conditions will rewards actually motivate employees? To be useful, rewards must be seen as timely
and tied to effective performance.

One theory suggests that the following conditions are necessary for employee motivation.

1. Employees must believe effective performance (or certain specified behavior) will lead to certain
rewards. For example, attaining certain results will lead to a bonus or approval from others.

2. Employees must feel that the rewards offered are attractive. Some employees may desire promotions
because they seek power, but others may want a fringe benefit, such as a pension, because they are older
and want retirement security.

3. Employees must believe a certain level of individual effort will lead to achieving the corporation’s
standards of performance.

As indicated, motivation to exert effort is triggered by the prospect of desired rewards: money,
recognition, promotion, and so forth. If effort leads to performance and performance leads to desired
rewards, the employee is satisfied and motivated to perform again.

As mentioned above, rewards fall into two categories: extrinsic and intrinsic. Extrinsic rewards come
from the organization as money, perquisites, or promotions or from supervisors and coworkers as
recognition. Intrinsic rewards accrue from performing the task itself, and may include the satisfaction of
accomplishment or a sense of influence. The process of work and the individual’s response to it provide
the intrinsic rewards. But the organization seeking to increase intrinsic rewards must provide a work
environment that allows these satisfactions to occur; therefore, more organizations are redesigning work
and delegating responsibility to enhance employee involvement.

Equity and participation

The ability of a reward system both to motivate and to satisfy depends on who influences and/or controls
the system’s design and implementation. Even though considerable evidence suggests that participation in
decision making can lead to greater acceptance of decisions, participation in the design and administration
of reward systems is rare. Such participation is time-consuming.

Perhaps, a greater roadblock is that pay has been of the last strongholds of managerial prerogatives.
Concerned about employee self-interest and compensation costs, corporations do not typically allow
employees to participate in pay-system design or decisions. Thus, it is not possible to test thoroughly the
effects of widespread participation on acceptance of and trust in reward system.

Compensation systems: the dilemmas of practice

A body of experience, research and theory has been developed about how money satisfies and motivates
employees. Virtually every study on the importance of pay compared with other potential rewards has
shown that pay is important. It consistently ranks among the top five rewards. The importance of pay and
other rewards, however, is affected by many factors. Money, for example, is likely to be viewed
differently at various points in one’s career, because the need for money versus other rewards (status,
growth, security, and so forth) changes at each stage. National culture is another important factor.
American managers and employees apparently emphasize pay for individual performance more than do
their European or Japanese counterparts. European and Japanese companies, however, rely more on slow
promotions and seniority as well as some degree of employment security. Even within a single culture,
shifting national forces may alter people’s needs for money versus other rewards.

Companies have developed various compensation systems and practices to achieve pay satisfaction and
motivation. In manufacturing firms, payroll costs can run as high as 40% of sales revenues, whereas in

service organizations payroll costs can top 70%. General managers, therefore, take an understandable
interest in payroll costs and how this money is spent.

The traditional view of managers and compensation specialists is that if the right system can be
developed, it will solve most problems. This is not a plausible assumption, because, there is no one right
answer or objective solution to what or how someone should be paid. What people will accept, be
motivated by, or perceive as fair is highly subjective. Pay is a matter of perceptions and values that often
generate conflict.

Management’s influence on attitudes toward money

Many organizations are caught up in a vicious cycle that they partly create. Firms often emphasize
compensation levels and a belief in individual pay for performance in their recruitment and internal
communications. This is likely to attract people with high needs for money as well as to heighten that
need in those already employed. Thus, the meaning employees attach to money is partly shaped by
management’s views. If merit increases, bonuses, stock options, and perquisites are held out as valued
symbols of recognition and success, employees will come to see them in this light even more than they
might have perceived them at first. Having heightened money’s importance as a reward, management
must then respond to employees who may demand more money or better pay-for-performance systems.

Firms must establish a philosophy about rewards and the role of pay in the mix of rewards. Without such
a philosophy, the compensation practices that happen to be in place, for the reasons already stated, will
continue to shape employees’ satisfactions, and those expectations will sustain the existing practices. If
money has been emphasized as an important symbol of success, that emphasis will continue even though
a compensation system with a slightly different emphasis might have equal motivational value with fewer
administrative problems and perhaps even lower cost. Money is important, but its degree of importance is
influenced by the type of compensation system and philosophy that management adopts.

Pay for performance

Some reasons why organizations pay their employees for performance are as follows:

Under the right conditions, a pay-for-performance system can motivate desired behavior.

a pay-for-performance system can help attract and keep achievement-oriented individuals.

a pay-for-performance system can help to retain good performers while discouraging the poor performers.

In the US, at least, many employees, both managers and workers, prefer a pay-for-performance system,
although white-collar workers are significantly more supportive of the notion than blue-collar workers.

But there is a gap, and the evidence indicates a wide gap, between the desire to devise a pay-for-
performance system and the ability to make such a system work.

The most important distinction among various pay-for-performance systems is the level of aggregation at
which performance is defined - individual, group, and organizationwide. Several pay-for-performance
systems are summarized in the exhibit that follows.

Historically, pay for performance has meant pay for individual performance. Piece-rate incentive systems
for production employees and merit salary increases or bonus plans for salaried employees have been the
dominant means of paying for performance. In the last decade, piece-rate incentive systems have
dramatically declined because managers have discovered that such systems result in dysfunctional
behavior, such as low cooperation, artificial limits on production and resistance to changing standards.
Similarly, more questions are being asked about individual bonus plans for executives as top managers
discovered their negative effects.

Meanwhile, organizationwide incentive systems are becoming more popular, particularly because
managers are finding that they foster cooperation, which leads to productivity and innovation. To
succeed, however, these plans require certain conditions. A review of the key considerations for designing
a pay-for-performance plan and a discussion of the problems that arise when these considerations are not
observed follow.

Individual pay for performance. The design of an individual pay-for performance system requires an
analysis of the task. Does the individual have control over the performance (result) that is to be
measured? Is there a significant effort-to-performance relationship? For motivational reasons already
discussed such a relationship must exist. Unfortunately, many individual bonus, commission, or piece-
rate incentive plans fall short in meeting this requirement. An individual may not have control over a
performance result, such as sales or profit, because that result is affected by economic cycles or
competitive forces beyond his or her control. Indeed, there are few outcomes in complex organizations
that are not dependent on other functions or individuals, fewer still that are not subject to external factors.

Choosing an appropriate measure of performance on which to base pay is a related problem incurred by
individual bonus plans. For reasons discussed earlier, effectiveness on a job can include many facets not
captured by cost, units produced, or sales revenues. Failure to include all activities that are important for
effectiveness can lead to negative consequences. For example, sales personnel who receive a bonus for
sales volume may push unneeded products, thus damaging long-term customer relations, or they may
push an unprofitable mix of products just to increase volume. These same salespeople may also take
orders and make commitments that cannot be met by manufacturing. Instead, why not hold salespeople
responsible for profits, a more inclusive measure of performance? The obvious problem with this measure
is that sales personnel do not have control over profits.

These dilemmas constantly encountered and have led to the use of more subjective but inclusive
behavioral measures of performance. Why not observe if the salesperson or executive is performing all
aspects of the job well? More merit salary increases are based on subjective judgments and so are some
individual bonus plans. Subjective evaluation systems though they can be all-inclusive if based on a
thorough analysis of the job, require deep trust in management, good manager-subordinate relations, and
effective interpersonal skills. Unfortunately, these conditions are not fully met in many situations, though
they can be developed if judged to be sufficiently important.

Group and organizationwide pay plans. Organizational effectiveness depends on employee cooperation in
most instances. An organization may elect to tie pay, or at least some portion of pay, indirectly to
individual performance. Seeking to foster team-work, a company may tie an incentive to some measure of
group performance, or it may offer some type of profits or productivity-sharing plan for the whole plant
or company.

Gains-sharing plans have been used for years in many varieties. The real power of a gains-sharing plan
comes when it is supported by a climate of participation. Various structures, systems, and processes
involve employees in decisions that improve the organization’s performance and result in a bonus
throughout the organization.

MOTIVATION and its importance:

Motivation is an important function of personnel management because management of personnel means
getting the work done by the people to achieve the organisational objectives.

Motivation is one of the method to induce the man on the job to get the work done effectively to have the
best results towards the common objectives. Motivation is necessary for the better performance. The
expected results from motivation are:-

1. Best utilisation of Resources: All other resources (except human resource) an produce no results uncles
the men try to put them into action, Men should be motivated to carry out the plans, policies and
programmes laid down by the organisation by utilizing the other resources to the bet of their efforts. In
other words, utilisation of resources is not possible to their fullest extent unless the man n induced to
contribute their efforts towards attaining the organisational goals.

2. Will to Contribute:- A distinction should be made between 'Capacity to work' and willingness to work.
A man can be physically, mentally and technically fit to work but the may not be willing to work
motivation concerns to create a need and desire on the part of he workman to present his better
performance.

3. Reduction if labour problems: All the members try to concentrate their efforts to achieve the objectives
of the organisation and carry out the plans in accordance with the policies and programmes laid down by
the organizations is the management introduces motivational plans. It reduces the labour problems like
labour turnover, absenteeism, indiscipline, grievances etc. because their real wages increase by the
motivational plans.

4. Sizable Increase in Production and Productivity: Motivation induces the men to work hence it results in
increased production. And productivity because men try to put their efforts to produce more and more and
thus their efficiency increases. They (motivated employees) use the methods, systems and technology
effectively in the best interest of the organizations.

5. Basis of Co-operation: In a zeal to produce more the members work as a team to pull the weight
effectively, to gt their loyalty to the group and the organisation, to carry out properly the activities
allocated and generally to play an efficient part in achieving the purposes which the organisation has
undertaken. Thus motivation is a basis of cooperation to get the best results out of the efforts of the men
on the job.

6. Improvement upon Skill and knowledge: All the members will try to be as efficient as possible and will
try to improve upon their skill and knowledge so that they may be able to contribute to the progress of the

organisation as much as possible because they know that they, in turn, will get what have been promised
and ultimately they will be able to satisfy their needs- personal and social both.

In the nut shell, to achieve the organisational and individual goals in an economical and efficient manuer,
motivation is an important toll in the hands of management to direct the behaviour of subordinates in the
desired and appropriate direction and thus minimise the wastage of human and other resources.

Theories on Motivation-

Maslow

Abraham Maslow (1908 – 1970) along with Frederick Herzberg (1923-) introduced the Neo-Human
Relations School in the 1950’s, which focused on the psychological needs of employees. Maslow put
forward a theory that there are five levels of human needs which employees need to have fulfilled at
work.

All of the needs are structured into a hierarchy (see below) and only once a lower level of need has been
fully met, would a worker be motivated by the opportunity of having the next need up in the hierarchy
satisfied. For example a person who is dying of hunger will be motivated to achieve a basic wage in order
to buy food before worrying about having a secure job contract or the respect of others.

A business should therefore offer different incentives to workers in order to help them fulfill each need in
turn and progress up the hierarchy (see below). Managers should also recognise that workers are not all
motivated in the same way and do not all move up the hierarchy at the same pace. They may therefore
have to offer a slightly different set of incentives from worker to worker.

Herzberg

Frederick Herzberg (1923-) had close links with Maslow and believed in a two-factor theory of
motivation. He argued that there were certain factors that a business could introduce that would directly
motivate employees to work harder (Motivators). However there were also factors that would de-motivate
an employee if not present but would not in themselves actually motivate employees to work harder
(Hygienefactors)

Motivators are more concerned with the actual job itself. For instance how interesting the work is and
how much opportunity it gives for extra responsibility, recognition and promotion. Hygiene factors are

factors which ‘surround the job’ rather than the job itself. For example a worker will only turn up to work
if a business has provided a reasonable level of pay and safe working conditions but these factors will not
make him work harder at his job once he is there. Importantly Herzberg viewed pay as a hygiene factor
which is in direct contrast to Taylor who viewed pay, and piece-rate in particular

Herzberg believed that businesses should motivate employees by adopting a democratic approach to
management and by improving the nature and content of the actual job through certain methods. Some of
the methods managers could use to achieve this are:

Job enlargement – workers being given a greater variety of tasks to perform (not necessarily more
challenging) which should make the work more interesting.

Job enrichment - involves workers being given a wider range of more complex, interesting and
challenging tasks surrounding a complete unit of work. This should give a greater sense of achievement.

Empowerment means delegating more power to employees to make their own decisions over areas of
their working life.

1) Contribution of Robert Owen :

Though Owen is considered to be paternalistic in his view, his contribution is of a considerable
significance in the theories of Motivation. During the early years of the nineteenth century, Owen’s textile
mill at New Lanark in Scotland was the scene of some novel ways of treating people. His view was that
people were similar to machines. A machine that is looked after properly, cared for and maintained well,
performs efficiently, reliably and lastingly, similarly people are likely to be more efficient if they are
taken care of. Robert Owen practiced what he preached and introduced such things as employee housing
and company shop. His ideas on this and other matters were considered to be too revolutionary for that
time.

2) Jeremy Bentham’s “The Carrot and the Stick Approach” :

Possibly the essence of the traditional view of people at work can be best appreciated by a brief look at
the work of this English philosopher, whose ideas were also developed in the early years of the Industrial
Revolution, around 1800. Bentham’s view was that all people are self-interested and are motivated by the
desire to avoid pain and find pleasure. Any worker will work only if the reward is big enough, or the
punishment sufficiently unpleasant. This view - the ‘carrot and stick’ approach - was built into the
philosophies of the age and is still to be found, especially in the older, more traditional sectors of industry.

The various leading theories of motivation and motivators seldom make reference to the carrot and the
stick. This metaphor relates, of course, to the use of rewards and penalties in order to induce desired
behavior. It comes from the old story that to make a donkey move, one must put a carrot in front of him
or dab him with a stick from behind. Despite all the research on the theories of motivation, reward and
punishment are still considered strong motivators. For centuries, however, they were too often thought of
as the only forces that could motivate people.

At the same time, in all theories of motivation, the inducements of some kind of ‘carrot’ are recognized.
Often this is money in the form of pay or bonuses. Even though money is not the only motivating force, it

has been and will continue to be an important one. The trouble with the money ‘carrot’ approach is that
too often everyone gets a carrot, regardless of performance through such practices as salary increase and
promotion by seniority, automatic ‘merit’ increases, and executive bonuses not based on individual
manager performance. It is as simple as this : If a person put a donkey in a pen full of carrots and then
stood outside with a carrot, would the donkey be encouraged to come out of the pen ?

The ‘stick’, in the form of fear–fear of loss of job, loss of income, reduction of bonus, demotion, or some
other penalty–has been and continues to be a strong motivator. Yet it is admittedly not the best kind. It
often gives rise to defensive or retaliatory behavior, such as union organization, poor-quality work,
executive indifference, failure of a manager to take any risks in decision making or even dishonesty. But
fear of penalty cannot be overlooked. Whether managers are first-level supervisors or chief executives,
the power of their position to give or with hold rewards or impose penalties of various kinds gives them
an ability to control, to a very great extent, the economic and social well-being of their subordinates.

3) Abraham Maslow’s “Need Hierarchy Theory” :

One of the most widely mentioned theories of motivation is the hierarchy of needs theory put forth by
psychologist Abraham Maslow. Maslow saw human needs in the form of a hierarchy, ascending from the
lowest to the highest, and he concluded that when one set of needs is satisfied, this kind of need ceases to
be a motivator.

As per his theory these needs are:

(i) Physiological needs:

These are important needs for sustaining the human life. Food, water, warmth, shelter, sleep, medicine
and education are the basic physiological needs which fall in the primary list of need satisfaction. Maslow
was of an opinion that until these needs were satisfied to a degree to maintain life, no other motivating
factors can work.

(ii) Security or Safety needs :

These are the needs to be free of physical danger and of the fear of losing a job, property, food or shelter.
It also includes protection against any emotional harm.

(iii) Social needs :

Since people are social beings, they need to belong and be accepted by others. People try to satisfy their
need for affection, acceptance and friendship.

(iv) Esteem needs :

According to Maslow, once people begin to satisfy their need to belong, they tend to want to be held in
esteem both by themselves and by others. This kind of need produces such satisfaction as power, prestige
status and self-confidence. It includes both internal esteem factors like self-respect, autonomy and
achievements and external esteem factors such as states, recognition and attention.

(v) Need for self-actualization :

Maslow regards this as the highest need in his hierarchy. It is the drive to become what one is capable of
becoming, it includes growth, achieving one’s potential and self-fulfillment. It is to maximize one’s
potential and to accomplish something.

As each of these needs are substantially satisfied, the next need becomes dominant. From the standpoint
of motivation, the theory would say that although no need is ever fully gratified, a substantially satisfied
need no longer motivates. So if you want to motivate someone, you need to understand what level of the
hierarchy that person is on and focus on satisfying those needs or needs above that level.

Maslow’s need theory has received wide recognition, particularly among practicing managers. This can
be attributed to the theory’s intuitive logic and ease of understanding. However, research does not
validate these theory. Maslow provided no empirical evidence and other several studies that sought to
validate the theory found no support for it.

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4) “Theory X and Theory Y” of Douglas McGregor :

McGregor, in his book “The Human side of Enterprise” states that people inside the organization can be
managed in two ways. The first is basically negative, which falls under the category X and the other is
basically positive, which falls under the category Y. After viewing the way in which the manager dealt
with employees, McGregor concluded that a manager’s view of the nature of human beings is based on a
certain grouping of assumptions and that he or she tends to mold his or her behavior towards subordinates
according to these assumptions.

Under the assumptions of theory X :

• Employees inherently do not like work and whenever possible, will attempt to avoid it.

• Because employees dislike work, they have to be forced, coerced or threatened with punishment
to achieve goals.

• Employees avoid responsibilities and do not work fill formal directions are issued.

• Most workers place a greater importance on security over all other factors and display little
ambition.

In contrast under the assumptions of theory Y :

• Physical and mental effort at work is as natural as rest or play.

• People do exercise self-control and self-direction and if they are committed to those goals.

• Average human beings are willing to take responsibility and exercise imagination, ingenuity and
creativity in solving the problems of the organization.

• That the way the things are organized, the average human being’s brainpower is only partly used.

On analysis of the assumptions it can be detected that theory X assumes that lower-order needs dominate
individuals and theory Y assumes that higher-order needs dominate individuals. An organization that is
run on Theory X lines tends to be authoritarian in nature, the word “authoritarian” suggests such ideas as
the “power to enforce obedience” and the “right to command.” In contrast Theory Y organizations can be
described as “participative”, where the aims of the organization and of the individuals in it are integrated;
individuals can achieve their own goals best by directing their efforts towards the success of the
organization.

However, this theory has been criticized widely for generalization of work and human behavior.

5) Contribution of Rensis Likert :

Likert developed a refined classification, breaking down organizations into four management systems.

1st System – Primitive authoritarian
2nd System – Benevolent authoritarian
3rd System – Consultative
4th System – Participative

As per the opinion of Likert, the 4th system is the best, not only for profit organizations, but also for non-
profit firms.

6) Frederick Herzberg’s motivation-hygiene theory :

Frederick has tried to modify Maslow’s need Hierarchy theory. His theory is also known as two-factor
theory or Hygiene theory. He stated that there are certain satisfiers and dissatisfiers for employees at
work. In- trinsic factors are related to job satisfaction, while extrinsic factors are associated with
dissatisfaction. He devised his theory on the question : “What do people want from their jobs ?” He asked
people to describe in detail, such situations when they felt exceptionally good or exceptionally bad. From
the responses that he received, he concluded that opposite of satisfaction is not dissatisfaction. Removing
dissatisfying characteristics from a job does not necessarily make the job satisfying. He states that
presence of certain factors in the organization is natural and the presence of the same does not lead to
motivation. However, their nonpresence leads to demotivation. In similar manner there are certain factors,
the absence of which causes no dissatisfaction, but their presence has motivational impact.

Examples of Hygiene factors are :

Security, status, relationship with subordinates, personal life, salary, work conditions, relationship with
supervisor and company policy and administration.

Examples of Motivational factors are :

Growth prospectus job advancement, responsibility, challenges, recognition and achievements.

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7) Contributions of Elton Mayo :

The work of Elton Mayo is famously known as “Hawthorne Experiments.” He conducted behavioral
experiments at the Hawthorne Works of the American Western Electric Company in Chicago. He made
some illumination experiments, introduced breaks in between the work performance and also introduced
refreshments during the pause’s. On the basis of this he drew the conclusions that motivation was a very
complex subject. It was not only about pay, work condition and morale but also included psychological
and social factors. Although this research has been criticized from many angles, the central conclusions
drawn were :

• People are motivated by more than pay and conditions.

• The need for recognition and a sense of belonging are very important.

• Attitudes towards work are strongly influenced by the group.

8) Vroom’s Valence x Expectancy theory :

The most widely accepted explanations of motivation has been propounded by Victor Vroom. His theory
is commonly known as expectancy theory. The theory argues that the strength of a tendency to act in a

specific way depends on the strength of an expectation that the act will be followed by a given outcome
and on the attractiveness of that outcome to the individual to make this simple, expectancy theory says
that an employee can be motivated to perform better when their is a belief that the better performance will
lead to good performance appraisal and that this shall result into realization of personal goal in form of
some reward. Therefore an employee is :

Motivation = Valence x Expectancy.

The theory focuses on three things :

• Efforts and performance relationship

• Performance and reward relationship

• Rewards and personal goal relationship

This leads us to a conclusion that :

9) The Porter and Lawler Model :

Lyman W. Porter and Edward E. Lawler developed a more complete version of motivation depending
upon expectancy theory.

Actual performance in a job is primarily determined by the effort spent. But it is also affected by the
person’s ability to do the job and also by individual’s perception of what the required task is. So
performance is the responsible factor that leads to intrinsic as well as extrinsic rewards. These rewards,
along with the equity of individual leads to satisfaction. Hence, satisfaction of the individual depends
upon the fairness of the reward.

10) Clayton Alderfer’s ERG Theory :

Alderfer has tried to rebuild the hierarchy of needs of Maslow into another model named ERG i.e.
Existence – Relatedness – Growth. According to him there are 3 groups of core needs as mentioned
above. The existence group is concerned mainly with providing basic material existence. The second
group is the individuals need to maintain interpersonal relationship with other members in the group. The
final group is the intrinsic desire to grow and develop personally. The major conclusions of this theory are
:

1. In an individual, more than one need may be operative at the same time.

2. If a higher need goes unsatisfied than the desire to satisfy a lower need intensifies.

3. It also contains the frustration-regression dimension.

11) McClelland’s Theory of Needs :

David McClelland has developed a theory on three types of motivating needs :

1. Need for Power

2. Need for Affiliation

3. Need for Achievement

Basically people for high need for power are inclined towards influence and control. They like to be at the
center and are good orators. They are demanding in nature, forceful in manners and ambitious in life.
They can be motivated to perform if they are given key positions or power positions.

In the second category are the people who are social in nature. They try to affiliate themselves with
individuals and groups. They are driven by love and faith. They like to build a friendly environment
around themselves. Social recognition and affiliation with others provides them motivation.

People in the third area are driven by the challenge of success and the fear of failure. Their need for
achievement is moderate and they set for themselves moderately difficult tasks. They are analytical in
nature and take calculated risks. Such people are motivated to perform when they see atleast some
chances of success.

McClelland observed that with the advancement in hierarchy the need for power and achievement
increased rather than Affiliation. He also observed that people who were at the top, later ceased to be
motivated by this drives.

12 ) Equity Theory :

As per the equity theory of J. Stacey Adams, people are motivated by their beliefs about the reward
structure as being fair or unfair, relative to the inputs. People have a tendency to use subjective judgment
to balance the outcomes and inputs in the relationship for comparisons between different individuals.
Accordingly :

If people feel that they are not equally rewarded they either reduce the quantity or quality of work or
migrate to some other organization. However, if people perceive that they are rewarded higher, they may
be motivated to work harder.

13) Reinforcement Theory :

B.F. Skinner, who propounded the reinforcement theory, holds that by designing the environment
properly, individuals can be motivated. Instead of considering internal factors like impressions, feelings,
attitudes and other cognitive behavior, individuals are directed by what happens in the environment
external to them. Skinner states that work environment should be made suitable to the individuals and that
punishments actually leads to frustration and de-motivation. Hence, the only way to motivate is to keep
on making positive changes in the external environment of the organization.

14) Goal Setting Theory of Edwin Locke :

Instead of giving vague tasks to people, specific and pronounced objectives, help in achieving them
faster. As the clearity is high, a goal orientation also avoids any misunderstandings in the work of the
employees. The goal setting theory states that when the goals to be achieved are set at a higher standard
than in that case employees are motivated to perform better and put in maximum effort. It revolves
around the concept of “Self-efficacy” i.e. individual’s belief that he or she is capable of performing a hard
task.

15) Cognitive Evaluation Theory :

As per these theory a shift from external rewards to internal rewards results into motivation. It believes
that even after the stoppage of external stimulus, internal stimulus survives. It relates to the pay structure
in the organization. Instead of treating external factors like pay, incentives, promotion etc and internal
factors like interests, drives, responsibility etc, separately, they should be treated as contemporary to each

other. The cognition is to be such that even when external motivators are not there the internal motivation
continues. However, practically extrinsic rewards are given much more weightage.

Applications of Motivation in organisation:

At lower levels of Maslow's hierarchy of needs, such as physiological needs, money is a motivator,
however it tends to have a motivating effect on staff that lasts only for a short period (in accordance with
Herzberg's two-factor model of motivation). At higher levels of the hierarchy, praise, respect, recognition,
empowerment and a sense of belonging are far more powerful motivators than money, as both Abraham
Maslow's theory of motivation and Douglas McGregor's theory X and theory Y (pertaining to the theory
of leadership) demonstrate.

Maslow has money at the lowest level of the hierarchy and shows other needs are better motivators to
staff. McGregor places money in his Theory X category and feels it is a poor motivator. Praise and
recognition are placed in the Theory Y category and are considered stronger motivators than money.

• Motivated employees always look for better ways to do a job.

• Motivated employees are more quality oriented.

• Motivated workers are more productive.

The average workplace is about midway between the extremes of high threat and high opportunity.
Motivation by threat is a dead-end strategy, and naturally staff are more attracted to the opportunity side
of the motivation curve than the threat side. Motivation is a powerful tool in the work environment that
can lead to employees working at their most efficient levels of production.

Nonetheless, Steinmetz also discusses three common character types of subordinates: ascendant,
indifferent, and ambivalent who all react and interact uniquely, and must be treated, managed, and
motivated accordingly. An effective leader must understand how to manage all characters, and more
importantly the manager must utilize avenues that allow room for employees to work, grow, and find
answers independently.

The assumptions of Maslow and Herzberg were challenged by a classic study at Vauxhall Motors' UK
manufacturing plant. This introduced the concept of orientation to work and distinguished three main
orientations: instrumental (where work is a means to an end), bureaucratic (where work is a source of
status, security and immediate reward) and solidaristic (which prioritises group loyalty).

Other theories which expanded and extended those of Maslow and Herzberg included Kurt Lewin's Force
Field Theory, Edwin Locke's Goal Theory and Victor Vroom's Expectancy theory. These tend to stress
cultural differences and the fact that individuals tend to be motivated by different factors at different
times.[28]

According to the system of scientific management developed by Frederick Winslow Taylor, a worker's
motivation is solely determined by pay, and therefore management need not consider psychological or
social aspects of work. In essence, scientific management bases human motivation wholly on extrinsic
rewards and discards the idea of intrinsic rewards.

In contrast, David McClelland believed that workers could not be motivated by the mere need for money
—in fact, extrinsic motivation (e.g., money) could extinguish intrinsic motivation such as achievement
motivation, though money could be used as an indicator of success for various motives, e.g., keeping
score. In keeping with this view, his consulting firm, McBer & Company, had as its first motto "To make
everyone productive, happy, and free." For McClelland, satisfaction lay in aligning a person's life with
their fundamental motivations.

Elton Mayo found that the social contacts a worker has at the workplace are very important and that
boredom and repetitiveness of tasks lead to reduced motivation. Mayo believed that workers could be
motivated by acknowledging their social needs and making them feel important. As a result, employees
were given freedom to make decisions on the job and greater attention was paid to informal work groups.
Mayo named the model the Hawthorne effect. His model has been judged as placing undue reliance on
social contacts at work situations for motivating employees.[29]

In Essentials of Organizational Behavior, Robbins and Judge examine recognition programs as
motivators, and identify five principles that contribute to the success of an employee incentive program:
[30]

• Recognition of employees' individual differences, and clear identification of behavior deemed
worthy of recognition

• Allowing employees to participate

• Linking rewards to performance

• Rewarding of nominators

• Visibility of the recognition process.

The concept of MBO:

The Concept Of Management By Objectives (MBO)

The concept of MBO is closely connected with the concept of planning. The process of planning implies
the existence of objectives and is used as a tool/technique for achieving the objectives. Modern
managements are rightly described as 'Management by Objectives' (MBO). This MBO concept was
popularized by Peter Drucker. It suggests that objectives should not be imposed on subordinates but
should be decided collectively by a concerned with the management. This gives popular support to them
and the achievement of such objectives becomes easy and quick.

Management by Objectives (MBO) is the most widely accepted philosophy of management today. It is a
demanding and rewarding style of management. It concentrates attention on the accomplishment of
objectives through participation of all concerned persons, i.e., through team spirit. MBO is based on the
assumption that people perform better when they know what is expected of them and can relate their
personal goals to organizational objectives. Superior subordinate participation, joint goal setting and
support and encouragement from superior to subordinates are the basic features of MBO. It is a result-
oriented philosophy and offers many advantages such as employee motivation, high morale, effective and
purposeful leadership and clear objectives before all concerned per-sons.

MBO is a participative and democratic style of management. Here, ample a scope is given to subordinates
and is given higher status and positive/participative role. In short, MBO is both a philosophy and
approach to management. MBO concept is different from MBC (Management by Control) and is also
superior in many respects. According to the classical theory of management, top management is
concerned with objectives setting, directing and coordinating the efforts of middle level managers and
lower level staff. However, achievement of organizational objectives is possible not by giving orders and
instructions but by securing cooperation and participation of all persons. For this, they should be
associated with the management process. This is possible in the case of MBO and hence MBO is different
from MBC and also superior to MBC.

MBO is an approach (to planning) that helps to overcome these barriers. MBO involves the establishment
of goals by managers and their subordinates acting together, specifying responsibilities and assigning
authority for achieving the goals and finally constant monitoring of performance. The genesis of MBO is
attributed to Peter Drucker who has explained it in his book 'The Practice of Management'.

Definitions Of Management By Objectives MBO :-

1. According to George Odiome, MBO is "a process whereby superior and subordinate managers of
an Organisation jointly define its common goals, define each individual's major areas of
responsibility in terms Of results expected of him and use these measures as guides for operating
the unit and assessing the contribution of each of its members."
2. According to John Humble, MBO is "a dynamic system which seeks to integrate the company's
needs to clarify and achieve its profits and growth goals with the manager's need to contribute
and develop himself. It is a demanding and rewarding style of managing a business."

Features Of Management By Objectives MBO :-

1. Superior-subordinate participation: MBO requires the superior and the subordinate to recognize
that the development of objectives is a joint project/activity. They must be jointly agree and write
out their duties and areas of responsibility in their respective jobs.
2. Joint goal-setting: MBO emphasizes joint goal-setting that are tangible, verifiable and
measurable. The subordinate in consultation with his superior sets his own short-term goals.
However, it is examined both by the superior and the subordinate that goals are realistic and
attainable. In brief, the goals are to be decided jointly through the participation of all.
3. Joint decision on methodology: MBO focuses special attention on what must be accomplished
(goals) rather than how it is to be accomplished (methods). The superior and the subordinate
mutually devise methodology to be followed in the attainment of objectives. They also mutually
set standards and establish norms for evaluating performance.
4. Makes way to attain maximum result: MBO is a systematic and rational technique that allows
management to attain maximum results from available resources by focussing on attainable goals.
It permits lot of freedom to subordinate to make creative decisions on his own. This motivates
subordinates and ensures good performance from them.
5. Support from superior: When the subordinate makes efforts to achieve his goals, superior's
helping hand is always available. The superior acts as a coach and provides his valuable advice
and guidance to the subordinate. This is how MBO facilitates effective communication between
superior and subordinates for achieving the objectives/targets set.

Steps In Management By Objectives Planning :-

1. Goal setting: The first phase in the MBO process is to define the organizational objectives. These
are determined by the top management and usually in consultation with other managers. Once
these goals are established, they should be made known to all the members. In setting objectives,
it is necessary to identify "Key-Result Areas' (KRA).
2. Manager-Subordinate involvement: After the organizational goals are defined, the subordinates
work with the managers to determine their individual goals. In this way, everyone gets involved
in the goal setting.
3. Matching goals and resources: Management must ensure that the subordinates are provided with
necessary tools and materials to achieve these goals. Allocation of resources should also be done
in consultation with the subordinates.
4. Implementation of plan: After objectives are established and resources are allocated, the
subordinates can implement the plan. If any guidance or clarification is required, they can contact
their superiors.
5. Review and appraisal of performance: This step involves periodic review of progress between
manager and the subordinates. Such reviews would determine if the progress is satisfactory or the
subordinate is facing some problems. Performance appraisal at these reviews should be
conducted, based on fair and measurable standards.

Advantages of Management By Objectives MBO :-

1. Develops result-oriented philosophy: MBO is a result-oriented philosophy. It does not favor
management by crisis. Managers are expected to develop specific individual and group goals,
develop appropriate action plans, properly allocate resources and establish control standards. It
provides opportunities and motivation to staff to develop and make positive contribution in
achieving the goals of an Organisation.
2. Formulation of dearer goals: Goal-setting is typically an annual feature. MBO produces goals that
identify desired/expected results. Goals are made verifiable and measurable which encourage
high level of performance. They highlight problem areas and are limited in number. The meeting
is of minds between the superior and the subordinates. Participation encourages commitment.
This facilitates rapid progress of an Organisation. In brief, formulation of realistic objectives is
me benefit of M[BO.
3. Facilitates objective appraisal: NIBO provides a basis for evaluating a person's performance since
goals are jointly set by superior and subordinates. The individual is given adequate freedom to
appraise his own activities. Individuals are trained to exercise discipline and self control.
Management by self-control replaces management by domination in the MBO process. Appraisal
becomes more objective and impartial.
4. Raises employee morale: Participative decision-making and two-way communication encourage
the subordinate to communicate freely and honestly. Participation, clearer goals and improved
communication will go a long way in improving morale of employees.
5. Facilitates effective planning: MBO programmes sharpen the planning process in an
Organisation. It compels managers to think of planning by results. Developing action plans,
providing resources for goal attainment and discussing and removing obstacles demand careful
planning. In brief, MBO provides better management and better results.
6. Acts as motivational force: MBO gives an individual or group, opportunity to use imagination
and creativity to accomplish the mission. Managers devote time for planning results. Both
appraiser and appraise are committed to the same objective. Since MBO aims at providing clear
targets and their order of priority, employees are motivated.
7. Facilitates effective control: Continuous monitoring is an essential feature of MBO. This is useful
for achieving better results. Actual performance can be measured against the standards laid down

for measurement of performance and deviations are corrected in time. A clear set of verifiable
goals provides an outstanding guarantee for exercising better control.
8. Facilitates personal leadership: MBO helps individual manager to develop personal leadership
and skills useful for efficient management of activities of a business unit. Such a manager enjoys
better chances to climb promotional ladder than a non-MBO type.

Limitations of Management By Objectives MBO :-

1. Time-consuming: MBO is time-consuming process. Objectives, at all levels of the Organisation,
are set carefully after considering pros and cons which consumes lot of time. The superiors are
required to hold frequent meetings in order to acquaint subordinates with the new system. The
formal, periodic progress and final review sessions also consume time.
2. Reward-punishment approach: MBO is pressure-oriented programme. It is based on reward-
punishment psychology. It tries to indiscriminately force improvement on all employees. At
times, it may penalize the people whose performance remains below the goal. This puts mental
pressure on staff. Reward is provided only for superior performance.
3. Increases paper-work: MBO programmes introduce ocean of paper-work such as training
manuals, newsletters, instruction booklets, questionnaires, performance data and report into the
Organisation. Managers need information feedback, in order to know what is exactly going on in
the Organisation. The employees are expected to fill in a number of forms thus increasing paper-
work. In the words of Howell, "MBO effectiveness is inversely related to the number of MBO
forms.
4. Creates organizational problems: MBO is far from a panacea for all organizational problems.
Often MBO creates more problems than it can solve. An incident of tug-of-war is not uncommon.
The subordinates try to set the lowest possible targets and superior the highest. When objectives
cannot be restricted in number, it leads to obscure priorities and creates a sense of fear among
subordinates. Added to this, the programme is used as a 'whip' to control employee performance.
5. Develops conflicting objectives: Sometimes, an individual's goal may come in conflict with those
of another e.g., marketing manager's goal for high sales turnover may find no support from the
production manager's goal for production with least cost. Under such circumstances, individuals
follow paths that are best in their own interest but which are detrimental to the company.
6. Problem of co-ordination: Considerable difficulties may be encountered while coordinating
objectives of the Organisation with those of the individual and the department. Managers may
face problems of measuring objectives when the objectives are not clear and realistic.
7. Lacks durability: The first few go-around of MBO are motivating. Later it tends to become old
hat. The marginal benefits often decrease with each cycle. Moreover, the programme is
deceptively simple. New opportunities are lost because individuals adhere too rigidly to
established goals.
8. Problems related to goal-setting: MBO can function successfully provided measurable objectives
are jointly set and it is agreed upon by all. Problems arise when: (a) verifiable goals are difficult
to set (b) goals are inflexible and rigid (c) goals tend to take precedence over the people who use
it (d) greater emphasis on quantifiable and easily measurable results instead of important results
and (e) over-emphasis on short-term goals at the cost of long-term goals.
9. Lack of appreciation: Lack of appreciation of MBO is observed at different levels of the
Organisation. This may be due to the failure of the top management to communicate the
philosophy of MBO to entire staff and all departments. Similarly, managers may not delegate
adequately to their subordinates or managers may not motivate their subordinates properly. This
creates new difficulties in the execution of MBO programme.

Essential Conditions for Successful Execution / Implementation of MBO Or...

Q.How To Make MBO Effective?

1. Support from all: In order that MBO succeeds, it should get support and co-operation from the
management. MBO must be tailored to the executive's style of managing. No MBO programme
can succeed unless it is fully accepted by the managers. The subordinates should also clearly
understand that MBO is the policy of the Organisation and they have to offer cooperation to make
it successful. It should be a programme of all and not a programme imposed on them.
2. Acceptance of MBO programme by managers: In order to make MBO programme successful, it
is fundamentally important that the managers themselves must mentally accept it as a good or
promising programme. Such acceptances will bring about deep involvement of managers. If
manages are forced to accept NIBO programme, their involvement will remain superfluous at
every stage. The employees will be at the receiving-end. They would mostly accept the lines of
action initiated by the managers.
3. Training of managers: Before the introduction of MBO programme, the managers should be
given adequate training in MBO philosophy. They must be in a position to integrate the technique
with the basic philosophy of the company. It is but important to arrange practice sessions where
performance objectives are evaluated and deviations are checked. The managers and subordinates
are taught to set realistic goals, because they are going to be held responsible for the results.
4. Organizational commitment: MBO should not be used as a decorative piece. It should be based
on active support, involvement and commitment of managers. MBO presents a challenging task
to managers. They must shift their capabilities from planning for work to planning for
accomplishment of specific goals. Koontz rightly observes, "An effective programme of
managing by objective must be woven into an entire pattern and style of managing. It cannot
work as a separate technique standing alone."
5. Allocation of adequate time and resources: A well-conceived MBO programme requires three to
five years of operation before it provides fruitful results. Managers and subordinates should be so
oriented that they do not look forward to MBO for instant solutions. Proper time and resources
should be allocated and persons are properly trained in the philosophy of MBO.
6. Provision of uninterrupted information feedback: Superiors and subordinates should have regular
information available to them as to how well subordinate's goal performance is progressing. Over
and above, regular performance appraisal sessions, counseling and encouragement to
subordinates should be given. Superiors who compliment and encourage subordinates with pay
rise and promotions provide enough motivation for peak performance.

Variable pay programme

A BRIEF ABOUT VARIABLE PAY

With the IT business environment becoming increasingly competitive, companies are aggressively aiming
to derive the maximum from their employees. One of the widely deployed practices among corporates to
pump up an employee’s performance is the adoption of the variable pay system. This system largely
implies a pattern where the employer divides an employee’s salary into two parts—fixed and variable,
whereby the fixed part of the salary is credited to an employee every month and the variable aspect
follows as per the goals and targets achieved.

Variable pay is:

• not a part of salary
• not guaranteed
• based on individual, group, or organizational performance.

Common purposes of variable pay include:

• rewarding individual performance,
• rewarding group performance (e.g., completing a project, meeting organizational objectives,
reducing costs),
• encouraging employees to increase productivity, and
• controlling payroll costs.

Common forms of variable pay include:

• individual special recognition awards,
• team or group awards,
• lump-sum bonuses,
• on-the-spot awards,
• group incentive plans, and
• stock options or grants.

TYPES OF PLANS FOR VARIABLE PAY SCHEME

Individual-based plans are the most widely used pay-for-performance plans in industry. Of the
individual-based plans commonly used, merit pay is by far the most popular; its use is almost universal.
Merit pay consists of an increase in base pay, normally given once a year. Supervisors’ ratings of
employee performance are typically used to determine the amount of merit pay granted. Once a merit pay
increase is given to an employee, it remains a part of that employee’s base salary for the rest of his or her
tenure with the firm.

Team-based pay plans normally reward all team members equally based on group outcomes. These
outcomes may be measured objectively or subjectively. The criteria for defining a desirable outcome may
be broad or narrow. As is less commonly done in individual-based programs, payments to team members
may be made in the form of a cash bonus or in the form of noncash awards such as trips, time off, or
luxury items.

Plantwide or company-wide pay-for-performance plans reward all workers in a plant or business unit on
the basis of the performance of the entire plant or business unit. Profit and stock prices are generally not
meaningful performance measures for a plant or unit because they are the result of the entire
corporation’s performance. Most corporations have multiple plants or units, a factor that makes it difficult
to attribute financial gains or losses to any single segment of the business. Therefore, the performance
indicator most frequently used to distribute rewards at the plant level is plant or business unit efficiency,
which is normally measured in terms of labor or material cost savings compared to an earlier period or
another plant or business unit.

The broadest type of variable-pay incentive programs—company-wide pay-for-performance plans—
reward employees on the basis of the entire corporation’s performance. The most widely used program of
this kind is profit sharing. Profit sharing is a company-wide pay-for-performance plan that uses a
formula to allocate a portion of declared profits to employees. Typically, profit distributions under a
profit-sharing plan are used to fund employee retirement plans.

INTRODUCTION

Skill-based pay (SBP) systems are like snowflakes -- they share some common characteristics, but each
one is unique. We will explore the foundations which underlie skill-based pay and many of the options
which are available.

Designing skill-based pay is not something which can be done by copying someone else's system. Every
company has its own unique products, people, and work processes. What works in one organization may
or may not work in another. Much can be learned by studying what has succeeded or failed with other
companies, but a sound understanding of the many variables and principles involved in SBP is essential to
an SBP design.

This book is the result of my experience with SBP design. It also includes information from researching
the literature on skill-based pay. Companies are doing SBP and are talking about it. However, little has
been committed to a practical written form which can guide would-be designers.

SBP, like many other workplace innovations, can be subject to the "let's-do-it-ourselves" approach.
Organizations must do SBP themselves, but when they do it alone without knowledgeable assistance, they
run the risk of repeating mistakes they could have avoided. Getting competent outside assistance is one
protection from this problem.

I hope this book provides an inexpensive way to provide a starting point for organizations interested in
SBP. It certainly is not sufficient to guide an entire design. There are simply too many variables to
explore each one fully, or to identify all the possible combinations which could exist. This book can
identify aspects of SBP to be considered in a design and suggest some possible approaches.

Skill-based pay has a purpose -- to promote learning. It is not the only way to compensate employees and
it is not a system for all situations nor one which lasts forever. It is very useful in promoting new learning.
This accounts for its popularity in start-up organizations and its association with organization redesigns.
SBP systems mature as the majority of participants either reach the limits of the system or coast to a stop
somewhere along its path. Paying for learning may eventually give way to requests to pay for
performance based upon team or total organization results. If higher skills create higher performance, this
is a foreseeable development.

Developing a skill-based pay system is not a linear process. The system requires that many items be
balanced. Very often what looks promising as a way to handle one part of the system becomes impractical
when meshed with other pieces. Original ideas need to be reworked again and again. Designers of SBP
can expect to travel the same territory several times before a system takes final shape.

The best systems are deceptively simple. That simplicity is usually the result of untangling a great many
hidden complexities. Like snowflakes, a good SBP system is a wonder to behold, but it's hard to tell what
went into creating it. This book can help melt away some of that mystery.

Most skill-based pay systems have been instituted in manufacturing and processing plants. SBP is
commonly found with team systems or other participative settings. More is known about these types of
installations. For that reason, those environments will be the primary focus of examples and discussion in
this guide. Many of the ideas and cautions for those systems can be extended into other work
environments -- see the section on "SBP in the Office."

Ob m5,m6,m7

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