Monday, May 16, 2011

Discuss the relationship between motivation and reward system in an organization.

Discuss the relationship between motivation and reward system in an
organization. What is gain- sharing and cite an organization where it is
practiced effectively. Briefly describe the organization you are referring to.

Answer. Motivation in simple words may be understood as the set of forces that
cause people to behave in certain ways. It is a process that starts with a
physiological deficiency or need that activities behaviour or a drive that is aimed at
a goal or an incentive.
The concept of motivation occupies a central place in the discipline of
Organizational Behaviour. It is a concept, which has received the maximum
attention from the academicians and researchers alike. Since a motivated
employee is highly productive and highly quality oriented, the managers are also
interested the concept of motivation.
Most people understand the concept of intrinsic satisfaction or intrinsic motivation,
i.e. when an activity is satisfying or pleasurable in and of itself. Naturally, these
activities are things we like and want to do. For most of us, intrinsically enjoyable
activities are things like eating, resting, laughing, playing games, winning, creating,
seeing and hearing beautiful things and people, being held lovingly, having sex,
and so on. To do these things we don't need to be paid, applauded, cheered,
thanked, respected, or anything--commonly we do them for the good feelings we
automatically and naturally get from the activity. Intrinsic rewards also involve
pleasurable internal feelings or thoughts, like feeling proud or having a sense of
mastery following studying hard and succeeding in a class.
Many, maybe most, activities are not intrinsically satisfying enough to get most of
us to do them consistently, so extrinsic motivation needs to be applied in the form
of rewards (positive reinforcements), incentives, or as a way to avoid some
unpleasant condition ("negative reinforcement" or punishment). Examples: You
work doing an ordinary job for pay. You study for good grades or to avoid failing or
to prepare for a good future. You do housework to get a clean, organized house
and/or a spouse's appreciation or to avoid her/his disapproval. A teenager comes
home from a date on time in order to avoid being grounded. These are all activities
that are commonly sustained by external pay offs, not because you love working,
studying, cleaning, and coming home early.
Are rewards, particularly money rewards, really motivators? The answer to this
question is YES and NO.
Money is understood to be powerful motivator for more than one reason. In the
first place, money is fundamental for completion of a task. The employee takes
pay as the reward for his or her work, and the employer views it as the price for
using the services of the employee. Second, as a medium of exchange. Third,
money is one of the hygiene factors, and improving maintenance factors is the first
step in efforts directed towards motivation. Fourth, money also performs the
function of a score card by which employees assess the value that the
organization places on their services and by which employees can compare their
values to others. Fifth, reinforcement and expectancy theories attest to the value
of money as a motivator. Sixth, money acts as a punctuation in one’s life. It is an
attention getting and effect producing mechanism. Money, has therefore
tremendous importance in influencing employee behaviour. Seventh, money is
easily vulnerable to manipulation. Finally, money will be a powerful motivator for a
person who is tense and anxious about lack o money. But behavioural scientists
think otherwise. They downgrade monetary rewards as a motivator. They prefer,
instead, other techniques such as challenging jobs, goals, participation in decisionmaking
and other non-monetary rewards for motivating employees.
Gain Sharing
Gain-Sharing is a financial incentive in which the performance gains of a company
(or of a particular new initiative) are shared with the employees who helped bring
about the improvement. This simple, powerful, and flexible technique can be a
cost-effective way of motivating employees and focusing them on the goals of your
Gain-Sharing can take many forms, but all Gain-Sharing programs include the
following elements:
 Employees are involved in a program for suggesting or making process
 Performance, usually in terms of cost per unit of productivity, is frequently
 A portion of the financial gains from performance improvement (e.g., cost
reduction, increased productivity) is shared with employees.
Gain-Sharing provides motivation and focus
The central tenet of employee motivation states that employees will work towards
goals when they believe: (a) their efforts will lead to successful performance, and
(b) that successful performance will lead to a desirable outcome. Gain-Sharing is
particularly well-suited for leveraging this principle. Gain-Sharing (a) is centered
on work processes and activities that employees can impact and (b) rewards
improved performance with a percentage of the financial gains from that
improvement. Other types of organization-wide incentive plans, such as Profit-
Sharing and Employee Stock Ownership Plans involve aspects of performance
that are less directly controlled by employees (e.g., general economic conditions
and the activities of competitors can obviate the impact of employee efforts on
profits and stock price), and, thus, do not demonstrate as powerful a connection
between effort and reward as does Gain-Sharing.
Gain-Sharing also specifies the company’s priorities and signals where employees
should focus their effort. This strong focus is a very positive attribute, but it also
necessitates careful consideration of what should be rewarded. For example, if
Gain-Sharing is tied to increased speed of production, employees may focus on
speed to the detriment of quality. With Gain-Sharing, as with any other reward
system, be careful in choosing your target behaviors in order to avoid unintended
Gain-Sharing can also be focused quite narrowly, targeting a particular workplace
initiative and particular groups of employees. In my opinion, Gain-Sharing is best
used when applied to a particular initiative with a particular group of employees.
Here are a few examples:
 A manufacturing company may tie Gain-Sharing to a workplace safety initiative
by sharing a portion of the Workers’ Compensation cost savings with its
production employees.
 An electronics chain can use Gain-Sharing to encourage its sales staff to sell
more extended warranties by offering higher rates of commission on the sale of
 A company can use Gain-Sharing to encourage innovation and ideas for new
products by agreeing to share 20% of the first-year revenues from the new
product with the research and development department employees involved in
that product.
 My favorite real-life example of Gain-Sharing occurred in a beverage
distribution company that paid very high insurance premiums for its fleet of
delivery trucks and drivers because of a high number of accidents. The CEO
went to the drivers and told them that 50% of any reductions in next year’s
insurance premiums would be split evenly among the drivers. The company
did not incur a single accident for the rest of the year and reaped several
thousand dollars in savings.
Example: The Yellow Bus Company
The Yellow Bus Company operated a fleet of around 500 buses in the city of
Auckland, New Zealand. It carried people on some 25 million passenger trips each
year, covering a total distance of around 22 million kilometers annually. There
were close to 900 employees, all of whom were included in the Gain sharing
system (except for the top four executives).
Gainsharing was part of the company's strategy for integrating its team together
and achieving a common set of aims.
The former Chief Executive, Barry Turley, wrote: "Gainsharing has a simple, but
essential purpose. To involve staff in helping to improve our business". To start off,
the Company opened a special "Gainshare" account and put money into it. Every
quarter after that a share of the "Gain" earned by the company (income less costs
and necessary payments) was added to this pool and an agreed proportion was
shared out between the employees.
The amount paid to employees depended on overall company performance on key
performance indicators; and all the details of Gain-sharing at the Yellow Bus
Company were developed in a consultative way.
There were many changes introduced in the Yellow Bus Company as a direct
result of Gain-sharing. The bus operators, maintenance engineers, service staff,
and managers turned their attention to finding ways to make the company more
successful. The employees of the Yellow Bus Company wanted to provide the
best bus service to the people of Auckland! They were so successful that in late
1998 the company was sold to an international company, Stagecoach, for a sum in
excess of one hundred and ten million dollars. Not bad for a company that a few
years before had been losing nearly a million dollars

No comments:

Post a Comment

Blog Archive