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(h) Firms continue to use demotivating practices such as layoffs, across-
the-board raises and cuts, and excessive executive compensation.
vii) Pay for Performance
(1) Pay for Performance Overview
(a) Pay for performance: monetary incentives tied to one’s results or
accomplishments. See Slide 9-29
(b) Pay for performance plans, also referred to as incentive pay or variable
pay, can include merit pay, bonuses and profit sharing as well as
piece-rate systems and sales commissions.
(c) Pay for performance plans are designed to reward employees with
additional pay for work that exceeds minimum performance standards.
(d) Proponents of incentive compensation say something extra is needed
because hourly wages and fixed salaries do little more than motivate
people to show up at work and put in the required hours.
(2) Modern Incentive Pay Plans
(a) One-size-fits-all approaches to incentive compensation are
inappropriate.
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(3) Research Insights
(a) Research results show mixed outcomes from pay for performance and
the programs do not always result in greater productivity or
performance.
(b) Successful pay for performance programs provide the appropriate
amount of administrative, communication and monetary support.
viii) Getting the Most out of Extrinsic Rewards and Pay for Performance
See Slide 9-30
(1) To maximize the motivational impact of extrinsic rewards:
(a) Tie noncash rewards to specific results.
(b) Make pay for performance an integral part of organizational strategy.
(c) Base incentive determinations on objective performance data.
(d) Encourage participation in the development, implementation, and
revision of the plan.
(e) Encourage two-way communication.
(f) Build plans around participative structures.
(g) Reward teamwork and cooperation.
(h) Actively sell to supervisors and middle managers.
(i) Pay cash bonuses in a lump sum.
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(j) Selectively use creative noncash rewards to create buzz and
excitement.
V. Positive Reinforcement
i) Thorndike’s Law of Effect
(1) Law of effect: behavior with favorable consequences is repeated;
behavior with unfavorable consequences disappears. See Slide 9-
31
(2) Thorndike’s Law of Effect was a dramatic departure from the prevailing
notion a century ago that behavior was the product of inborn instincts.
ii) Skinner’s Operant Conditioning Model
(1) Skinner drew an important distinction between two types of behavior:
See Slide 9-33
(a) Respondent behavior: unlearned stimulus-response reflexes.
(b) Operant behavior: learned consequence-shaped behavior.
(2) Examples of respondent behavior would include shedding tears while
peeling onions and reflexively withdrawing one’s hand from a hot stove,
and this type of behavior represents only a very small proportion of adult
human behavior.
(3) Skinner’s work has significant implications for OB because the vast
majority of organizational behavior falls into the operant category.
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iii) Contingent Consequences See Slides 9-35, 9-36
(1) Contingent Consequences Overview
(a) The term contingent means there is a systematic if-then linkage
between the target behavior and the consequence.
(b) Figure 9-4: Contingent Consequences in Operant Conditioning
illustrates how operant conditioning can be used to control behavior.
See Slides 9-34
(2) Positive Reinforcement Strengthens Behavior
(a) Positive reinforcement: the process of strengthening a behavior by
contingently presenting something pleasing.
(b) A behavior is strengthened when it increases in frequency and
weakened when it decreases in frequency.
(3) Negative Reinforcement Also Strengthens Behavior
(a) Negative reinforcement: strengthens a desired behavior by
contingently withdrawing something displeasing.
(b) Negative reinforcement is not the same as punishment since negative
reinforcement seeks to strengthen a behavior, while punishment seeks
to decrease one.
(4) Punishment Weakens Behavior
(a) Punishment: the process of weakening behavior through either the
contingent presentation of something displeasing or the contingent
withdrawal of something positive.
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(5) Extinction Also Weakens Behavior
(a) Extinction: weakening a behavior by ignoring it or making sure it is not
reinforced.
(b) A behavior without occasional reinforcement eventually stops.
iv) Schedules of Reinforcement See Slide 9-37
(1) Continuous Reinforcement
(a) Table 9-1: Reinforcement Schedules summarizes the options for the
timing of behavioral consequences and the probable effects on
responding.
(b) Continuous reinforcement (CRF): reinforcing every instance of a
behavior.
(c) Behavior weakens rapidly (undergoes extinction) when reinforcers are
withheld.
(2) Intermittent Reinforcement
(a) Intermittent reinforcement: reinforcing some but not all instances of
behavior.
(b) Reinforcement for ratio schedules is contingent on the number of
responses emitted.
(c) Interval reinforcement is tied to the passage of time.
(d) Examples of intermittent reinforcement are:
(i) Fixed ratio (FR): a fixed number of responses must be emitted
before reinforcement occurs.
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(ii) Variable ratio (VR): a varying or random number of responses
must be emitted before reinforcement occurs.
(iii)Fixed interval (FI): the first response after a specific period of time
has elapsed is reinforced.
(iv)Variable interval (VI): the first response after varying or random
periods of time have elapsed is reinforced.
(3) Scheduling Is Critical
(a) The schedule of reinforcement can more powerfully influence behavior
than the magnitude of reinforcement.
(b) A field study of beaver trappers shows that variable ratio schedules
may result in higher productivity.
(4) Work Organizations Typically Rely on the Weakest Schedule
(a) Generally variable ratio and variable interval schedules of
reinforcement produce the strongest behavior that is most resistant to
extinction.
(b) Fixed and continuous schedules are the least likely to have the desired
effects over time.
(c) Despite the trend toward pay-for-performance, time-based pay
schemes that rely on the weakest schedule of reinforcement (fixed
interval) are still the rule in today’s workplaces.
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v) Behavior Shaping
(1) Shaping: reinforcing closer and closer approximations to a target
behavior. See Slide 9-38
(2) Successful behavior shaping requires reducing a complex target behavior
to easily learned steps and then consistently reinforcing improvements
until the target behavior is achieved.
(3) Table 9-3: Ten Practical Tips for Shaping Job Behavior profiles
suggestions for using shaping. See Slide 9-39
BACK TO THE CHAPTER-OPENING CASE
1. Why would MBO work well at NuStar?
a. A MBO program would work well at NuStar because the company treats
2. Why is volunteering so intrinsically rewarding?
a. There are many reasons volunteering can be intrinsically rewarding. First,
volunteers may find enjoyment in the tasks required in the volunteer
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3. Why is NuStar’s approach to incentive compensation so effective?
a. One of the recommendations for maximizing the motivational impact of
extrinsic motivation is to make pay for performance an integral part of
4. Is there any form of variable reinforcement in NuStar’s compensation plan that
could boost employees’ motivation with a surprise effect?
a. Variable reinforcement schedules reinforce the first response after a
varying number of responses or after a varying period of time. Variable
To gain further insight and knowledge about NuStar Energy, visit its website:
http://www.nustarenergy.com/ and explore the content in the “Company” section.
OB IN ACTION CASE STUDY: Why DineEquity’s CEO Julia A Stewart Manages
Like a Teacher
1. What elements of the performance management cycle in Figure 9-1 are evident
in Stewart’s comments?
a. In her management style, Julia Stewart focuses on the three main
components of the performance improvement cycle: goal setting,
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2. Is Julia Stewart a good role model for how to generate employee engagement
and motivate the employees in her company’s restaurants? Explain.
a. Julia Stewart is a good role model for how to generate employee
engagement and how to motivate the employees in her company’s
3. In terms of Thomas’s four building blocks in Figure 9-3, how would you rate
Stewart’s “teaching” style of management for generating intrinsic motivation in
her employees? Explain.
a. Four rewards underlie a person’s level of intrinsic motivation: a sense of
meaningfulness, a sense of choice, a sense of competence, and a sense
4. What role does positive reinforcement play in this case? Do you think Stewart
uses it effectively? Explain.
a. Julia Stewart effectively uses positive reinforcement. She compliments
employees for doing something correctly and she also makes sure other