CHAPTER 16
Managing Employee Motivation and Performance
CHAPTER SUMMARY
This chapter deals with employee motivation. The key topics discussed include the nature of motivation
LEARNING OBJECTIVES
After covering this chapter, students should be able to:
1. Characterize the nature of motivation, including its importance and historical perspectives.
2. Identify and describe the major content perspectives on motivation.
In the opening case, the link between productivity and happiness is examined. There is one school of
thought (as evidenced by Sara Caputo and Alexander Kjerulf in the case) that believes that if you are
happy with your job you will be more productive. Others, however, don’t see the same causal link
between happiness and productivity.
Management Update: Every year Fortune identifies the 100 best companies to work for in America.
Discussion Starter: Ask students – are they really happy in their jobs (if they work)? Do they know
people who are happy with their job? Are these people more productive?
LECTURE OUTLINE
I. THE NATURE OF MOTIVATION
Motivation is the set of forces that cause people to behave in certain ways.
A. The Importance of Motivation in the Workplace
Chapter 16: Managing Employee Motivation and Performance
4. While the last two can be controlled by the manager, the first cannot.
Teaching Tip: Note that motivation reflects behavioral choices—people choose to work hard, to do
just enough to get by, or to do nothing at all.
Teaching Tip: Note the importance of ability and environment, in conjunction with motivation, as
Discussion Starter: Ask students to recall instances in which they have done an exceptionally good
job, and then to describe the respective roles of motivation, ability, and environment in that
performance.
B. Historical Perspectives on Motivation
1. The traditional approach to employee motivation is best represented by Frederick Taylor,
who believed that economic gain is the only motivating force for workers.
2. The human relations approach grew out of the work of Elton Mayo and his associates
who emphasized the role of social processes in the workplace. They suggested that
3. The human resource approach assumes not only that the illusion of involvement is
important, but that the workers will be motivated when they provide a real contribution
to both themselves and the organization.
II. CONTENT PERSPECTIVES ON MOTIVATION
Content perspectives are approaches to motivation that address the question “What factors in the
workplace motivate people?”
Content perspectives discuss what motivates people, but they do not describe how people are motivated.
A. The Need Hierarchy Approach
1. Maslow’s hierarchy of needs states that people are motivated to satisfy five need levels.
Chapter 16: Managing Employee Motivation and Performance
d) Esteem needs involve self-image and self-respect.
e) Self-actualization needs, or being all one can be.
Teaching Tip: Many students will have covered Maslow in other courses (e.g., psychology, marketing,
Group Exercise: Have students work in small groups and identify ways that people might satisfy each
of the five need levels in Maslow’s hierarchy.
Maslow suggested that people will remain at one level until that need is satisfied and
then move up to the next level.
2. The ERG theory of motivation was presented by Clayton Alderfer to address some of the
weaknesses of Maslow’s model.
Each letter of the name stands for a need.
Teaching Tip: Stress the similarities and differences between Maslow’s need hierarchy and the ERG
theory.
Discussion Starter: Ask students to critique these two theories and discuss how they, as future
managers, might apply one or the other in a work setting.
B. The Two-Factor Theory
The two-factor theory was developed by Frederick Herzberg based on interviews with two
Cross-Reference: Note that Herzberg’s theory is the basis for job enrichment, an alternative approach
to job design introduced and discussed in Chapter 11.
Chapter 16: Managing Employee Motivation and Performance
Discussion Starter: Herzberg asserts that pay in and of itself does not motivate performance. At the
same time, pay may be a motivator as a symbol of a person’s worth or value to an organization. Solicit
student opinions about this idea.
C. Individual Human Needs
Individual human needs play a role in motivation as well. Three in particular have been well–
researched.
Discussion Starter: Ask students to assess their own needs for achievement, affiliation, and power.
III. PROCESS PERSPECTIVES ON MOTIVATION
Process perspectives focus on why people choose certain behavioral options to fulfill their needs
and how they evaluate their satisfaction after they have attained these goals.
Discussion Starter: Ask students to recall an instance in which they did not pursue something they
wanted because they felt they had little or no chance of achieving it.
The assumptions of expectancy theory are: that behavior depends on both the individual and
the environment, that people choose how they will behave, that different people have different
needs and goals, and that people make choices based on their perceptions about the
relationship between behavior and desired outcomes.
There are three important perceptions in the expectancy model.
1. Effort-to-performance expectancy is the individual’s perception of the probability that
effort will lead to high performance.
Chapter 16: Managing Employee Motivation and Performance
Cross-Reference: In Chapter 2 we noted the fallacy of the human relationists who argued that
satisfaction causes performance. The Porter-Lawler extension of expectancy theory provides the
framework from which this viewpoint was changed.
B. Equity Theory
Equity theory, developed by J. Stacy Adams, is based on the notion that people are motivated
to seek social equity in the rewards they receive for performance.
Extra Example: An excellent example of equity theory occurs at the beginning of each new NFL
season. Top draft choices fresh out of college sign big contracts, and disgruntled veterans almost
Discussion Starter: Equity theory predicts that if people believe that they are being overpaid, they will
take some action to reduce their feelings of inequity. Ask students what they think about this prediction.
Cross-Reference: Note the similarities between the equity process and the notion of psychological
contracts, as discussed in Chapter 15.
Discussion Starter: Have students recall situations in which they have felt both equity and inequity.
C. Goal Setting Theory
A relatively new process perspective on motivation is goal setting theory. This theory suggests
Discussion Starter: Ask students if they think goals can be too difficult or too specific.
3. Goal acceptance is the extent to which an individual adopts a goal as his or her own.
Chapter 16: Managing Employee Motivation and Performance
Teaching Tip: Point out the similarities between the expanded goal-setting theory of motivation and
the expectancy theory.
IV. REINFORCEMENT PERSPECTIVES ON MOTIVATION
Reinforcement theory is an approach to motivation that explains the role of rewards as they cause
behavior to change or remain the same over time.
Extra Example: Explain the role of reinforcement in the classroom as you provide grades, verbal
compliments, criticisms, etc. in response to student behavior.
Extra Example: Also note the reinforcing consequences that student behaviors have on instructors. For
example, good class attendance and student enthusiasm provide positive reinforcement for instructors.
2. Avoidance can be used to strengthen the desired behavior by allowing the employee to
Teaching Tip: Solicit additional examples of the various kinds of reinforcement from your students.
B. Providing Reinforcement in Organizations
1. A fixed-interval schedule provides reinforcement at fixed intervals of time, regardless of
behavior.
Group Exercise: Have student groups design a motivational system that a manager might use that is
based on the concepts and principles of reinforcement.
Chapter 16: Managing Employee Motivation and Performance
V. POPULAR MOTIVATIONAL STRATEGIES
Many managers today are exploring new ways to motivate their employees.
A. Empowerment and Participation
Teaching Tip: Stress for students the subtle but real difference between empowerment and
participation.
1. Participation can occur in many different settings and involve a variety of different
problems or situations.
2. Organizations are moving toward more empowerment via such techniques as work teams
and new methods of organizing.
B. Alternative Forms of Working Arrangements
Another popular strategy for motivating workers today is developing and offering alternative
Extra Example: Texaco, Shell, and General Mills are among other firms that use modified workweeks
of some sort.
Discussion Starter: Ask students how they would feel about working different forms of modified
workweeks.
Discussion Starter: Note that some employers promote telecommuting not for motivational reasons
but rather to cut down their own facilities costs.
VI. USING REWARD SYSTEMS TO MOTIVATE PERFORMANCE
An organizational reward system is the formal and informal mechanisms by which employee
Chapter 16: Managing Employee Motivation and Performance
A. Merit Systems
Merit pay refers to pay awarded to employees on the basis of the relative value of their
B. Incentive Reward Systems
Incentive systems attempt to reward employees in proportion to what they do. Incentive
systems have the advantage of rewarding employees for high performance while not becoming
a part of an individual’s base salary, encouraging continued high performance over time.
1. A piece-rate incentive plan is used when an organization pays an employee a certain
amount of money for every unit she or he produces. This is the simplest type of incentive
system.
Global Connection: Workers in Japan receive an average of 25 percent of their total pay in the form of
flexible bonuses. In the United States, the average is only 1 percent.
C. Team and Group Incentive Reward Systems
1. Gainsharing programs are designed to share the cost savings from productivity
improvements with employees. Gainsharing aligns employee and corporate interests.
a) In implementing gainsharing, team performance is measured, and if it shows an
2. One-time team incentives may be awarded as a proportion of each employee’s base
salary, or the same dollar amount may be given to each worker.
3. Nonmonetary rewards may be given at the group level.
D. Executive Compensation
Typically, top managers have a different compensation plan than do the rest of a firm’s
employees.
Chapter 16: Managing Employee Motivation and Performance
3. A stock option plan is established to give senior managers the option to buy the company
stock in the future at a predetermined fixed price.
a) If executives are effective, then stock price should rise, and the managers may buy
the stock at bargain prices. The options are worthless, however, if stock price falls.
4. Executives also usually receive many other types of compensation, including club
memberships, use of company apartments and planes, low- or no-interest loans, and so on.
5. There are two important criticisms of executive compensation in the U.S. today.
a) Many feel that executive compensation, averaging over $1 million, is simply too
Cross-Reference: Note the relevance of designing reward systems to various theories of motivation as
discussed throughout earlier sections of this chapter.
END OF CHAPTER QUESTIONS
Questions for Review
1. Each historical perspective on motivation built on the earlier perspectives and differed from them in
some ways. Describe the similarities and differences between the traditional approach and the
human relations approach. Then describe the similarities and differences between the human
relations approach and the human resource approach.
The human relations approached put more emphasis on social needs than did the traditional
2. Compare and contrast content, process, and reinforcement perspectives on motivation.
The content theories of motivation focus on why people are motivated, whereas the process and
3. Explain how goal-setting theory works. How is goal setting different from merely asking a worker
to “do your best”?
Goal-setting theory proposes that workers are most motivated when they know exactly what they
Chapter 16: Managing Employee Motivation and Performance
4. Describe some new forms of working arrangements. How do these alternative arrangements
increase motivation?
Variable work schedules allow workers to work outside of the traditional “Monday to Friday, 8–to–
Questions for Analysis
5. Choose one theory from the content perspectives and one from the process perspectives. Describe
actions that a manager might take to increase worker motivation under each of the theories. What
differences do you see between the theories in terms of their implications for managers?
Students will choose different theories, so answers will vary. Students should note that content
6. Can factors from both the content and the process perspectives be acting on a worker at the same
time? Explain why or why not. Whether you answered yes or no to the previous question, explain
the implications for managers.
Clearly, both content and process theories can be operating at the same time, because there is
7. How do rewards increase motivation? What would happen if an organization gave too few rewards?
What would happen if it gave too many?
Underlying every motivation theory is the premise that individuals act in certain ways in order to
Chapter 16: Managing Employee Motivation and Performance
Questions for Application
8. Think about the worst job you have held. What approach to motivation was used in that
organization? Now think about the best job you have held. What approach to motivation was used
there? Can you base any conclusions on this limited information? If so, what are they?
One likely response is the use of Herzberg’s theory. Note whether the response shows hygiene
9. Interview both a manager and a worker (or administrator and faculty member) from a local
organization. What views of or approaches to motivation seem to be in use in that organization? Do
the manager’s views differ from the worker’s? If so, how do you explain the differing perceptions?
Students may show how a manager attempts to make each subordinate feel self-actualized at work.
10. Consider a class you have taken. Using just that one class, offer examples of times when the
professor used positive reinforcement, avoidance, punishment, and extinction to manage students’
behavior.
Examples will vary, but students will see that most professors, like most managers, use a variety of
END OF CHAPTER EXERCISES
Building Effective Interpersonal Skills
I. Purpose
This exercise gives students a chance to see whether the factors that motivate them come primarily
II. Format
III. Follow-Up
The 12 factors are divided into two lists – motivating factors and maintenance factors and questions
Building Effective Decision-Making Skills
I. Purpose
Students exercise their decision-making skills by researching a career path and making choices
about that path.
Chapter 16: Managing Employee Motivation and Performance
II. Format
This decision-making skills exercise should be done outside of class by individuals. It will take
students about 10 minutes to complete, although research will take longer.
III. Follow-Up
A. Consider the position that you’d like to hold at the peak of your career. It may be CEO, or
owner of a chain of clothing stores, partner in a law or accounting firm, or president of a
university. Then again, it may be something less lofty. Whatever it is, write it down.
B. Now describe a career path that will lead you toward that goal. It may help to work
“backwards,” that is, starting with your final position and work backwards in time to some
C. Write down each step in your path on a card or a sheet of paper.
D. If, like Lee Iacocca, you were to carry this piece of paper with you and refer to it often as you
pursued your career goals, do you think it would help you achieve them? Why or why not?
Students will choose a variety of goals and an even-larger variety of paths to achieve those
CHAPTER CLOSING CASE
THE LAW OF DIMINISHING MOTIVATION
The number of women partners in law firms is significantly lower than the number of women who join
law firms. The chapter closing case looks at possible reasons as to why this happens. Motivation appears
to be a problem – motivation caused by conflicting demands that women face.
Management Update: Fortune’s “Best Companies to Work for” article shows how the more
progressive firms support their women employees. A comparison of the best practices in this area
among leading companies should lead to a good discussion.
1. Case Question 1: Among the various approaches to enhancing workplace satisfaction and
productivity discussed in the chapter, which ones might you take under the circumstances described
in the case? Why are some of the other approaches less likely to be effective (or even relevant)?
The case quotes a woman partner at a law firm who says, “ You have a given population of people
2. Case Question 2: You’re the managing partner in a law firm with 55 male associates and 45 female
associates, and you agree with the argument that women lawyers need to “selfpromote” more
effectively. Which approach to motivation would you apply in order to encourage female associates
in your firm to “self–promote” more actively? Explain your choice of approach.
One theory that can be applied to this situation is the expectancy theory of motivation. If you, the
3. Case Question 3: What about your own values when it comes to balancing your home and work
life? Assume that you’re about to graduate from law school and about to get married to a fiancé(e)