ACCA F1 Accountant in Business - 2010 - Study text

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Chapter 9: Motivation

1.8 Handy: motivation calculus and psychological contracts

Motivation calculus

Charles Handy suggested that there is a motivation calculus. His ideas were similar

to those of Vroom. He argued that the strength of an individual’s motivation is

dependent on three factors:

 Needs. These are the needs of the individual. They might include any of the

needs in the Maslow hierarchy of needs. Needs are also affected by the

personality characteristics of the individual, and by outside pressures and

influences.

 Results/rewards. Individuals must be able to measure the effect that their

individual efforts have on results. If the individual is motivated to put in more

effort, how will this affect results and rewards?

 Effectiveness. This is the perception of the individual that the rewards that have

been earned meet the needs of the individual.

Psychological contracts

Handy argued that the motivation calculus applies to every type of ‘psychological

contract’ between an individual and an organisation to which the individual

belongs.

Every individual has a psychological contract with any organisation to which he or

she belongs. This contract normally takes the form of implied and un-stated

expectations about:

 the returns or rewards that the individual will receive

 in return for putting in a certain amount of effort and talent.

Similarly, organisations have expectations of:

 what they expect individuals to do, and

 the rewards that they will give to individuals in return.

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There are three types of psychological contract:

 Coercive contracts. This is a contract that is not freely entered into. The

organisation is ruled by a small number of people who are in charge and in

control. An example of a coercive contract is the relationship between a prisoner

and his prison.

 Calculative contracts. This is a contract that is freely entered into, but where

management retain control through their ability to reward individuals with

extrinsic rewards, such as pay and promotion. Individuals enter these contracts

believing that what they receive justifies the amount of effort they put in. The

relationship between many employees and their employer is a calculative

contract.

 Co-operative contracts. A co-operative contract is a contract between ‘equals’.

The individual identifies with the goals of the organisation and works hard to

achieve them. In return, the individual is rewarded fairly, and is given a chance

to participate in setting the organisation’s goals and deciding on the ways to

achieve them. Some organisations have adopted this approach to their

employees, but the relationship must be freely entered into by the employees.

1.9 McClelland: motivational needs theory

David McClelland (1917 – 1998) put forward a motivational needs theory, which he

developed into a needs-based motivational model.

He argued that there are three needs that are found in all employees. Everyone

displays all three needs, but one of the three needs is often dominant in affecting the

individual’s attitudes and behaviour. The three needs are:

 a need for achievement (‘n-ach’)

 a need for authority and power (‘n-pow’)

 a need for affiliation (‘n-affil’).

He identified the characteristics of individuals who are motivated mainly by the

needs for achievement, power and affiliation, as follows:

 N-ach person. This person seeks achievement. Targets for achievement should

be realistic but challenging goals. The person also seeks advancement in the job,

and has a need for:

- feedback: this is information about his achievements and progress towards the

goals – the individual needs to know whether or not the goals are being met

- a sense of accomplishment from achieving the goals.

 N-pow person. This person needs to be influential and effective, and to make an

impact. He has a strong need to lead, and for his ideas to be accepted rather than

the ideas of others. He needs status and prestige.

 N-affil person. This person needs friendly relationships and is motivated by

interaction with other people. He needs to be liked and held in high regard. He

makes a good ‘team player’.

Chapter 9: Motivation

McClelland argued that n-ach people make the best leaders. However, they can

demand too much from their employees, because they often assume that everyone

else is motivated by the same need for achievement that they have.

 N-affil individuals are usually poor leaders. This is because their need to be

liked will often affect their objectivity and prevent them at times from making

unpopular but necessary decisions.

 N-pow individuals are also poor leaders. They are often determined individuals,

with a strong work ethic and a commitment to their organisation and its goals.

However, they often lack ‘people skills’ (skills at dealing with other people) and

also lack flexibility.

Achievement-motivated individuals are usually the ones who make things happen

and get results.

 They set goals that they can influence (so the goals are achievable): this is a

characteristic of successful businessmen and entrepreneurs.

 They consider achievement more important than financial rewards.

 Achieving a goal or successfully completing a task gives them more satisfaction

than praise or thanks from others.

 Security and status are not prime motivators for them in their work.

 They are constantly looking for ways to do things better.

 Crucially, however, they need feedback about their performance. They must be

told about their actual performance and what they have achieved.

 For achievers, pay is a form of feedback about their performance. High pay and

bonuses are a measurement of their success in achieving goals.

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Reward systems and motivation

 Extrinsic and intrinsic rewards

 What managers can do to motivate staff

 The reward system and motivation

 Constructive feedback and motivation

2 Reward systems and motivation

2.1 Extrinsic and intrinsic rewards

For an individual, rewards from doing a job can be both extrinsic and intrinsic.

Extrinsic rewards are rewards that are outside the control of the individual.

Another person, often the individual’s boss, has the power to provide extrinsic

rewards. The main examples of extrinsic rewards are:

 basic pay (and the size of a pay increase)

 cash bonuses and incentive payments

 when the employer is a company, rewards in the form of share options or a gift

of some shares

 pension benefits

 free medical insurance (and other forms of insurance, such as disability

insurance, or even life assurance)

 the award of a company car, or a company helicopter or jet

 subsidised loans (these are loans from the company at an interest rate that is

lower than the normal market rate).

Intrinsic rewards are rewards that are within the control of the individual himself.

They include:

 a sense of achievement in doing the work

 a sense of recognition for doing the work

 enjoying the status that the job provides

 pride in doing the work

 personal satisfaction from doing the work

 a sense of responsibility, that the individual enjoys.

According to theorists such as Vroom and Handy, the strength of the motivation of

an individual depends partly on how strongly the individual wants these rewards –

and how big are the expected rewards.

Chapter 9: Motivation

2.2 What managers can do to motivate staff

There are differing views on how individuals are motivated. Consequently, there

are differing views about what management can do to improve the motivation of

their employees.

 There is a view that management must get the ‘basics right’ first: they must

offer a fair pay structure for staff and fair employment policies – to meet the

physiological needs and security needs of their employees (Maslow) or to

prevent dissatisfaction from employees (Herzberg).

 Herzberg argued that management should take some measures to prevent

dissatisfaction, but that a completely different approach is also needed in order

to create motivation. Herzberg believed that job enrichment was a key to better

motivation.

 Adams argued that the rewards system should be seen to be fair: however,

rewards can be intrinsic rewards as well as extrinsic rewards such as higher pay.

 McGregor and Argyris argued in favour of a participative style of management,

and getting employees involved in problem-solving and decision-making. They

argued that this management style gets more out of employees, and this

improves the performance of the organisation.

 McClelland argued that the best leaders were individuals with a need for

achievement. Management should therefore try to identify and develop high

achievers.

 One of the factors affecting the strength of motivation is the belief that the

individual’s efforts will lead to better performance. Managers should therefore

try to increase the strength of this expectancy. Vroom argued that managers

should give encouragement and advice to their employees, give them the

resources they need to accomplish their tasks and, where necessary, give them

suitable training.

 It can also be argued that managers can motivate staff by providing inspiring

leadership.

The ability of managers to motivate their employees may also be affected by the

differing needs of different employees. Whereas some content theorists (Herzberg)

argued that all individuals were motivated by the same needs, there are differing

views that:

 different people have different needs (for example, McClelland, Vroom)

 these needs can change over time (for example, Maslow).

It seems clear, however, that:

 managers can influence the motivation of their employees

 needs as well as rewards are an important factor in motivation, therefore

 managers must try to understand what the needs of their employees are, and

what rewards – intrinsic as well as extrinsic – will help to satisfy those needs.

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2.3 The reward system and motivation

The reward system refers to the system of ‘extrinsic’ rewards that an organisation

can give to its employees. The most significant extrinsic rewards are usually:

 pay (remuneration), and

 promotion or advancement.

Elements of pay include basic pay, bonuses, commissions, premium pay for

working overtime, pension rights and so on.

It is generally agreed that individuals need to be kept satisfied about their pay, in

order to avoid feelings of dissatisfaction or inequality and unfairness.

Dissatisfaction about pay will affect the attitudes and behaviour of individuals in

their work.

It is not certain, however, whether offering pay incentives will increase the

motivation of employees. (It is also not certain that extra motivation will lead to

better performance.)

 McClelland would have argued that pay rewards might be seen as a measure of

recognition and goal accomplishment by high achievers. Rewards in the form of

higher pay or bonuses may therefore be an important motivator.

 It may also be argued that getting paid more for better performance (for example

receiving a cash bonus) is important for many individuals, because the money

can be used to fulfil some important needs.

 Process theories of motivation often place strong emphasis on financial rewards,

because money can be used to buy satisfaction of many needs.

 There is also a view that group reward systems are able to improve the collective

motivation of teams.

However, as explained already, there is also a view that in many organisations, pay

systems do not provide motivation, and employees can be motivated by other

things, such as participation in decision-making or an ‘enriched’ job.

Performance-related pay for individuals

Even so, many organisations in practice do have systems for rewarding individuals

for the achievement of certain levels of performance or performance targets.

Performance-related pay may be cash bonuses or other forms of incentive.

 Cash bonuses are payments in cash that are related to meeting short-term

targets, such as meeting budget targets such as achieving or exceeding a profit

target. Sales representatives may be paid a sales commission based on the value

of sales they have won during a period of time. Performance targets do not have

to be financial targets: cash bonuses might be paid to an individual who achieves

a specific non-financial target, such as completing a particular task on time or

before a specified date.

 Incentives for the achievement of longer term goals are often paid to senior

managers, often in the form of company shares or share options.

Chapter 9: Motivation

If companies use a system of performance-related pay, they presumably believe that

the pay incentives are successful in motivating employees. If they did not think that

this was the case, there would be no point in offering the incentives!

It is also important to remember that rewards are not always given in the form of

pay. Promotion and recognition may be equally important to an individual.

However, there is a limit to the number of individuals who can be rewarded with

promotion, especially in small business entities.

Performance-related pay for groups

Cash bonuses might be paid to groups of workers, such as all the employees in a

department, section or project team. For group bonuses to be effective as a

motivator, however, it is important that individuals should identify themselves with

the group and should believe that the efforts of the group as a whole are capable of

earning a bonus.

A problem with group bonuses, however, is to decide how the total bonus for the

group as a whole should be divided between the individual group members. If the

basis for sharing the bonus is seen as unfair, a bonus payment might create

resentment and arguments rather than act as a motivator.

Company-wide bonuses

Sometimes a company pays a bonus to all its employees, particularly if it has had a

highly profitable year. For example in 2007, UK stores group Marks and Spencer

announced strong profits growth for the previous year and a £91 million bonus to

be shared by all its employees as a reward. Such a bonus might help to persuade

employees to remain with the company, but it is doubtful whether it can be effective

in motivating individual employees to do their work more efficiently or effectively.

Bonuses and performance

For a cash bonus scheme to be effective, the payment of a bonus should be clearly

linked to the performance of an individual (for individual bonuses) or a group (for

group bonuses). A clear link can only be established when the following conditions

apply:

 The performance of the individual or group can be measured.

 The individual or group can affect the measured performance through efficient

or effective working. As stated in some of the earlier descriptions of motivation

theory, there should be a connection between effort (motivation) and outcome.

2.4 Constructive feedback and motivation

Process theories of motivation emphasise the importance of:

 the link between putting in more effort and improving performance (or reaching

targets), and

 the link between reaching targets and obtaining rewards.

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Individuals need to know how they are performing, and whether they are on course

for achieving their goals.

If they are not on target for achieving their goals, they need to be given advice and

guidance from their boss.

The process of providing information to individuals about their performance is an

example of feedback. Feedback should be constructive and helpful, rather than

critical, to maintain the motivation of the individual. If individuals are criticised in a

negative way for failing to reach their goals, their motivation will disappear.

A system for providing constructive feedback about performance (but not the only

system) is a system of job appraisal. This was described in an earlier chapter.

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AccountantinBusiness

CHAPTER

Recruitment and selection

Contents

1 The recruitment and selection process

2 Effective recruitment

3 Job descriptions and person specifications

4 Job analysis

5 The changing nature of employment

6 Selection methods

7 The selection decision

8 The selection interview

9 Equal opportunities and the management of

diversity

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The recruitment and selection process

 The importance of effective recruitment and selection

 Stages in the recruitment and selection process

 Roles and responsibilities for recruitment and selection

 Recruitment and the HR plan

 Reasons for ineffective recruitment and selection

 Evaluating the recruitment and selection process

1 The recruitment and selection process

1.1 The importance of effective recruitment and selection

The people who work for an organisation are extremely valuable assets. Without its

employees, an organisation would not exist and could not operate. The efficiency

and effectiveness of an organisation depend on the skills and abilities of its

employees.

Over time, changes occur in the work force.

 Some existing employees leave the organisation, for example to take a job

somewhere else or on retirement.

 Employees who have acquired enough skills and experience might be moved on

to other jobs within the organisation that make better use of their developing

talent.

 The labour requirements of the organisation will change, as new jobs are created

and old jobs are no longer required. People are recruited to fill the new jobs,

with new skills. Some existing employees might be made redundant.

Changes in the work force must be properly managed, in order to make sure that

the work force remains efficient and effective. It is therefore important to make sure

that job vacancies are filled when they occur. It is also important to make sure that

suitable individuals are appointed to do the jobs.

1.2 Stages in the recruitment and selection process

Recruitment and selection are two stages in the process of filling job vacancies.

 Recruitment starts when a job vacancy is identified. It is the process of obtaining

a supply of suitable possible candidates to fill the vacancy. When job vacancies

arise, an organisation needs a number of individuals to choose from, and these

individuals:

- must seem able to do the job and

- should also want to do the job.

 Selection is the process of appointing the most suitable candidate to a job

vacancy, by choosing the best individual from the candidates available.

ACCA F1 Accountant in Business - 2010 - Study text - Emile Woolf Publishing

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