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Motivation is the best way in which employees can encourage for doing a good job. Motivation will help the success of the organization. With the help of well motivated employees organization can increase the product and service, profits and the workforce of employee into its maximum. (Buelens M., et al 2006, p: 197)Â Before introducing motivation in an organization its must to find out the main factors which motivate the employees and have to do through research that by implementing it what are the changes it's going to bring to the organization whether it's good or bad. (Kreitner R., et al 2002, p: 176)
Motivation will make the employee feel that they are worth working for the organization, which will help them to achieve their goals; it's much more than just pays. (Van Dyk, et al (2001 P: 326) There is lot of different types of motivation and merits given for employees in an organization. The most challenging part of HR management is to find out what type of merits will help the employees to bring his/her maximum potential and what are the factors should organization consider before giving merits to employees.
Motivation of employees start with the environment where they work, the company has to take good care about the employees Health & Safety. They have to provide the employee with a nice comfortable place to work. Workplace environment is one of the main things which impacts on the performance of the employee and have to provide with enough breaks. And providing the employee's resources and the training provided on adequate time and interval help them to achieve new skills and help them to increase their productivity and change the mentality towards the company , which make them feel like they are worth full to work with the company (Buelens M., et al 2006, p: 197).To get maximum output from the employees company have to show them that the employees are valuable , by giving them adequate training and put up a promotion plan and pay rise for the employees who works well which will help the employees motivation.
There is a lot arguments going on about the merits and the demerits of employees motivation. There is not set rules about how to motivate the employees. Employers follow different ways to motivate the employees, they are primary motivation, secondary motivation, extrinsic motivation, internal motivation and successful motivated behavior (Buelens M., et al 2006, p: 201). The employers are confused at what point should reward employees. Rewards and merits are used to motivate certain behaviors, but at what condition will rewards work out that's the big question.
There are different types of merits and profit sharing followed by organizations. By giving out merits and rewards at the right time help to encourage the employees and work wells in the organization. Some companies do follow including employees as there share holders which increase the responsibility of the employee.
It's all starts from Motivation
2. Motivational Theories
There are lot of views and theories about motivation for employees which adopt and acquire in last 100 years. Organizations continuously access the employees in various ways and decide to give the rewards share profits and all those merits. This help the employees well motivated and make them feel to work more successfully and error free. There are two different types of motivation theory content theory and process theories. Content theory explains the motivation in terms of personal needs and satisfaction. Process theory explains the motivation as a rational cognitive process for each individual.
2.1 Maslow's Theory
A.H Maslow an American psychologist put forward a theory that everyone work to get their deficiency needs. First they need to satisfy their survival needs. After the needs are met they will try to safe and secure. Once people feel they are safe and secure they will look forward for social life, they try started to make friends and involve in social activities. All this is for good reputation in the society. Finally Maslow said there is last step called self actualization needs another way called ambition or goals. People set new targets once they succeeded in previous goals called Growth needs. The Succession of these different needs is called hierarchy of needs. Â (Buelens M., et al 2006, p: 177).
2.2 D McGregor's Theory
Mc Gregor put of two types of Theory X and Theory Y. He point out the views of employees and employer attitude towards each others. Theory X says Employers just paid the money, supervise and give instruction about the job. The employees will do the job, haven't got any questions and get paid just take the money. Theory Y is just opposite to Theory X. Theory y employees enjoy their work and they are self motivated to work hard where they can work without supervision and the more they will trustworthy and reliable. Mc Gregor believed that the people in Theory Y can work more efficient and can be managed well so employers will get the maximum workforce from them. (Buelens M., et al 2006, p: 186).
2.3 Herzberg's Theory
In early 1970 Herzberg put forward assumption after conducting interview between 200 engineers and accountants employees to find out what are the factors affects the motivation and the work of them. And after the several set of interviews he put forward a two factor theory which affect the employee's motivation and work in the organization and it has been widely accepted by the organization (Buelens M., et al 2006, p: 185). According to Herzberg's theory the two factor affects on employees are Hygiene factor and Motivation factor. Hygiene factors such as salary, job status, security and incentives for the employers all this will help to satisfy there personal needs. Motivation factors like responsibility at work, job recognition, challenging at work will help to increase his knowledge and help him to achieve higher goals within the company itself. Motivation factors won't affect the satisfaction of the employee but the hygiene factors of employees will affect the motivation.
3. Different types of Merits and Rewards
There are different types of merits and rewards followed by organization. And it decides by accessing different factors of employees as well as how well the organization doing out. The main type's merits and rewards used by organization are ESOP, Profit sharing, Scanlon plan, Annual Bonus, Gain sharing and Merit plans.
3.1 Employee Stock Ownership Plan (ESOP)
Some of the organization follows Employee stock ownership plan in which organization entirely or to some extent owned by the employees it self. After working considerable time in the organization and showing brilliance performance within the organization the management let the employee to buy shares of the company and where employees will get the dividend of the profits to. The share hold employees can select the board directors and also they can report to the higher management about the key performance have to improve as well as the problems.(ESOP centre 2010) ESOP help the employees to improve their commitment make them feel better in terms of ownership and that leads to the increase productivity and profitability of organization. By helping key workers to take shares organization can hold there service. There are different types of ESOPs used by companies they are
1.Company share option plan- where after spending considerable time in an organization and showing improvement through out the job organization allow workers to participate in the shareholding which organization share the profit among the employees.
2. Approved profit sharing- This kind of ESOPs allows the returns to a trust they buy the shares of company and later it will share in between the employees.
3. All employees share option plan- Some companies spread the rewards among the all employees i.e. rewards or risk both will shared between the employees, it's a most highly cost-effective way of providing long term reward.
3.1.1 Advantages and Disadvantages of ESOP
There are some advantages and disadvantages of ESOP from the point of organization before applying ESOP organization have to check the following things.
The important advantage of ESOP is that it allows the owner to sell part of business and still can be on control. And if the companies shared to outside some one there is risk of negotiation in terms salary and other finance but if its sell among the employees he don't have to worry about it ,and he have the freedom to dispose the company whenever he wants.
Organization get exempted of tax according to value of the share holders in the company thus it help the organization spent less on taxation.
Give more tax exempt earnings for the organization.
The dividend is comparatively less if the shares purchased with the loan by the ESOP i.e. the employer having to pay more to pay the loan back.
The equity of the company will affect if the value of ESOP is so high. if the organization lent money and invest it on ESOP to buy shares that will resemble on the balance sheet as the liability of the company.
if the share sold to the ESOP is overvalued then the organization have to pay penalty tax when the time of selling.
Share value of the organization will go down if the performance of organization is not good.
Procter & Gamble Co - its one of fortune 500 multinational company situated Cincinnati OH founded on 1837 currently with around 40000 of employees in it ESOP holding shares. P&G starts it ESOP in 1989 by borrowing around $1.0 billion dollar to buy the share through ESOP. (Procter & Gamble 2010)
Sherwin Williams company which established in 1866 Cleveland OH , employs around 30000 employees and start ESOP by spending $200 billion dollars to buy the share.(Sherwin Williams 2010 )
Marriott Corporation:Â Marriott Corporation ESOP purchased $1.0 billion in employer securities by the ESOP.(Marriot Group 2010)
4.1 Profit sharing
Organization shares it profits among the employees in terms bond, share or cash is called profit sharing. The shared profits are not tax deductable the percentage of the contribution depends on the experience and the success of the employees in the firm itself (Bob Nelson 2008). The employees can withdraw the money by the time of retirement, some companies let the employees to withdraw the money before they retire. This is an additional pay which get to the employees and help them motivate and improve their efficiency and over all attitude towards the organization.
4.2 Types of Profit Sharing
Performance- Based incentives
Direct Cash and bonuses- employees get paid extra for extreme level of performance, the employees have to pay the tax for the extra incentives paid for them.
Deferred compensation plans - the employer paid the bonuses to pension trust and the employee can withdraw the amount by the time of the retirement and have to pay the tax for the amount.
4.3 Advantages and Disadvantages
Help to increase the motivation of employees.
Employees will start working along the organization to be success in the market.
Employees will start to work as a part of the company.
Helps to change the vision of the employee same as the organization, both of them work for the common goal.
Organization get more committed and trustfully employees.
Help the organization to hold the key workers.
The salary of the employees goes up.
A slight percentage of employees will just concentrate only on profit.
Some of the employees may withdraw the amount before the retirement.
Examples for Profit sharing organization
Beachcroft LLP - one of the biggest law firm in UK with more than 1500 employees, share there annual profits among the employees.(Beachcroft shares, 2010)
Vitabiotics - one of the pharmaceutical company in UK provide profit sharing for the employees and share holders.(Vitabiotics shares and benefits 2010 )
ADMIRAL GROUP- A leading car insurer group in UK, employing 2857 staffs. Admiral shares acquired profit dividend to all the employees.(100 best companies in UK ,2010)
5.1 Scanlon plan
Scanlon plan was introduced by Joseph N Scanlon in 1930.Organization follows Scanlon plan program is a formula-based bonus system. The simple formula is base ratio = HR payroll costs/net sales. A Scanlon organization will pay when the current ratio is better than that of the base period.Â
5.2 Advantages and Disadvantages
Reasonable amount to implement.
Scanlon plan are very flexible.
Employees will have to pay the tax for the deduction.
Labor cost is minimized without lowering the performance of the company.
A bit complicated to manage.
The bonus pay to the whole employees is only by considering the overall performance.
Its time constrained project to implement in an organization
1. Rackspace Hosting IT services- an IT company based in UK provide staff with Scanlon plan including free health care and child care .( 100 best companies in UK ,2010)
2. Microsoft IT internet service - one of the world wide known IT company provides Scanlon plan for the employees. (100 best companies in UK, 2010)
3. Experian QAS Data Management - The organization follows Scanlon plan for the employees. (100 best companies in UK, 2010)
4. Blue Arrow- With more than 120 branches in UK offering employees annual bonuses. (100 best companies in UK, 2010)
5. Just Retirement Financial services- company provides Scanlon plan to employees. (100 best companies in UK, 2010)
6.1 Annual Bonus
Annual bonus is one of the main motivation most of the companies been using from the beginning. There is a lot factors which organization consider before giving bonus to the employees. Organization thoroughly monitors the performance of the employees on key factors such as customer care, quality of the work and time keeping. Whether the employee helping to improve the value of the organization. The annual bonus sort of thing will increase the motivation of the employee as well as that's help the organization to get loyal employees and change of resistance from the employees will be comparatively less.
6.2 Advantages and disadvantages
It helps the organization to improve the quality of the work.
Helps the organization to improve its brand
Reduce the unwanted absence of the key workers
Employees are highly motivated and improve their skills
It helps to finish the tasks on time
Bonus is paid upon individual performances
Some time the target set for the employees and some times they think it won't be achievable and they will demotivate because of that.
It's very difficult to set the performance factor for giving the performance.
The target set by the organization makes employees to concentrate on it, which affect on the lack of creativity and innovation.
Its very difficult to implement bonus scheme for all the employees, some kind of job organization can't put any performance factor to give the bonus.
1. Office Angels- One of the main recruiting agency in UK provide bonuses and other rewards to the employees such as air ticket, and other cash discounts. (100 best companies in UK, 2010)
2. Think Money Group in UK is one of the debt advice companies in UK, where staffs entitled to discounts and other bonuses. (100 best companies in UK, 2010)
3. SAS IT Service- Company provides business analytical software which established in 142 countries provides Annual bonuses and other rewards to all of their employees. (100 best companies in UK, 2010)
7.1 Gain sharing and Merit plans
Organization gives direct or indirect payment to employees on top of the basic salary based upon the performance and profitability of the organization is called Gain sharing. The organization has to decide it how much profit can share and how it can be divided among the employees. Employees also can contribute money with the organization and can claim back on the end of the year.
7.2 Advantages and Disadvantages
Employees get Tax deduction for the contribution they made along the organization when they claim it back at year end.
Profit sharing will increase productivity of the organization , employees knows by increasing the productivity they will entitled to get rewards for that and this help them to motivated.
It helps the performance of the organization
Employees will be much creative and innovative, because they know it will benefit them to rewards on top of salary.
Organization will be attractive in job market by announcing extra rewards for key workers.
The pay for the employees varies.
Employees only focus on the profitability which affects cost of production of organization.
If it's not properly managed that affect the organizations budgets.
Small organization it will some times bring negative impact on employees.
1. Totemic Financial services - currently employed around 500 staffs and following a gain share reward scheme for the staffs and help them to get into train to achieve new skills.
2. The yellow bus company - based in New Zealand using gain sharing from the beginning of 1990s itself.
Based on the studies a good salary is the main motivating factor for the employee. It's a must to organization to use some kind of motivation for the employee, for better performance, profitability and to achieve main goals of company. After studying various type of motivation in an organization I strongly feel like it better to follow Gain sharing and merit plans, it's both ways good for the employees as well as the organization. From the organization point of view it helps to motivate people focus on the job as well as to maintain the quality of the product. It helps the organization