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Within every organization, the motivation of employees represents one of the main factors influencing the worker's attitude and the effective work performance. Ultimately this can determine the success and profitability of the organization as well as its susceptibility to change if needed. Applying key motivation concepts and theories, the role of rewards in motivation as well as job satisfaction and performance into Nucor Corporation model we can state that the company realizes the importance of employee's motivation building a working model that encourages and motivates their employees to achieve the highest standards.
The concept of motivation lies in the driving force of the individual through which tries to achieve a particular goal in fulfilling a need or expectation. Individuals are motivated when expecting that a particular course of action leads to the accomplishment of their goals thus satisfying their needs.
According to Hertzberg et al there are two types of motivation: intrinsic and extrinsic. Intrinsic motivation was described as "motivation through the work itself". This occurs when individuals perceive the their work as challenging, important and interesting as well as involving autonomy, freedom to act, purpose and the development of skills, ability and opportunity for steady progress and growth.
Extrinsic motivation focuses on the actions towards the people in order to be motivated such as an increase in wages, promotions and recognitions. Extrinsic motivation also includes negative elements meant to channel one's work such as criticism and disciplinary actions such as pay-cuts. Although very effective and powerful in the short-run they prove to be ineffective on the long run. Most companies that follow an employee motivation strategy tend to focus on the intrinsic motivators which are meant to build a long-term effect coming from within their employees not from the outside. Needles to say, both types of motivation are important and complement each other.
The main characteristics of intrinsic motivation are found in the design of the job and focus on discretion, autonomy, responsibility and self control. When employees can make use of their abilities, and constructive feedback is available, employees not only feel that their work is appreciated, but also constantly improves the "quality of their working life."(Taylor, 1911)
Although throughout history, the loyalty of employees was maintained through higher wages and a gradual progression in the firm's hierarchy, motivation has shifted its base to values rather than pure financial reward (Grayson, Hodges, 2001)
According to a recent study from the Economic and Social Research that analyzed the main influences in employee productivity and behaviour has shown that employees are guided also by social norms rather than financial incentives. These elements interact having a significant impact on the organisation's performance. (Huck, Kubler and Weibull, 2003)
3. The role of rewards and incentives in motivation
Rewards act as motivators when they are attainable and worth having by people who know they can attain them. They provide the recognition of their achievements and work contribution and can be financial as well as non-financial. Just as rewards, incentives are meant to stimulate employees into achieving their goals. They do so by directly motivating them through financial means but also promotions and recognitions.
4. Motivational Theories:
Maslow's hierarchy of needs
Hertzberg's two factor theory
Expectancy, goal and equity
a. Maslow's hierarchy of needs
The basis of Maslow's theory is the belief that tension and disequilibrium are the direct effect of unsatisfied needs. In order for the balance to be restored, a goal needs to be identified which will satisfy the need by selecting a behaviour pathway that leads to the objective. In a simpler way, unsatisfied needs motivate behaviour.
Depending on the individuals background and situation needs don't carry the same importance, some constituting different drives towards the objective than others. There is no simplistic relation between the goals and needs since the same need can be satisfied by different goals, while a goal can satisfy a diverse number of needs.
Maslow's framework conceptualizes a hierarchy of needs starting with the physiological needs leading onwards to the self-fulfilment which is the highest.
The problems with Maslow's theory lies in the fact that individuals don't satisfy their higher needs just through their work but through others areas of life as well. Also, there are individual differences in a sense that different values are placed on the same need. There are many ways people pursue satisfaction of their esteem needs since motivating factors are not the same even for individuals in the same hierarchical level.
A good example regarding the fulfilment of the basic needs and
b. Hertzberg's two factor theory
The factors responsible for the increase in job satisfaction are different from the factors that cause dissatisfaction is at the basis of the motivation-hygiene factors theory. The first factors are satisfiers (motivators) which are intrinsic to work such as achievement, responsibility and growth. The second group are called "hygiene factors" which are extrinsic including company policy, wages, and relations in the organization, security and status. Although these cannot create immediate satisfaction the opposite can occur unless preventive measures are taken. Any satisfaction that resulted from a salary increase is relatively short when comparing to the longer lasting satisfaction from the work itself. More concrete, the research has shown the financial benefits constitute a motivator only in a short term and that an unbalanced system of payment can lead to the opposite, demotivation.
c.Process or cognitive theory
Extensive research has shown though that there are more relevant approaches such as the process or cognitive theories. Due to their psychological forces that affect employee motivation as well as basic needs they are know as process theories. The cognitive aspect of them relates to the perception of the work environment and the ways of understandment and interpretation. In that respect, process theory is more useful than needs theory since it can provide a more realistic approach to techniques of motivation. Most relevant theories cover processes such as:
Expectations- Expectancy Theory
Goal Achievement- Goal Theory
Feeling about equity- Equity Theory
Developed by Porter and Lawler in a model following Vroom, is suggests that there are two factors which determine the effort put in the job. One is the value of the rewards in regards to satisfaction related to security need, autonomy, esteem, and self-actualization. The second relates to the probability of an effort dependent reward or their expectations in regards to effort vs. the reward. Therefore, if the value of the rewards set is greater, then, the probability that these rewards are received is dependent on the greater the effort in a certain situation.
According to Porter and Lawler, (graph 1) effort is not all that it takes. In order to achieve the desired performance, the effort has to be effective. There are 2 variables that in addition to this effort can impact the task achievement: ability and role perceptions. Ability focuses on the individual traits such as the know-how, skills and intelligence and the role perceptions focus on the required task. From the viewpoint of the organization, role perceptions are a positive thing as long as they are corresponding with what the employee should been doing. In the case that the individual's point of view and the organization view is not the same, role perceptions are poor.
The goal theory by Latham and Locke implies that
motivation and performance are higher when specific goals are set to employees
the goals are high in difficulty but accepted
Feedback on performance is present
In this case, the participation in the setting of the objective has a high importance through its means of strengthening the agreement of setting higher goals. The achievement of difficult goals has to be aided by advice and they have to be agreed upon. Goal theory is important since it provides the theoretical support to important processes such as MBO are in which the focus was on setting objectives as well as measuring the performance. Although bureaucratic and over-expressed in terms of quantification of targets they are still the foundation for traditional pay-schemes based on performance where financial rewards are given by the objectives and their measurement.
The theory states that better motivation in individuals or lower motivation lies in them being treated equitably or inequitably thus is concerned with the employees perception of their treatment compared to others (Adams, 1965) Based on a reference group, equitably refers to the fair treatment of the individual compared to this group involving feelings and perceptions being at all times a "comparative process". This is connected with Jacques "felt-fair" principle that "pay systems will be fair if they are felt to be fair"
5. Motivation and Financial Incentives and rewards
Since people need money, they want money, therefore is no secret in the fact that incentives and rewards can motivate. According to Wallace and Szilagyi money can serve several functions in terms of rewards. Money can be seen as a goal that individuals seek, a tool providing valued outcomes, a symbol indicating the employee value to the company or since its association with value rewards as a general reinforcer.
The motivation behind money is connected in a direct or indirect way to the fulfilment of a broad range of needs from the basic sustenance to the self-esteem need and status. Even though, money alone has no intrinsic meaning, it has a high motivational power due to being the symbol for various intangible goals. At the same time since it is a major factor in choosing your employer as well as an essential in the decision of either staying or leaving an organization. Some people are more motivated than others.
Pfeffer states that "People do work for money, but they work even more for meaning in their lives. In fact they work to have fun. Companies that ignore this fact are essentially bribing their employees and will pay the price in lack of loyalty and commitment". On the other hand, according to Gupta and Shaw focus on the basic behaviour approach stating that "while employees will do the things for which they are rewarded, it also means that they will ignore the things for which they are not rewarded"
6. Factors affecting satisfaction with pay
Generally, employee's attitudes in regards to how adequate their financial rewards are always based on the comparisons made in regards to others (Lawler, 1990)The most critical comparisons are made in rapport to the external market since this is the strongest factor influencing employees in their belonging with the company. Another common trait is that most of the times they are never satisfied with their pay.
The individuals reactions to the company's reward policies as well as practises is dependant mostly on the needs and values of that particular individual as well as the conditions of their employment. Although it is hard to generalize the reasons of satisfaction and dissatisfaction, internal and external equity feelings have a strong influence on most people. As mentioned in the previous points, the research of Porter and Lawler has evidentiated that employees that are higher paid can be more satisfied with their pay although a short-pay satisfaction can have a short-term effect?
7. Motivation and job satisfaction and performance
Although very little research has been conducted on the issue, there has always been a tight connection and a positive relation between job satisfaction and performance into the extent that "a satisfied worker is not necessarily a high performer and vice-versa" The relationship is reciprocal since job satisfaction leads to good performance just as good performance leads to satisfaction.
We have to acknowledge that when it comes to motivation and performance, things get a little more complex. A recent reformulation of Vroom is done by Boxall and Purcell:
P = M + A + S
S- Scope to develop abilities
By including A and S as factors, Boxall and Purcell formulation state, that adopting integrated approaches to rewards as well as Human Resources Strategies is highly important, since paid motivation is not sufficient thus reward strategies have to be in association with HR development and sourcing strategies for a maximum impact on performance.
8.The Nucor Corporation Case
Environment at Nucor
Nucor Steel Corporation is one of the largest steel companies in the United States employing over 11,300 non-unionized employees, all taking part in their unique approach of work. At Nucor Steel, a more social environment is encouraged and the traditional hierarchies found in the workplace are broken down to a certain extent. Employees are greatly valued within the company, and are communicating effectively with the management who gives their ideas a chance. In the same extent of this organizational culture, CEO's fly commercial, do not have an executive parking and related to the workers by plain communication without the use of standardized formalities. While the typical CEO earns over four hundred times the amount of a worker, a Nucor's CEO earns only twenty three times more than an average Steelworker in the company.
One of the most important motivational schemes here is the payment plan for employees. While other companies use a fixed rate, Nucor uses a pay-for-performance scheme bases on how well the workers perform. By emphasizing quality through the production of defect-free steel, the employees can earn three times the amount the average steel worker at another company can make. In 2005, a Nucor employee earned on average 79000$, adding a 2000$ bonus as well as an average of 18.000$ in profit sharing. (Business Week, 2006) As they are rewarded for good performance, bad performance can cause them to loose these bonuses. The pay-for-performance system carries on to high-level employees as well. To that respect, managers are paid based on department performance while an executive's pay is mainly based on teambuilding. Teamwork is also encouraged through the comparison of the entire corporation's return on equity.
The approach encouraging productivity at Nucor is working since from 2000 to 2005 it has increased its sales from $4.6 billion to 12.7$ and the net income from $311 million to $1.3 billion. (Business Week, 2006)
Nucor establishes a good example in relation to the importance of employee motivation and how it can greatly influence a company's success.
The pay-for performance system becomes a well known topic in Organizational behaviour.
In this king of model, the employees are paid on the basis of the measure of their performance, in Nucor Corporation on how good the employees can produce the steel without any form of defect. Through the use of this system, the employees have a higher motivation to work even harder since the quality of their performance is directly linked to their earnings. On the other hand, this is also benefic for the company since production and revenue increase with it. The company also uses a profit-sharing system of financial incentives in order to motivate their employees. In these types of systems, a part of the profit of the company is divided with the employees also depending on the quality of their performance. The effectiveness of the system, here, lies in the tie it creates between the company's overall success and the work of its employees. This fits perfectly in the models describe above including in the Boxell and Purcell mode in terms of P, M, A and S.
Employees here, have an increased motivation since they have realized that their work is valued greatly in the company since it intertwines its success and respectively its earnings.
Even though the pay-for-performance system has extended benefits, it has also its downfalls. Being based on extrinsic factors of motivation is questionable if it can motivate all employees in every situation. For example as mention in the previous points, not all the employees are motivated by extrinsic rewards, focusing more on job enjoyment. Another downfall of this system (P for P) is the restriction of teamwork by the encouragement of competition between the employees which are set to outperform each other.
In regards to the motivational theories discussed above, several can be found in Nucor's program if employee productivity. The company is creating an increasing social environment within the workplace by the breakdown of the hierarchies thus creating a relational link among management and steelworkers.
The sense of empowerment is always given in the company, through the managers who take their time to listen to the workers and open up to ideas
This particular element is found in the need to affiliate in McClelland Needs Theory where, by satisfying the need, it makes the workers more prone to be motivated.
The productivity program at Nucor relates to the consistency theory as well, due to the fact that the employees are paid based on job performance hence are motivated by the sole expectation that naturally a larger effort will eventually lead towards greater job performance. (Expectancy theory).Also, in the same context greater performance will lead to greater rewards which will further lead them towards their own personal objectives.
The goal setting theory also applies here since the workers may establish their own goal to make a certain quantity of steel/company profit to ultimately lead to a higher wage. In that respect, goal setting provides motivation since they aid direct effort an attention towards a specific goal. The idea of positive reinforcement is also used by the company in order to motivate their employees by the increase in pay with every time they have met the company's objectives and repeat the same behavior.