Employee compensation plays such a key role because of the

following reasons

1. It is at the heart of the employment relationship, being of critical importance to both employees and employers.

2. Employees typically depend on wages, salaries, and so forth to provide a large share of their income and on benefits to provide income and health security.

3. For employers, compensation decisions influence their cost of doing business and thus, their ability to sell at a competitive price in the product market.

4. In addition, compensation decisions influence the employer's ability to compete for employees in the labor market (attract and retain), as well as their attitudes and behaviors while with the employer

Motive comes from the Latin for ‘move.’

Motives are a special kind of cause which energize, direct and sustain a person’s behaviour (including hunger, thirst, sex and curiosity). (Rubin and McNeil, 1983)

The degree to which an individual wants and chooses to engage in certain specific behaviours. (Mitchell 1982)

Need Drive SatisfactionGoal

A lot of our motives are said to be cyclic.

Externalstimulation

Motives tend to be divided into two groups.

Primary motives (basic drives) innate/inborn. Purpose:- self preservation/species preservation.

Secondary motives:- learned, Acquired as part of the socialisation process.

Only consider our secondary motives once our primary motives have been satisfied.

Primary motivesHungerThirstSleepTemperature

regulationEliminationAvoidance of painSex

Secondary motivesGregariousness

(common social motive)

CuriosityAmbitionCompetitionAggressionInterestsAttitudes

3 Groups of Motivational Theories

InternalSuggest that variables within the individual give

rise to motivation and behaviorExample: Maslow’s hierarchy of needs theory

ProcessEmphasize the nature of the interaction

between the individual and the environmentExample: Expectancy theory

ExternalFocus on environmental elements to explain

behaviorExample: Two-factor theory

Content Theory Models

The Hierarchy of Needs Theory (Abraham Maslow: 1943)

The ERG Theory (Alderfer: 1972)

The Acquired Needs Theory/ Achievement Motivation Theory (Mc Clelland: 1961)

The Dual Factor Theory (Herzberg: 1968)

Process Theory Models

Theory X and Theory Y (Mc Gregor: 1960)

Expectancy Theory(Vroom: 1964 and Porter & Lawler: 1968)

Equity Theory(Adams: 1965)

Content Theory Models

Physiological

Safety & Security

Love (Social)

Esteem

SA

Lowes

t to h

ighe

st or

der

Physiological Needs:- Needs for food, drink, oxygen, sleep,

protection from extreme temperature.

Safety Needs:- Ensure a reasonable degree of continuity,

order, structure, and predictability in one’s environment

Love needs:- Affectionate relations with

Friends,family,and people in general, and group acceptance.

Self – esteem Needs:- Consists of self respect and self

esteem from others. Need for Independence, freedom, competence personal strength.

Self – Actualization Needs The desire to become everything

that one is capable of becoming. To reach the peak of one’s potential

2. Alderfer’s ERG Theory

This a modified need hierarchy model and it condenses Maslows five levels of need into only three levels based on the core of:

“Existence”“Relatedness”“Growth”

Alderfer’s ERG Theory

Physiological

Safety & Security

Love (Social)

Esteem

SA

Existence

Relatedness

Growth

Existence Needs are concerned with sustaining human existence and survival and cover physiological and safety needs of a material nature.

Relatedness Needs are concerned with relationships to the social environment and cover love or belonging, affiliation and meaningful interpersonal relations of a safety or esteem needs.

Growth Needs are concerned with the development of potential and cover self-esteem and self-actualization.

3. Herzberg’s Two-Factor Theory

Hygiene Factor - work condition related to dissatisfaction caused by discomfort or painmaintenance factorcontributes to employee’s feeling not

dissatisfiedcontributes to absence of complaints

Motivation Factor - work condition related to the satisfaction of the need for psychological growthjob enrichmentleads to superior performance & effort

Motivation–Hygiene Theory of Motivation

Hygiene factors avoid job dissatisfaction

• Company policy & administration

• Supervision• Interpersonal relations• Working conditions• Salary• Status• Security

• Achievement• Achievement recognition • Work itself• Responsibility• Advancement• Growth

• Salary?

Motivation factors increase job satisfaction

Motivation-Hygiene Combinations

High M Low M

High H high motivation few complaints

low motivation few complaints

Low H high motivation many complaints

low motivation many complaints

(Motivation = M, Hygiene = H)

Individual—Organizational Exchange Relationship

Organizational goals Departmental objectives Job tasks

Physiological needs Security needs Physical needs

Company status Benefits Income

Developmental potential Employee knowledge Employee skills and

abilities

IndividualOrganization

Dem

ands

Con

trib

utio

ns

4. Mc Clelland’s Achievement Motivation Theory

Mc Clelland identified different motivational categories of people and if you could identify which category a person fell into it would help establish patterns of motivation would lead to effective performance and success at work.

McClelland’s Need Theory:Need for Achievement

Need for Achievement - a manifest (easily perceived) need that concerns individuals’ issues of excellence, competition, challenging goals, persistence, and overcoming difficulties

McClelland’s Need Theory:Need for Power

Need for Power - a manifest (easily perceived) need that concerns an individual’s need to make an impact on others, influence others, change people or events, and make a difference in life

McClelland’s Need Theory:Need for Affiliation

Need for Affiliation - a manifest (easily perceived) need that concerns an individual’s need to establish and maintain warm, close, intimate relationships with other people

Self-actualization

Maslow Alderfer McClelland

HigherOrderNeeds

LowerOrderNeeds

Esteem selfinterpersonal

Safety & Security interpersonal

physical

Need for Achievement

Need for Power

Relatedness Need for Affiliation

Existence

Growth

Belongingness(social & love)

Physiological

1. Motivational Theories X & Y(Mc Clelland)

Physiological

Safety & Security

Love (Social)

Esteem

SA Theory Y - a set of assumptions of how to manage individuals motivated by higher order needs

Theory X - a set of assumptions of how to manage individuals motivated by lower order needs

McGregor’s Assumptions About People Based on Theory X

Naturally indolentLack ambition, dislike

responsibility, and prefer to be led

Inherently self-centered and indifferent to organizational needs

Naturally resistant to changeGullible, not bright, ready dupes

McGregor’s Assumptions About People Based on Theory Y

Experiences in organizations result in passive and resistant behaviors; they are not inherent

Motivation, development potential, capacity for assuming responsibility, readiness to direct behavior toward organizational goals are present in people

Management’s task—arrange conditions and operational methods so people can achieve their own goals by directing efforts to organizational goals

2. Equity Theory

This theory was developed by J. Stacey Adams

Adams' equity theory builds on Maslow's Hierarchy of Needs and Herzberg's Two Factor Theory, and was first presented in 1963

The essence of Equity theory is that employees make comparisons of their efforts and rewards with those of others in similar work situations

Adams describes this comparison in terms of input/outcome ratios

Adam's Equity Theory also means that employees will become de-motivated if their perceived input is greater than the output from the company

consider the balance or imbalance that currently exists

between your employee’s inputs and outputs, as follows:Inputs typically include:

Effort Loyalty Hard Work Commitment Skill Ability Flexibility Tolerance Determination, etc

Outputs typically include

Financial rewards (salary, benefits, perks, etc.) Intangibles that typically include:

Recognition Reputation Responsibility Sense of Achievement Praise Stimulus Sense of Advancement/Growth Job Security

Equity is represented schematically as: Person’s outcomes = Other’s outcomes Person’s input Other’s inputs

Inequity is represented as follows: Person’s outcomes < Other’s outcomes Person’s input Other’s inputs

Or Person’s outcomes > Other’s outcomes Person’s inputs Other’s inputs

3a. Vroom’s Expectancy Theory of Motivation

Victor Vroom was the first behavioral scientist to propose an expectancy theory to explain work motivation.

According to Vroom, the content theories of work motivation not provide an adequate explanation for the complex process of work motivation.

Therefore, as an alternate, he proposed the explanatory theory of work motivation.

Theory is based on 3 variables :-

1.Valence

2.Instrumentality

3.Expectancy

Also known as VIE theory

Performance RewardEffortEffort

Perceived effort–performance probability

Perceived value of reward

Perceived performance– reward probability

“If I work hard,will I get the jobdone?”

“What rewardswill I get when the job is well done?”

“What rewardsdo I value?”

3b. The Porter-Lawler Model

The Porter-Lawler model was developed by Lyman W. Porter and Edward E. Lawler 111 as an extension of Vroom’s expectancy theory.

They tried to explore the complex relationship between motivation, satisfaction and performance, and pointed out that efforts put in by an employee did not directly result in performance.

The model is a comprehensive explanation of work motivation.

The model is dependent on 3 factors

An employee should have the desire to perform, i.e. must feel motivated to accomplish the task.

Motivation alone cannot ensure successful performance of a task. The employee should also have the abilities and skill required to perform the task.

The employee should have a clear perception of his role in the organization and an accurate knowledge of the job requirements. This will ensure him to focus his efforts on accomplishing the assigned tasks.

Important variables in the Model

Efforts

Performance

Rewards

Satisfaction

Conclusion